Washington Indsider: The Law of the Sea Convention Resurfaces

The Audacity of Hope Confronts Political Reality

By Larry Kiern

A year ago this column reported dramatic change in America's national energy policy. President Obama and the Democratic-controlled Congress exuberantly altered the direction of our national energy strategy toward renewable and alternative energy sources and away from  America’s traditional preference for fossil fuels. In short, American’s energy policy was expressed principally in environmental, not energy, terms.

Now press reports portray the majority as beleaguered by emboldened political opponents and a disaffected electorate blaming Democrats for the nation’s slow recovery from the high rate of unemployment. Leading electoral prognosticators have offered predictions of large political losses for congressional Democrats in the upcoming midterm elections. Against this backdrop, all other issues besides jobs are secondary.

While the November 2008 election manifested a greater sense of environmental concern regarding climate change, that concern has been swamped by the more palpable pain inflicted by the rising tide of economic distress engulfing millions of Americans. The crushing loss of an estimated eight million jobs during the recession has refocused the electorate’s attention. Moreover, unemployment is a lagging economic indicator, so even though economists report that the recession officially ended in the third quarter of 2009, that fact provides cold comfort for Democrats these days.

Stimulus Plan Redux
A year ago the President and Congress used the national economic crisis to enact into law new national programs to promote alternative energy and spur investments in conservation. The American Recovery and Reinvestment Act aimed, among other things, to reduce America's dependence on foreign oil principally by providing $80 billion for conservation and to promote the development of domestic renewable and alternative sources – biofuels, solar, wind, wave and tidal energy. One year later conservative critics pronounced the $787 billion stimulus plan a failure, highlighting its inability to prevent unemployment from rising above eight percent as initially projected by the Obama Administration. Additionally, critics argued that the stimulus wasted public funds and threatened our fiscal security. Notably, however, they have not targeted for cutting those projects that spur alternative energy, and there appears no serious effort to repeal these programs.

To the contrary, supporters of the stimulus complain about the plan’s slow pace and potential benefits flowing to foreigners instead of Americans. For example, Senator Chuck Schumer (D-NY) recently demanded an end to federal stimulus funding for alternative energy projects benefiting foreign and not American workers and called for a “Buy American” mandate.  Recognizing the importance of alternative energy projects and the critical need to provide long-term financial underwriting, a bipartisan group of coastal state senators introduced legislation on March 8, 2010 to extend to 2020 the favorable investment and production tax credits for offshore wind projects. They cited a study by the University of Delaware predicting that Atlantic Coast winds alone can generate 330 gigawatts of power, enough to replace 300 large coal plants and power nine states from Massachusetts to North Carolina. While uncertainty surrounds the Cape Wind offshore wind project off Massachusetts, many other projects are underway in less sensitive waters and with a surer regulatory process.

Economists generally agree that the stimulus plan has helped America’s economic recovery, saved about two million jobs that otherwise would have been lost, and shortened the duration of the economic downturn. Despite all the negative criticism, the reality is that powerful political energy is building to enact additional stimulus measures totaling over $150 billion and more tax cuts favored by conservative critics who have harped on the nation’s fiscal deficit. While it remains unclear what form the final new stimulus legislation will take, the differing Senate and House versions suggest compromise will be reached by including elements of each. The Senate proposal emphasizes tax breaks for business while the House proposal prefers direct spending on state and local governments and infrastructure. To gain the votes necessary to pass in the Senate, i.e., to attract Republican votes, it seems likely that more tax breaks for business will be adopted.

Greenhouse Gas Regulation
The most vigorous and concerted opposition to the Obama Administration’s energy policy concerns the increased costs likely to be assessed on the fossil fuel industry in the U.S. as a result of the proposed regulation of greenhouse gas emissions. That opposition, prominently led by the American Petroleum Institute, targets both legislative and executive branch proposals to regulate greenhouse gas emissions via increased fossil fuel costs.

With the passage of over 15 months and the loss of the Democratic party’s 60-vote supermajority in the Senate, it seems increasingly likely that President Obama’s ambitious domestic legislative agenda may be downsized. But the President doesn’t need new legislation for his greenhouse gas agenda. He can use Executive Branch power for that. As this column is written, tThe President’s proposal for comprehensive national health care reform hangs in the balance, and it appears that if enacted into law it will be by a narrowly margin in thepassed the House, and encountered determined resistance from its opponents who pledged to “repeal and replace” it and may also depend upon further legislative challenges to be raised in a reconciliation process in the Senate. Despite recent signs of progress, long-stalled financial reggulatory reform likewise continues to encounter deeply determined opposition from key elements in the industry.

