On Energy Policy, Navy Secretary Is Either Dishonest or Misinformed

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Lachlan Markay
March 28, 2012 at 10:29 am

In response to a congressional inquiry regarding a Navy purchase of expensive biofuels, Secretary Ray Mabus made numerous claims that are either factually incorrect or misleading regarding federal energy policy and the nation’s oil reserves.

Mabus was responding to concerns raised by Reps. Doug Lamborn (R-CO) and Mike Conaway (R-TX) regarding a Navy purchase of 450,000 gallons of biofuels – the largest-ever federal purchase of such fuel – at $15 per gallon. That is more than three times the price of conventional diesel fuel.

The company providing the fuel, Solazyme, is advised by an energy consultant who helped write the alternative energy portion of president’s stimulus package.

“The math is clear,” Mabus told Lamborn in a letter dated March 23. “Opening up every possible source of oil available to us still would not provide enough to supply all our needs.”

That statement is categorically untrue. The United States has 1.4 trillion barrels of recoverable oil, more than the proven reserves (note: reserves, not recoverable resources) of any other nation, and more than the entire non-North American world combined, according to a study by the Institute for Energy Research.

It is true that the U.S. has only two percent of the world’s oil reserves, a statistic that Mabus cited in his letter in highly misleading fashion. But that measure only accounts for oil that is recoverable at current prices and under current law. In other words, if all government-owned land were open to oil development, that two percent figure would skyrocket.

What’s more, Lamborn did not suggest that all of the military’s energy should be met using oil. The issue is how best to determine what mix of energy sources should be used. The Obama administration apparently believes that bureaucrats, not market forces, are best suited to make that decision, despite evidence that the market is better suited to the task.

Mabus also touted one of the White House’s favorite talking points on energy production. “President Obama’s ‘All of the Above’ energy strategy clearly advocates increasing domestic oil production as much as possible,” Mabus wrote. “In fact, domestic oil production has risen and foreign oil imports have declined in each of the last three years.”

But as Scribe has reported, oil production on federal lands – lands over which the president has authority – is at a nine-year low. The increase in oil production that Mabus cites is due primarily to activity on privately-owned land.

As for oil imports, the decline Mabus cites is primarily attributable to decreases in domestic demand brought on by the economic downturn, and policies put in place by Obama’s predecessor, George W. Bush, according to independent energy analysts.

Mabus went on to cite the potential price shocks that result from changes in global oil prices, claiming, “every dollar increase in the price of a barrel of oil costs the Navy an additional $30 million.”

But unless oil prices rise so rapidly that the per-gallon cost of fuel reaches $15 – the price paid for the biofuels that spurred Lamborn’s letter – even these price shocks cannot cost the Navy as much, per gallon of fuel, as the biofuel purchase in question.

Indeed, Mabus insisted, “a competitively priced and domestically produced liquid fuel that can be dropped in as a replacement to diesel or aviation gas can give us greater energy independence.” But Lamborn’s issue is precisely that the biofuels the Navy purchased are not “competitively priced.” They are many times the price of conventional fuel.

Mabus attempted to deflect that obvious point by noting that alternative energy remains expensive because “we have not provided the type or level of incentives for alternative fuels that we provide the oil industry to encourage exploration and production.”

Again, this claim is untrue. Most of the incentives enjoyed by the oil industry are enjoyed by a multitude of other businesses. They include standard tax write-offs for operating expenses, and tax breaks offered to all manufacturing or natural resource extraction companies. Alternative energy sources, meanwhile, enjoy specific and targeted subsidies aimed at benefitting certain technologies, industries, or companies.

The level of benefits afforded the oil industry is in fact below that given to the alternative energy sector. Tax breaks for oil companies – again, the primary source of federal support – pales in comparison to tax breaks given to alternative energy companies, as a recent Congressional Budget Office report pointed out.

Those facts aside, “every American would be better served by getting rid of all energy subsidies,” Heritage energy policy expert Jack Spencer told Scribe. “The fact is that the federal government doesn’t need to waste taxpayer money to bring new energy technologies on line.”

Spencer noted that if Mabus is correct and oil prices skyrocket to unaffordable levels, market forces would naturally offer a foothold for biofuels and other renewables without making the purchase of economically uncompetitive fuel sources necessary.

The Navy’s biofuel purchase, and Mabus’s defense of it, is part of an ongoing mission “that needlessly bleeds scarce resources away from core missions to advance a political agenda is untenable,” Spencer noted in a report on the effort.

“The White House is pushing the idea that the alternative energy industry would get the kick start it needs if the military will just commit to using them,” Spencer added. “But the assumptions behind this argument are flawed, and the strategy would increase demands on the military budget while harming national security.”

Here is the full text of Mabus’s letter: Mabus Letter

Source

Posted on March 28, 2012, in Algae, AMERICAS, Clean Energy, Crony Capitalism, Economic policy, Energy, Fraud & Corruption, GEOPOLITICS, North America, Political economy, Progressive Agenda, Tax Payer's Dime, United States and tagged , , , , , , , , , , , , , , . Bookmark the permalink. Comments Off on On Energy Policy, Navy Secretary Is Either Dishonest or Misinformed.

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