Thursday, January 12, 2012

Ron Johnson's Misguided Obsession with Domestic Oil Production

When Ron Johnson was running for office in 2010 he made one of his first policy gaffes came when he made comments that could be interpreted that he supported potential oil drilling in the Great Lakes. This was right around the time it was revealed that Johnson owned six figures worth of stock in BP, stock he promised to eventually sell, a promise he ultimately reneged on, then sorta followed through with following the election when he sold of his entire stock portfolio. Last May Johnson voted against a bill that would have stripped oil companies of several billion dollars worth of government subsidies, which Johnson has routinely opposed on principle.

The moral of the story is that Johnson's relationship with the oil industry is checkered, at best.

Most of this oil business happened during the early months of summer 2010, when no one was paying attention, and as a result domestic drilling never really become much of an issue. Since Johnson took office, however, he's made it a point to champion domestic oil production in most of communiques with the masses. It's not terribly surprising since it's been a pet cause among conservatives for the last decade, and it might be seem odd coming from Johnson given his political past with the issue and the fact that he has no expertise with the matter at all, so why does Johnson appear to be making domestic drilling his issue de jour?

First of all, Johnson's drilling agenda is about five years old. He accuses the President of "limiting energy development" in the U.S. in his column in yesterday's Wall Street Journal and adds:
The administration has squandered billions of dollars on politically connected, green-energy boondoggle projects, while at the same time maintaining a de facto moratorium on off-shore drilling, and dragging its feet on granting permits for other energy utilization projects such as the Keystone XL Pipeline and restricting and limiting leases for offshore energy production. Republicans could propose a plan to utilize crucial domestic resources, including oil, natural gas and coal, to produce energy and create jobs.
(For the record, Obama has actually pledged to to increase lease sales both off-shore and in Alaska.)

He elaborated on that thought in an interview with Newsmax today:
Johnson accused Democrats of being beholden to extreme environmentalists in their rejection of both drilling in the Arctic National Wildlife Refuge (ANWR) and the construction of the Keystone XL oil pipeline from Canada to Texas.

Alaskans want drilling and their view about their own environment is more important than those of people in California, New York or Massachusetts, he said, declaring: “If Alaskans want to drill in ANWR, we should let Alaskans drill in ANWR.”

The pipeline will be built unless Obama declares it against the national interest, Johnson said. “If you take a look at the 20,000 jobs the construction would create; you take a look at the $20 billion in private sector investment; you take a look at the hundreds of thousands of jobs that would be created long-term; and the impact on our energy prices, I think it will be very difficult for President Obama to make that determination.”
So Johnson domestic oil production plan revolves around three different elements: off-shore drilling, drilling in ANWR and the Keystone pipeline. 

But let's take a look a what is actually happening to oil production in the United States, which has actually increased since Obama entered the White House:

So far from "limiting" oil production, it's actually picked up and without drilling in environmentally sensitive areas. Last year, for the first time in six decades, the U.S. became an oil exporter. All of this has happened despite the disruption in off-shore drilling Johnson decries.

This has occurred largely because of drilling in the Bakken Oil Formation in North Dakota. The discovery and subsequent exploitation of this cache has completely transformed the way we think about energy in America. The USGS estimates that there are "only" 896 million barrels of oil under ANWR, but there are 18 billion barrels in the Bakken. That's just recoverable oil using today's extraction technology, the estimate has actually been growing as the technology is reconfigured to meet the needs of the location. The estimates of the total oil in the formation range from 167-503 billion barrels.

There really is no comparison between the reserves in ANWR compared to those in the Bakken.

The oil in the Bakken formation is one of the big reasons green tech firms are dropping like flies these days. Most of these firms were founded prior to 2008 when Bakken oil boom began and acquired much of their seed capital from investors expecting sky-rocketing gas prices in the years ahead. That's not going to happen now. This poses a huge problem for environmentalists who can no longer lean on the "energy independence" and/or "national security" aspects of green energy promotion, which tended to be their strongest arguments.

If conservatives were smart that would drop ANWR all together on focus on Bakken because vigorous development of that formation is going to happen regardless of who's in power. It's an easy win. To an extent Republicans are kind of doing this by harping on the Keystone pipeline, but why ditch a perfectly good talking point when it's still moving voters, right?

During his first year in office Johnson has tried -- without any success whatsoever -- to find an issue that he can latch onto and call his own. He's tried to become a point man on the deficit, on regulations (and specifically banking regulations) and even on senate procedure, but has failed to find a cause that can separate him from the rest of the pack. Perhaps it should come as no surprise that Johnson has eventually made his way to energy. If energy isn't your cup of tea, don't worry: Johnson will likely be opining on another completely unrelated topic in about six weeks or so.

This is becoming one of the most fundamental problems of Johnson's tenure: his impatience with the issues. There's very little doubt Johnson believes he has the answer to all that ails Washington, but in attempting to be a master of all issues he's become an expert in none of them. Instead of adopting a cause and sticking with it for the long haul, Johnson seems to be test-driving as many as he can handle in order to find the one issue where others will actually follow his lead. This why Johnson fills his op-ed pieces with shallow discussions of between 5 and 12 issues when he really should be focusing on just one.


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