Transformer. Obama returns focus to energy.

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UYGUR: A big and broad plan today from President Obama on energy, including his goal of breaking America‘s dependence on foreign oil—which honestly I always find to be funny, but we‘ll get back to that in a second.

President Obama unveiled his proposals during a speech at Georgetown University. They include tapping new energy sources including natural gas reserves—questionable; encouraging energy efficient automobiles—lovely; investing in high speed rail and mass transit—fine; investing in clean and renewable energies research—well, that sounds good; ensuring safety of nuclear power in new generation of plants—that in reality, of course, means we keep going forward on nuclear energy, hence that‘s questionable, if you ask me; encouraging offshore oil exploration and production—well, that is totally questionable.

Look, it‘s classic Obama—a little progressive and a little conservative. Did I please everybody? Did I please everybody?

The Obama administration is, in fact, already encouraging offshore oil production as they handed out seven new deep water drilling permits recently. Now, that‘s despite the fact that earlier in this month, Interior Secretary Ken Salazar told a group of reporters that containment systems for gushing wells still needed some work. That doesn‘t sound.

Here‘s what he said, quote, “These containment systems are a work in progress. Both systems currently have limitations on water depth and barrel-per-day containment capability.”

So, we‘re barreling straight ahead, even though containment systems are, quote, “a work in progress.” That sounds disastrous. In other words, if something goes wrong, oops, we were in the middle of a work in progress.

But to Republicans, of course, that‘s still not good enough.

They‘re calling for more drilling, baby.


SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: When you shut down drilling, higher prices and fewer jobs are sure to follow.


UYGUR: Fewer jobs for Republicans who get paid by those oil companies.

To that end, Republicans are pushing measures in the House and Senate that would speed up the granting of permits and open up new offshore areas for drilling. They want to do that, even though oil companies are still exploiting a giant loophole that allows them to avoid about $50 billion in royalties on deep water drilling. Yes, look, that‘s $50 billion that go to the taxpayers and, sure, because it‘s supposed to be our oil but it‘s not going to us, whey are the Republicans are there to protect them?

And even though extra drilling would do almost nothing to decrease oil prices in this country, do you understand this. Oil drilled in the U.S. goes to the whole world market. We don‘t get to keep it.

BP doesn‘t go congratulations, Bob and Suzy, here‘s your oil. No, they sell it and make money off of it. And they can sell it to the Chinese. They can sell it to anyone they like.

And now, if you think that‘s bad on a federal level, it‘s also ugly on the state level, too. Republican Governor Tom Corbett in Pennsylvania has a brilliant idea. Even though they‘ve got a lot of natural gas in Pennsylvania, he says, you know what, let‘s not tax that natural gas drilling—even though 2/3 of his voters in the state supported this and saying, come on, please tax them, it‘s our gas, we should be getting something for it.

You know how much they would get for it? The Pennsylvania Budget and Policy Center estimated that the tax could bring in $400 million in revenue by 2015. Remember, Pennsylvania has a $4 billion budget gap. They could really use that money.

“The Philadelphia Enquirer” reports that Corbett got $800,000 in campaign donations from the drilling industry. Of course, he did!

Gee, I wonder why he‘s giving away the natural gas. I love his excuse, though. He‘s like, you know what? If we don‘t give them the tax incentives, they‘ll go somewhere else.

Where are they going to go? The gas is underneath Pennsylvania. How could they possibly get it from somewhere else? What are they going to do, drill up from China?

Come on, man. That‘s painfully stupid.

But all of this drilling isn‘t for your benefit, it‘s for the benefit of the energy companies and the politicians that they buy. That‘s why this whole idea of energy independence is a bit of a joke. We don‘t keep the oil, the oil companies do.

All right. With me now is Tyson Slocum. He‘s director of Public Citizen‘s Energy Program. He‘s going to fill me in a little bit more on this.

OK. First, Obama‘s plan. What do you think his real motivation there is?

TYSON SLOCUM, DIRECTOR, PUBLIC CITIZEN‘S ENERGY PROGRAM: Well, I think his real motivation is he wants to get the upper hand in the debate about energy policy and take his case directly to the American people. Right now, you‘ve got the crisis in Libya, which is spooking speculators to drive up the price of oil, even though we‘ve got 2 billion barrels of oil and gasoline in storage here in the United States. You got the crisis with the Japanese nuclear reactors that‘s spooking investors and other supporters of nuclear power here at home.

And all of this is going on while Congress debates whether or not the Environmental Protection Agency should be regulating power plants and industrial facilities under the Clean Air Act, and whether or not they should be regulating greenhouse gas emissions.

So, what Obama is doing is he‘s trying to preview his campaign theme going into the presidential re-election year, saying, look, I‘m trying to drill for more oil, I‘m trying to get more efficient cars, I‘m trying to build new nuclear power plants. And so, that‘s his message that he‘s kind of putting forward.

