Energy Policy – A Suggestion

The lack of an American energy policy, particularly when America currently is the largest user of energy on the planet, simply is childish. Unfortunately, childishness has come to be expected from both of our major political parties.

Using huge amounts of energy with no policy or plan to ensure the continued availability of energy, for the identification and use of new sources of energy that are less polluting to make, use or dispose of, or to invent or identify new ways to source energy where it can be efficiently sourced, to move energy to where it is used, to store energy where it makes the most sense from the standpoints of sourcing, distribution and usage of that energy, is, not to put too fine a point on it… crazy.

Other than in presidential election years, virtually no discussion occurs on America’s energy needs and how to meet them. Even during election years the discussions are far from serious. While this is to be expected from a government in which the leading legislator calls those who disagree with her, “Nazis,” and a president who chooses a self-proclaimed communist as a “Jobs czar” in a market-based economy, or a Treasury Secretary who doesn’t pay his taxes or a Ways and Means Chairman who doesn‘t declare his means, it still makes no sense at all to intelligent people.

This is a country that created the atomic bomb in fewer than four years, from chalk on a board to green glass on the New Mexico desert. Surely we can arrive at a policy to meet our current needs, and those of our progeny far into the future. Surely we can agree on a policy that is neither destructive to the planet nor provides working capital for religious fanatics to blow-up one another … or us.

(One hopes that we can even ask our representatives in Congress to do so in an intelligent, non-acrimonious manner, using actual science and economics, though it certainly is arguable that asking for the development of an actual, competent energy policy from the adolescent representatives we continue to choose to govern us will be more difficult than inventing new energy sources. But that’s OUR fault, not theirs. We choose them… again and again and again.)

Easily the largest problem of a comprehensive energy policy is how to pay for it – how to fund the development and then implement technology and infrastructure that will enable mankind to continue to advance, continue to progress. The availability of cheap energy is a primary point of demarcation between those societies which can capitalize on the intelligence of their members, pulling all members of the society forward, and those societies which cannot harness the intelligence of their members, and continue to lag as the world modernizes.

How to fund the invention of new energy sourcing, storage, distribution and usage technologies? It can be argued that usage will follow naturally from availability. We can build electric cars now, for instance, but little ability to create the massive amounts of electricity where the cars are used, and no way at all to store electricity efficiently within the car itself.

Distribution, too, will follow sourcing. Our distribution technology far outpaces sourcing or use, and our ability to extend it currently is not a large issue. (Protecting our grids may be, but not building and managing the grids themselves.)

This brings us to energy sourcing.

We know how to create energy by splitting the atom; we have known how to do this for generations. Whether the regulatory and legal hurdles created by those who insist we follow Europe in areas both imaginable and unimaginable, but viscerally reject following Europe in nuclear power, can be resolved is an open question without an obvious answer. It certainly is neither the market nor the demand that is denying Americans the use of clean, green nuclear energy.

Solar? The current 18% (or so) efficiency will not get us to our goal of massive amounts of clean, inexpensive energy that doesn’t also fund terrorists.

Wind? At some point the eco-warriors and judges will notice that wind farms are killing between 75,000 and 275,000 birds a year – most of them protected by the migratory birds act. At that point the courts likely will turn off wind just as they currently fine oil producers millions for killing thousands of times fewer birds with their energy technology. Only time will tell whether, now that Ted Kennedy is dead, wind farms will be created in his “yachting” playground, or continue to be relegated to flyover country or geographies lacking Democrat political power – the same Democrat political power insisting on the use of wind to begin with… just not in THEIR backyards…

What else? Many tried technologies exist – more drilling for oil and gas. Conversion of shale oil and tar sands. Coal. All of these are known energy resources that can be exploited with varying degrees of efficiency and varying degrees of pollution. Technology, such as SkyMine from Skyonics, creates pure bicarbonate, pure hydrogen and pure chlorine in saleable quantities through osmosis, from flue gases at a coal-powered generating station. This makes coal not only completely clean, but a source of “free” hydrogen that can be used to power cars. Just one example of technology fixing problems in a market economy rather than the heavy never-efficient hand of government.

But – what about other ideas? Where are they? Percolating in physics labs in the universities? Awaiting funding from an existing energy company to pursue and bring to commercial availability? On a drawing board trying to bridge the gap from 18% efficiency of solar cells to, say 40%? Or More?

The issue really is funding the development of alternative sources of electricity. So – how to do that?

America and the world always have been able to rely on the resiliency of the American economy. Left alone it has created more wealth and more progress for more people, not only in America, but across the planet, than any other economy – ever. It has rebounded from world wars, oil embargoes and technology bubbles. It has not been sunk by oil at over $120/bbl. It even is beginning to show signs of recovery from the current global economic implosion.

