So The Democrats Caved On Drilling. What Next?

by The New Republic | September 17, 2008

Last night, House Democrats tacked pretty sharply to the right and voted to relax the congressional ban on offshore drilling, as part of a broader energy package that had money for wind, solar, energy efficiency, clean coal... the works. There's also a national renewable-electricity standard in there, which would count as a massive step forward for clean energy. And no, coastal drilling still won't do much to shield the country from future oil price shocks, but the Republicans plainly mauled the Dems on this debate over the summer, and at this point, a compromise is likely better than lifting the drilling ban without getting anything in return.

Trouble is, this bill probably won't get far—the White House has already promised to veto it, and it may well die in the Senate. Why's that? The Wall Street Journal reports that, under the House bill, any oil royalties from new drilling wouldn't be shared with the coastal states, which means that those states would have little incentive to actually approve new drilling. Republicans don't like that. But if the government did share royalties with the states, that would count as new spending—thanks to a ruling last week—and, under budget rules, Congress would have to find new spending cuts to offset this. And Democrats don't want that. Right now, the GOP may well prefer to try to let the current drilling ban expire—but since the moratorium is tucked in one of the big appropriations bills, that would mean shutting down the government. It's a mess all around.

Of course, the other angle here is the Interior Department—that marvelous cesspool of sex, cocaine, and shoddy accounting. Last week, the GAO found that the agency was so sloppy about monitoring oil and gas production that they were conceivably missing out on billions of dollars in royalties. So it's a crapshoot as to how much new revenue the Treasury would actually get from offshore drilling, assuming the states even approved it. (If Congress wanted to raise new money from new drilling, clearing out the rot in Interior would be a more logical first step.)

No, wait, there's another angle, too—with a special election bonus! The House bill also rolls the ball forward on shale-oil development in the Green River Basin area (spanning Colorado, Utah, and Wyoming), finishing up various regulations and kicking the approval process down to the states. Josh Patashnik has, I think, summarized nicely the case against oil-shale drilling—it's filthy, expensive, it can devastate local water supplies, and there's no guarantee that we can actually recover anywhere near the 800 billion barrels of oil that's been advertised. This is a big deal in Colorado—which is looking more and more like the swing state come November—and part of the Democratic appeal to enviro-minded independents in the Rockies was that they were against this stuff. Does that go out the window now?

In the meantime, the Senate is trying to dial the volume down a bit, with the Finance Committee recently passing a much more modest energy-tax package that would extend the production credits for renewable power and pay for it with a scaled-back tax hike on U.S. oil and gas producers. If Congress can't reach an accord on drilling, would this become the fallback plan? All things considered, it would be a major (if staggered) step in the right direction if the House bill did get signed into law—though those shale provisions look troubling—but at this point, it might count as progress if Congress could just extend the renewable tax credits and avoid a shutdown of the wind and solar industries.

--Bradford Plumer

Source URL: http://www.newrepublic.com//blog/the-vine/so-the-democrats-caved-drilling-what-next