Energy reality check

Loren Steffy:

President Barack Obama, in his State of the Union speech, called for an “all-of-the-above” strategy to develop energy that’s “cleaner, cheaper and full of new jobs.” 

He’ll be lucky to get one out of three. 

It’s likely that our energy sources will become cleaner. Stricter pollution and carbon standards are inevitable, and the abundance of natural gas from hydraulic fracturing in the U.S. means it’s likely to become a viable alternative fuel – both for electricity generation and powering fleet vehicles. To drive home the point, Obama was in Nevada on Thursday touting the prospects for natural gas. 

By 2040, natural gas will surpass coal as the world’s second-biggest fuel source behind oil, according to a recent study by Exxon Mobil Corp. 

Obama wasn’t just referring to natural gas, though. He wants to improve the reliability of other sources – wind, solar, biofuels. For that, he wants to shift tax incentives from the oil industry to renewables programs. 

Given that much of new fuel development is moving toward cleaner sources, it makes sense to offer tax benefits, but it shouldn’t be an either-or shift from conventional energy. 

As we’ve seen with the collapse of natural gas prices, companies will simply shut in production if it isn’t economical, and the shift to cleaner fuels will stall. So it makes sense to maintain some tax incentives for “unconventional” plays such as shale drilling at least at lower prices, and marginal producing “stripper” wells. 

If it’s jobs the president is worried about, we can’t afford to discourage fossil fuel production. While “green jobs” are increasing, they alone can’t solve our economic problems any more than renewables by themselves can resolve our energy issues. 

Unfortunately, the administration always pitches its energy initiatives in terms of jobs. That may have political value in a struggling economy, but it undermines the purpose of government-funded research. 

Innovation can’t be measured by short-term hiring. The Solyndra debacle should have made that clear. In his speech, Obama touted – and probably overstated – the government’s role in developing hydraulic fracturing, but he seemed to miss the lesson. 

Houston’s Mitchell Energy benefited from some early government-funded research and maybe even some cost-sharing on early projects, said Bill Whitsitt, a spokesman for Devon Energy, which acquired Mitchell. But it took decades of private-sector financing, development and risk-taking to turn that government research into the current job boom.

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Obama clearly overstated the government's roll in fracking tech.  If anything the government, particularly the EPA is looking more like an impediment.  The interior department is still strangling energy production on government owned tracts both on shore and off shore.  If the government would get out of the way hundreds of thousands of jobs would be created in the private sector.

Government attempts to spur development in alternative energy have been a disaster for many.  The stimulus money was wasted on technology that did not have a ready market.  Some of the disappointments were caused by the failure of market manipulation laws such as cap and trade which would have tried to drive up the cost of convential energy to make the alternatives look more competitive.