So – how to pay for what can and has been described as a “Manhattan Project” to develop alternative sources of energy?

Well, we’ve already proven we can deal with oil prices north of $100/bbl. So let’s keep them there.

No, not through taxes.

Oil companies already pay plenty of taxes, as does the American consumer. People complaining about the profits of oil companies don’t seem able to make the link that these companies also pay huge amounts in taxes. The three largest American oil companies, by way of example, pay on the order of $200B in annual income taxes.

My suggestion:

Use government policy to force companies selling petroleum products in the United States to create an internal account for alternative energy Research & Development. This will be a private account, auditable by the government and not subject to taxation, not a tax redistributed to government to squander.

Regardless of the global oil price, use government policy to require oil companies selling petroleum products in the US to pay into this account $40 per barrel of oil they buy on the market. Audit the account to ensure it is being filled, and that any monies coming from the account are not reported as retained earnings, distributed to shareholders as profits, or used for anything other than alternative energy R&D.

How much will this R&D fund hold? In 2007, Americans consumed 20,680,000 barrels of oil per day. This sounds like a big number and it may be, but it’s only 25 barrels per capita annually for American’s 304,000,000 population.

Let’s just pretend that this price does not increase due to the ups-and-downs of the economy over the past year, and Obama’s extraordinary spending going forward.  If the oil companies were forced to cost that oil at $40 over today’s (Sept 14, 2009) market price ($70), or $110 (still below the June, 2008, high of $128, which we lived through), and put the $40 into this R&D fund, the R&D fund generated would exceed $300B annually.

If we put the R&D surcharge at, say $30/bbl instead, the R&D fund still would see an annual inflow of $226B. $20/bbl = $150B. $15/bbl = $113B.

My guess is that America could have some serious alternative energy on the drawing board in a couple of years, in testing in another year or two, and in production and building the infrastructure in five-six years if they had an annual fund of $100B -$300B that they couldn’t spend or invest in any other way. This is a whole lot better than what we have now – NO energy policy or plan – at all.

This also would create a heckuvalot of new jobs in R&D and in distribution and infrastructure, as well. Green jobs, as the Administration likes to say.

(This is an example of an area in which the government truly can help – can be NOT part of the problem, but part of the SOLUTION. On the other hand, if the government insisted on a tax to create this fund, and then abused the fund as it has the Social Security fund (putting it in the general revenue when they ran out of money to spend), and laundered the money through various government bureaucracies and unions, then government remains part of the problem… and the energy problem does not get fixed.)

Once infrastructure needs are established, i.e. the type of energy sourcing that rises to the top and the infrastructure necessary to its implementation becomes known, some percentage of that fund could go to infrastructure invention, engineering, manufacturing and deployment & maintenance. Or perhaps we stay true to the original idea and continue funding newer and newer energy sources – to the betterment of everyone on the planet, and let the enrgy companies pay for their own infrastructure out of their income, as they do now.

When calculating their costs and prices, oil companies will cost a barrel of oil at the global market plus $40. When calculating profits and taxes, they will be based on the global market alone. The $40 will ONLY be used for new energy sourcing and storage R&D.

Will this cause consumer prices to rise to the level at which the existed when the actual price of oil was more than $40 above its current price? Yes.  Consumers use the electricity. Consumers will reap the benefits of new sources of energy as well as the benefits of the cleaner environment that these technologies will drive. Why shouldn’t consumers pay for it? Who else would or could? The government? That just means yet more redistribution – and far less efficiency as we search out new energy sources. And no one needs that.

As long as we keep the money away from the the government, ensuring it is used for its intended purpose by those who will gain most both from its use and from its efficient use, we all gain.

The money will NOT flow into the government as a tax to be laundered through our absurd bureaucracy. It will not be available to Barack Obama or Charley Rangel or Timmy Geithner or Nancy Pelosi or a future GOP president to save their butts from their visceral overspending and dishonesty. The energy companies will deposit and spend this money on new energy sources and new energy storage technology. ONLY.

And any profit they make from breakthrough discoveries – will belong to the companies finding the breakthrough, and to them alone (though it will be taxable income).

Rather than tax dollars creating this R&D fund being laundered by Congress, making discoveries the property of the taxpayers (e.g. Congress, who will epically destroy this wealth, as well), the inventions, discoveries and profits will belong to those who invented them: The shareholders, investors, owners.

The taxes from these profits and capital gains will be taxed, of course, ensuring that the government gets its hands on some of this money. It’ll be needed to pay for the trillions of government-created liabilities unfunded because Congress is too busy spending money we don’t have on yet more absurd idiocies we don’t need.