In this highly charged election year, the ability of the Senate to cobble together a simple majority, much less a filibuster-proof, 60-vote margin in favor of cap-and-trade legislation passed by the House appears doubtful. Simply put, many Members find it politically damaging to place themselves in the position of being accused of raising energy costs while unemployment hovers at ten percent and underemployment at 17 percent. Consequently, Senator John Kerry’s (D-MA) protracted efforts to fashion a Senate version of cap-and-trade in response to the House-passed bill has lost steam. Instead, reports from Capitol Hill suggest that the “three amigos” – Senators Kerry, Joe Lieberman (I-CT) and Lindsey Graham (R-SC) – have altered their approach to mirror that proposed by the Environmental Protection Agency (EPA): caps, but no trading. 

On February 22, 2010, EPA Administrator Lisa Jackson announced the agency’s estimated timeline for the imposition of regulatory caps on greenhouse gases. It will proceed piecemeal by first achieving greenhouse gas reductions through fuel-economy standards for light trucks, starting in 2012. EPA estimates that measure alone will avoid almost one trillion metric tons of greenhouse-gas pollution in America. Importantly, EPA will not require any stationary source, e.g., power plants and petroleum refineries, to get a Clean Air Act permit to cover greenhouse gas emissions during 2010. EPA estimates phasing in requirements on large stationary sources only in 2011 and continuing gradually through 2013. Administrator Jackson also announced that EPA would likely raise the threshold for permitting “substantially higher than the 25,000-ton limit that EPA originally proposed” and added that “EPA does not intend to subject the smallest sources to . . . permitting for greenhouse-gas emissions any sooner than 2016,” thus reflecting the Administration’s pragmatic understanding of the short-term political, economic, and regulatory challenges of regulating greenhouse gases. 

Following the announcement, Members of Congress quickly introduced new legislation that would freeze for two years the EPA’s ability to regulate greenhouse gases from large stationary sources and factories. Additionally, Senator Lisa Murkowsk (R-AK) and Representative Collin Peterson (D-MN) have spearheaded a resolution of disapproval aimed at overturning the EPA’s finding last December that greenhouse gases constitute a danger to public health and welfare, which is the agency’s predicate finding to exercising regulatory authority. But the support these legislative proposals have garnered appears insufficient to overturn a likely Presidential veto should either measure pass both the House and Senate in their current forms. 

Notwithstanding the hyperbole featured in advocacy advertising appearing in both print and electronic media, it is now plain that greenhouse gas regulation in the U.S. will not happen anytime soon, that it will be gradually implemented starting with light trucks and the largest stationary emitters, and that smaller sources will not face regulation for another six years at the earliest. Therefore the claim that such regulation will impair the nation’s recovery from the current downturn appears unsubstantiated.

Expanded Offshore Drilling Remains Uncertain
On February 10, 2009, Secretary of the Interior Ken Salazar announced a six-month extension of the March 2009 deadline for public comment provided by the Bush Administration.  He explained that the offshore drilling plan deserved greater input from the public. Energy industry representatives decried the decision and advocated expedited drilling to spur job growth and energy independence. The last year witnessed public hearings and input from diverse interests, including coastal states and environmental groups. But those supporting expanded drilling continue to await a decision from the Secretary.

Despite the delay, it appears the Administration will support environmentally responsible offshore drilling. For example, Secretary Salazar has backed the proposals of Shell Oil Company to drill exploratory wells in Alaska's Beaufort Sea and Chukchi Sea this summer and fall following Shell’s adoption of enhanced measures to protect the environment. The Secretary’s  decisions provoked withering criticism and a new legal challenge in federal court by Earthjustice, representing a phalanx of Alaska Native tribes and environmental advocates opposed to offshore drilling in Alaskan waters. The outcome remains uncertain.

Steady As She Goes
Despite the growing political storm and fury fed by the approaching mid-term elections and rhetoric alleging extremism by the Obama Administration, the nation’s new energy agenda remains largely bipartisan, steady, and on course. No serious opposition has emerged to challenge the consensus view favoring the development of alternative energy sources. To the contrary, new proposals to bolster offshore wind projects further illustrate the bipartisan acknowledgment of their value to the nation. And while the offshore oil exploration industry remains frustrated with the Administration’s delay in opening more coastal waters to drilling, Secretary Salazar’s deliberate pace may turn out to be a long-term plus by better protecting the industry from collateral assaults by the opponents of offshore drilling, such as that actively underway in Alaska.  – MarEx