The Coming Showdown Over America's Energy Future

The change of control of the House of Representatives yesterday was not only a political loss for the Democrats; it changed the landscape in Washington and diminished the chance for meaningful progress on comprehensive energy policy any time soon. With leaders like Mitch McConnell saying that the Republicans' single most important job for the next session is to make Barack Obama a one-term president, we can expect massive gridlock for the next two years, as the GOP renews its pledge, spelled out by Rush Limbaugh in 2009, to make the president a failure.

Among all the posturing and victory laps last night, especially by the members of the GOP's renegade Tea Partiers, the chances of real progress on most fronts slipped away as more seats moved into the red column. Ohio Republican John Boehner's trademark tear-filled speech will surely evaporate into even more stonewalling, subpoenas, and assaults on the Obama administration's successes. Healthcare reform and the expiration of Bush-era tax cuts will face major and noisy challenges. Lost in the shuffle and power grabbing will be--as it has been--our own energy security.

Virtually everyone in the United States has already forgotten the tragedy in the Gulf that unfolded over the summer as BP's well blew out, spewing millions of barrels of oil into the water, causing massive and as yet undetermined damaged to the economies of 5 states and a vast ecosystem. After the blowout, the Obama White House, late to the party, rushed a response that proved inadequate as the catastrophe dragged on for months, eroding voters' confidence in the administration and paralyzing the coordinated effort to stop the well from gushing and clean up the mess. BP and the Obama administration did succeed, however, in achieving their number one goal: getting the blowing out well off of our televisions screens, and off our minds. But something else vanished from the American radar screen, too, and that was our new-found though short-lived commitment to finding a saner energy future.

During the crisis, the administration shut down all deepwater drilling and Interior Secretary Ken Salazar proposed new drilling rules that would be imposed before lifting the ban. His rules included primarily superficial regulatory reforms, but there were two key changes that required congressional action. First, he proposed raising the $75 million liability cap for companies operating in offshore US waters. Second, he proposed increasing the time period for new permit reviews from 30 to 90 days. On July 30 of this year, over the objections of Republicans and conservative Democrats, the House passed an offshore drilling reform bill that lifted the $75 million cap, but the bill, of course, died in the Senate. No legislative action has been taken on the permit review provision. But, unfortunately, Salazar and the Obama adminstration lifted the ban anyway--even before its expiration date.

Let's hope that leaders once again take up the serious issues they so unwisely abandoned in political frenzy of the midterm elections. The $75 million cap is a huge issue. Without that cap, many companies would be forced to consolidate or exit the Gulf. With it, the risk is placed entirely on the US taxpayer. This problem is little discussed in the media, and the public is oblivious to the issue. Keep in mind that damage estimates from the BP well blowout range between $40 and $60 billion. With the cap in place, a company is only required to pay $75 million of their damages and the rest of the cleanup tab is on the taxpayer. The cap also allows risky operators to gamble on our shorelines. Consider this: of the dozen or so deepwater operators, only four or five are large enough to even survive a catastrophe the size of BP's blowout and spill. Had this accident happened to others, without the liability cap, they would have almost immediately declared bankruptcy and the total cost of clean up and capping would have been on the taxpayer. The cap makes their gamble a safe one. But without a cap--since no company wants to risk bankruptcy--those operators wouldn't be there in the first place.

The 30-day permit review limit is also huge. With it, the Bureau of Ocean Energy Management, Regulation and Enforcement (formerly the Minerals Management Service) essentially was rubber stamping permit to keep the paper flowing. Without increasing the time limit, this will continue to happen.

I predict that there will be a showdown after the first of the year over offshore drilling. The Republican House, soon to be led by Boehner, is just going to sit there and stare at Obama and Salazar. They have no incentive to pass offshore reform: they are the largest recipients of oil industry contributions. The Obama administration--faced with threats of further layoffs, increased foreign oil imports, and losing the 2012 election--will cave. The administration will allow the industry to go back to work in the Gulf with only superficial regulatory reform. The industry will continue to self regulate and enjoy limited liability. And the safety of workers will continue to be in jeopardy.

Let's be clear here about the risks that we are facing as a nation. We now import close to 70 percent of our daily oil needs from foreign countries, many of which hate us. Our own domestic production of oil, with the exception of the deepwater Gulf of Mexico, is declining. We have lost control of our own destiny, and the makeup of the next Congress gives me no hope that we are going to make any substantial moves to improve on our security. That would take leadership and courage, two qualities seriously lacking in Washington today, especially with another election coming up in two years.

After all, the 2012 campaign began at midnight last night.

Bob Cavnar, a 30-year veteran of the oil and gas industry, is the author of Disaster on the Horizon: High Stakes, High Risks, and the Story Behind the Deepwater Well Blowout, recently released by Chelsea Green Publishing Company.