I don‘t really see, though, that this speech that he made today is going to be able to translate effectively into legislative action because the two parties just continue to fight—and as you just previewed, are very far apart on the solutions to America‘s energy situation.

UYGUR: Is he going to throw the EPA partly under the bus?

SLOCUM: I think that Obama will definitely throw the EPA under the bus if he gets some sort of pro-active legislative agenda to replace it.

UYGUR: Like what?

SLOCUM: And that‘s what he‘s talking about. Well, we saw what he did when he signed off on the climate bill back in 2009 that established a cap-and-trade system, that a lot of environmentalists and some folks in industry supported and that eviscerated EPA authority to regulate greenhouse gases.

And so, I think the things that Obama would like to see is some establishment of a clean energy standard, like what he previewed in the State of the Union address, some expansion of offshore drilling and mandating that oil companies develop existing leases that they‘re already sitting on.

UYGUR: Right. But, Tyson, as far as his priorities are concerned –

is it any way reasonable that the expectation that the Republicans would go towards him? Are they really going to say, oh, cap and trade, let‘s discuss it? No way, right? I mean—

SLOCUM: Right.

UYGUR: Can he get anything from them?

SLOCUM: I really don‘t see that there‘s a point of agreement or intersection between the two parties. I mean, when the Republicans dust off their tired play book of “drill, baby drill,” when even the Bush administration concluded in 2007 that opening up all areas that are currently off-limits offshore in the United States to new drilling would have an insignificant impact on prices and imports, that shows that drilling is not going to be the answer. We have to focus on alternatives.

UYGUR: Tyson, that‘s the thing that drives me crazy. That‘s the final question for you. I mean, for decades, I‘ve been hearing oh, we‘ve got to get independent of foreign oil, as if we get the oil. Can you just am I getting this wrong? I mean, when BP or ExxonMobil drills for oil, they don‘t give it to you, do they? They never showed up at my house and give me a tank of gas. They keep the oil and sell it all over the world, right?

SLOCUM: Well, I mean, most of the time when they‘re drilling domestically here, it makes more business sense for them to sell it into a massive consumption market like the United States. You‘ve got pipelines and infrastructure.

Legally, they can sell it anywhere. But when the number one consumption market, when one out of every four barrels of oil is consumed here in the United States, it makes business sense to sell in to that very lucrative market.

UYGUR: Right. But they‘re selling it to us. It‘s not like we get the oil. They sell it. They get a profit. So, how are we getting the oil?

SLOCUM: Well, I mean, that‘s a good point. It‘s a globally priced market, and the United States is the third largest oil producer in the world. Very few Americans know that. It‘s just that we consume so much.

But the oil companies make out like bandits. When it cost them about $18 in costs to pull a barrel of oil out of the ground and they‘re selling it into the U.S. market for more than $100, you do the math. That is great profit numbers for the big oil companies. And more than 80 percent of their campaign contributions are going to Republicans.

UYGUR: Look, I don‘t mind people making a huge profit if it didn‘t come from our hide. They‘re taking our oil. They‘re saying, hey, let me drill for more oil and then I‘m going to charge you an $82 profit per barrel. It‘s insanity, right? All right.

SLOCUM: And there‘s thousands of leases in the Gulf of Mexico where oil companies aren‘t even paying a dime in loyalties to the American taxpayer.

UYGUR: Aaah! OK. All right. I get frustrated by politics.

All right. Tyson Slocum, thank you very much. We appreciate it.

SLOCUM: Yes. My pleasure.

UYGUR: All right.

About William Brighenti

William Brighenti is a Certified Public Accountant, Certified QuickBooks ProAdvisor, and Certified Business Valuation Analyst. Bill began his career in public accounting in 1979. Since then he has worked at various public accounting firms throughout Connecticut. Bill received a Master of Science in Professional Accounting degree from the University of Hartford, after attending the University of Connecticut and Central Connecticut State University for his Bachelor of Arts and Master of Arts degrees. He subsequently attended Purdue University for doctoral studies in Accounting and Quantitative Methods in Business. Bill has instructed graduate and undergraduate courses in Accounting, Auditing, and other subjects at the University of Hartford, Central Connecticut State University, Hartford State Technical College, and Purdue University. He also taught GMAT and CPA Exam Review Classes at the Stanley H. Kaplan Educational Center and at Person-Wolinsky, and is certified to teach trade-related subjects at Connecticut Vocational Technical Schools. His articles on tax and accounting have been published in several professional journals throughout the country as well as on several accounting websites. William was born and raised in New Britain, Connecticut, and served on the City's Board of Finance and Taxation as well as its City Plan Commission. In addition to the blog, Accounting and Taxes Simplified, Bill writes a blog, "The Barefoot Accountant", for the Accounting Web, a Sift Media publication.
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