In fact, an intelligent government would see this as a way to create a vast new pool of taxable income, either to replace the taxes the oil companies soon will not be paying on oil revenues, or to help fund tens of trillions of unfunded liabilities. More likely is that our “representatives” will squander this money, as well, however.

A role for government can exist in this R&D plan, a way inexpensively either to add to the R&D investment pool of these companies, or to create that pool independently of requiring the energy companies to overcharge their customers (us).

How?

Well, America spent tens of billions of dollars freeing Kuwait from Saddam, has spent tens of billions defending Saudi Arabia from Saddam and Iran, and hundreds of billions freeing Iraqis from the dictator they allowed to govern themselves for decades. Tell those countries that we’re now accepting repayment, in the form of a $40/bbl discount in oil bought by American oil companies – for US domestic consumption ONLY. And then ensure that $40 swing winds up in the R&D pool.

And, Oh By The Way, these countries will continue selling the same approximate share to American oil companies as they have historically sold. They simply will have the opportunity to graciously repay their debt to America for keeping them safe and free.

Like it or not.

Does this mean acknowledging we went into Kuwait for oil?

Did we go into Rwanda to save lives and ensure freedom?

Of course we went into Kuwait to save oil. A fool’s errand when we could have let Saddam overreach, takeover the Saudi oilfields, rid the world of the Saudi terror-funders, and then let Saddam turn West and head for Israel, who promptly would have nuked him, saving the world from Islamist terror and ensuring global oil supplies under competent, non-ideological hands. But noooooo, Bush 41 had to get all righteous about it and NOT let natural selection occur. Oops.

The point is this: America has spent trillions of dollars and thousands of lives ensuring the free flow of oil globally. This is legitimate because not doing so ensures global poverty and the deaths of tens of thousands and the lack of progress of mankind by NOT having inexpensive energy. Only America can, will and has defended global energy supplies – and the entire world has benefited from it.

But – the time has come to bill them for our work. Time to be a bit less altruistic with the dollars (sweat) of our taxpayers and the lives of our warriors.

This is a legitimate role for the federal government.

Either way – through forced investment of the energy companies and a surcharge (higher prices) on the consumer (who ultimately will profit from the discoveries and inventions driven by this forced R&D) or through forced discounting from OPEC, American energy companies create a massive R&D pool, and are allowed the profit incentive to invent and discover new sources of power and power storage.

An intelligent, implementable energy policy that will provide for consistent, inexpensive electricity for generations to come. (Once the measure no longer is bbl of oil, some other unit of energy at the wholesale level can be used to define the per-unit R&D funding, replacing the per-barrel $40.)

An energy policy that will clean the planet from the pollution from traditional, fossil fuel, energy sources.

A policy that will, at the same time, deny funding to those trying their best to destroy civilization itself.

This is not rocket science. It may not even be particularly politically difficult. Democrats want new power sources and don’t mind telling oil companies what to do with their money. One can even toss in the fact that higher oil prices will discourage some oil use, to the favor of those believing the myth of anthropogenic global warming.

Republicans want energy companies to make profits, recognizing that profits drive the entire global wealth machine. And everyone wants non-polluting, inexpensive electricity. And the energy technologies and sources created would be available through the market to the entire world. An intelligent government policy would even use foreign policy to deliver new, cheap, non-polluting energy to South America, Africa, Southwest Asia, India, everywhere the lack of energy forestalls progress, and is a primary driver of terrorism and regional violence, so these new energy sources could cure alot of the world’s ills.

It’s difficult, frankly, to see any losers in this arrangement.

All it would take to accomplish this would be a little leadership in the government.

But maybe this is the hardest part of all?

(PS – There may (will) be unintended consequences of this idea, and I am open to discussion on what these may be – just because I haven’t thought of them certainly doesn’t mean they don’t exist.)

About Alex Scipio

About Alex Scipio: Alex moved out of the People's Republic of California to the Free State of Arizona, finally tiring of the lack of the Bill of Rights, the overgrown idiocracy, and the catering to non-Americans & welfare recipients. He still wonders how America got from Truman, Eisenhower, and Daniel Patrick Moynihan to the Liberal and Conservative extremes so badly managing America today. And, yes, islam DOES need to be annihilated. And doing what he can to get folks away from the extremes of political life.
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2 Responses to Energy Policy – A Suggestion

  1. Pingback: In This Dimension » Blog Archive » Let’s Play ‘If I Were President’

  2. I’ve liked reading these types of blogs. Interesting stuff! Solar energy has always been a fascination with me.

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