Thomas J. Pyle is the president of the Institute for Energy Research.
Common sense dictates that bad outcomes will result from penalizing success while rewarding failure. To this point, no one suggested diverting money from commercial jet travel to fund the development of commercial zeppelin travel, nor did we take revenue from automobile manufacturers to invest in stagecoaches. Yet, the Obama administration's new "Energy Security Trust" proposes to do exactly this, by building unproductive technologies while simultaneously discouraging productive ones.
President Obama plans on taking $2 billion in revenue from oil and natural gas production on federal lands and redistributing it to politically-favored energy projects, like the notorious, now-bankrupt Solyndra. The "Energy Security Trust" is empty rhetoric and not a real solution to our energy challenges.
According to government data, revenue from leasing and royalties on federal lands decreased from over $24 billion in Fiscal Year 2008 to $12 billion in Fiscal Year 2012—a drop of more than 50 percent. This is the result of more restrictive energy permitting and leasing policies. As such, it is curious that President Obama is proposing to take money from a shrinking pot and diverting it to industries that have received billions of dollars in subsidies the past few years.
Instead of creating yet another subsidy program, the President and his administration should endeavor to open up more federal lands for energy production. This would have the twofold benefit of increasing both energy security and revenue for federal coffers. A study released by IER last month highlighted that opening federal lands to oil and gas development could bring $24 billion in federal tax revenue each year for the next seven years, and $86 billion annually thereafter. Opening up these off-limits areas would also be enormously beneficial for the economy, generating about $450 billion in economic activity over the next thirty years.
As we have witnessed via the numerous bankruptcies and failures of the Department of Energy's section 1705 loan program, many of the alternative energy companies that President Obama and his administration favor have been bad investments that ultimately left the taxpayer on the hook. President Obama needs to come to terms with the fact that throwing money at alternative energy projects will not make them cost competitive and productive, rather than trying to revived the same tired strategy in the guise of a "new" trust fund. Technological breakthroughs and business models built on long-term sustainability will be what make alternative energy cost competitive—not short-run subsidy-driven models or government handouts.
The President's plan for the energy security trust is more proof that his "all of the above" energy strategy is truly only a "some of the above strategy." This most recent move is anything but new and innovative; it is simply an unfortunate continuation of failed policies that will hurt the makers in this country and help the takers.