Part of Speaker Pelosi’s agenda for the “First 100 Hours” included freeing the country from its dependence on foreign oil. Sounds ambitious and I know she didn’t think she could just wave her magic wand and solve our energy problems. Instead, it’s going to take a long time and we need to make proactive steps in Washington and in the oil patch. Immediately after Katrina there was a lot of talk about nuclear and ANWR and alternative energy and new refineries. What have we done since then? Not much in my opinion. We may have increased corn-based ethanol production but as I have previously written, that’s a small benefit with significant costs. No amount of additional subsidies over the current 50 cents per gallon will make corn an efficient or economical energy source. But that’s what we’ll probably get.

Pelosi’s first action plan is to renege on oil lease commitments and she is in familiar political territory. US history is full of examples of reneging on contracts - just look at how many times we renegotiated reservation boundaries and treaty agreements with Native Americans. It was shameful then and it is shameful now. Forget about the fact that the Clinton administration negotiated the terms that the Dems feel are unfair. At a time when politicians act with indignation towards Venezuela’s President Chavez for reneging on contracts in his country, our hypocrisy is pathetic. The Interior Department had the power to negotiate these contracts in 1998 / 1999 and now the Congress is unhappy with their progress in renegotiating the contracts voluntarily. So they are using their legislative power to usurp another part of the government - nice! The real message is that the Dems’ plan seems to rely on punishing big oil to solve our dependency on foreign oil. If that wasn’t so stupid it would be funny.

I know it’s easy for politicians to play on the hatred of Exxon by gas guzzling consumers, but is it really going to reduce our dependence on foreign oil? It may get votes, but it will not energize the companies those voters get their paycheck from or the car they drive to work or the house they heat. The plan calls for raising $12 billion dollars to fund alternative energy projects. Sounds noble but how do we pay for it? Get $6 billion by reneging on the oil royalty contracts and $6 billion from the “tax breaks” given to big oil and the problem is apparently solved. It may be politically wonderful but it’s economically ignorant. If you want a good summary of the details without much spin, read this article.

We need to take a harsh look at this energy crisis and do more than punish big oil by reneging on royalty contracts, removing “tax breaks” or imposing “excess profits” taxes. As for this new concept of “a conservation fee” on oil and gas from the Gulf of Mexico - I’ll keep my opinion on that brief - it’s stupid and it will cut production, not increase it. The bill calls for $9 a barrel fee on oil and a $1.25 per million BTU fee on natural gas for Gulf production as long as market prices remain at more than $34.73 a barrel for oil and $4.34 per million BTU for gas. I guess if you use precise numbers like $34.73 versus $34.75 or a round number like $35.00 it makes you sound smarter! Actually, it’s no coincidence that the bad royalty contracts failed to trigger at a threshold of (you guessed it) roughly $35.00 per barrel. Does any of this sound like a good way to increase domestic oil production? Or does it just sound like a good way to get votes and generate taxes to spend?

Don’t confuse the slogan of “reducing our dependence on foreign oil” from either President Bush or Speaker Pelosi with cheap energy or environmentally-friendly energy. Isn’t that what we really want? I don’t think people would care about our dependence on foreign oil if it was trading at $10 per barrel. And I think they would care less if oil wouldn’t cause pollution and greenhouse gases even if we had to pay $34.73 a barrel. We want cheap energy regardless of where it comes from and we want it to be environmentally friendly. Don’t confuse that with a generic desire to be free from dependence on Chavez and Imanutjob(Iran’s prez.) The bad contracts will cost the government about $10 - $35 billion in lost payments over their life depending on oil prices and the person making the estimate. The tax breaks cost us about $1 billion. You never know, but solving the energy problem will likely require more than $35 billion. This is the key point for me. We need to spend a lot of money to generate inexpensive and clean energy. We need to do it now. If punishing the oil companies is the best we can do, we will fail.