Rebuilding America: Energy Independence

Member Group : Lincoln Institute

Inflate your tires, tune up your car’s engine, drill in the Arctic National Wildlife Refuge are all reflective of the multitude of potential solutions to our Nation’s energy problems. Despite these possible solutions, our leaders have consistently failed over the past 50 years to solve the real problem. Solutions without decisions are not solutions at all.

The problem of energy supply is but one factor in the much more immediate concern of energy independence.

When a company is at strategic risk with a supplier, virtually all corporate executives will tell you it is prudent to understand that risk, deal with it, and reduce your vulnerability to that supplier, be they a benevolent supplier or not.

For our Nation, it is incredibly naïve to think that all nations will share the same strategic interests and goals as we do. To that end, it is prudent for our society to determine its critical infrastructure and then work to defend that infrastructure.

Energy supply is precisely one of those infrastructures that need to be protected. That protection should not be in the form of market interference by government. Instead that protection should be to establish a framework or rule of law that encourages a reasonable and sound policy of energy independence as a national goal.

Energy’s importance in our nation’s economy is undisputed. Families are dependent upon availability of reasonably priced fuel as are business owners. The trucking and airline industries are testimony to the interdependence we all have to availability and reasonable prices for fuel. Remember the gas lines of the 1970’s when OPEC flexed its muscles and we sat in lines waiting for rationed fuel. (Ok, I concede I am old)

We have not only failed to contain the risk to such economic sabotage but have in reality become that much more vulnerable to an interruption of energy supplies.

Many would assume that to ensure supply, government should intervene. In reality, to ensure proper supply government should get out of the way. Prohibiting drilling on federal lands is silly at best but that is only part of the solution as it is part of the problem.

Government intervention in other markets has been equally problematic such as with nuclear, coal and ethanol. Promoting ethanol as an example has been linked to significantly higher food prices. An energy policy that causes food to compete with energy is not a policy at all. Such a policy is tantamount to economic suicide.

Government’s role is to provide the rules of the market such as anti-trust, rational and well thought out environmental policies, and public safety. Government was never intended to control the markets by bureaucratic delays and impediments.

The Alaskan constitution claims ownership of mineral rights of oil and other minerals for all its citizens. As such, most citizens receive dividends from the government for their "share" of Alaskan oil revenue as part of the Alaska Permanent Fund. Imagine if the United States allowed drilling on other federal lands and required that the payment of the royalty on that oil at a rate of $50 per barrel to the federal treasury to reduce debt (as well as reducing the balance of trade). If 3 million barrels were added to supply daily from domestic sources, the revenue to the treasury would be $150 Million per day or almost $55 billion annually. The reduction in imports would improve the balance of payments significantly as well as reduce the federal deficit.

This simplistic analysis is merely intended to demonstrate the significant interrelationships in all markets. Attempts by government to impact one market, almost always adversely affects another.

To properly solve our energy needs, a multiple stepped approach is needed. Such an approach would include leasing federal lands for oil development, streamlining the approval process for nuclear power plants, improving the processes for allowing pipelines to be constructed to transport fuel and natural gas, promoting conservation efforts such as tire inflation and tune-ups, reducing traffic congestion with more efficient highway systems, and reducing regulatory costs for building all power plants. Wind, solar, water, and other sources of energy are also part of this solution and need to be included in a national solution.

This county’s resources are so vast that it is imprudent not to develop a multi-solution approach to our energy needs. Our national goal must be energy independence if we are to remain a viable force for democracy in this world. To deliberately place our nation in the grips of Iran and Venezuela is irresponsible.

When the entire world believes in fair play and global responsibility, we can then afford to be naïve, but not until then.

Frank Ryan, CPA specializes in corporate restructuring and lectures on ethics for the AICPA. He is on the boards of three publicly traded companies. He can be reached at [email protected]