Speaker of the House John Boehner has proposed an extensive new jobs bill aimed at stimulating job growth in the US. It is a plan that has as its main goals 1) to spur job creation and 2) to boost domestic energy production by removing government barriers to that production. The job creation would be achieved by investing heavily in the repair and revitalization of our nation’s highways and general infrastructure. The plan is called the American Energy and Infrastructure Jobs Act. Let’s go over some of the details now.
The plan calls for job creation through major infrastructure investments. The plan would be paid for by expanding domestic energy production in the US. So as domestic production is increased, revenues would be produced, and those revenues would be used to fund the investment in our infrastructure. The plan proposes 5 major reforms. Let’s touch on each of them briefly.
The first major reform the Speaker proposes is to ensure that taxpayer dollars are spent on high-priority infrastructure projects. The plan notes that currently, only about 75% of funds from the Highway Trust Fund go to core infrastructure projects, such as the National Interstate Highway system that we all know and use. Now, the Highway Trust Fund was established in 1956. It is a transportation fund that spends money on maintaining and repairing the nation’s highways. And it’s funded with money received from the federal fuel or gas tax.
So the plan asserts that only 75% of the funds in the Highway Trust Fund go toward high priority infrastructure projects. The plan contends that a large portion of the fund goes towards projects that have no bearing on the nation’s economy. Things like beautification projects, the construction of bike paths, and sidewalk lighting. The plan would eliminate federal mandates that force states to spend highway fund money on non-highway related projects. The plan contends that this step would ensure that funds get spent only on the highest priority projects.
The second major reform the plan proposes is to eliminate special interest earmarks and wasteful spending from the bill. So this plan would contain no earmarks. Earmarks are provisions that are included in spending bills that direct a certain amount of funds to specific projects or special interests. Members of Congress usually insert these provisions into large spending or appropriations bills to direct funds to particular projects in their home state or district. The plan sites past infrastructure bills that were laden with earmarks, and that cost taxpayers billions of dollars. A 1998 transportation bill, for example, had almost 2,000 earmarks totaling over $9 billion. A 2005 highway bill had over 5,000 earmarks costing almost $22 billion. This plan would contain no earmarks ensuring that funding is spent only on the most important projects.
The third major reform proposed in the plan is that it seeks to significantly decrease the lead time of bureaucratic approvals for infrastructure projects. The plan points out that the governmental process for permits and other approvals can take as long as 15 years to navigate, causing delays and cost increases. The plan calls for such improvements in the approval process, as allowing federal agencies to review projects concurrently, and giving more decision-making authority to the states.
The fourth reform is that the plan seeks to trim some of the fat from National Transportation programs. The plan points out that there are currently more than 100 federal surface transportation programs, many of which overlap and provide duplicate services. The plan calls for the consolidation of 70 of these programs. It points out that consolidating these programs and maybe eliminating some of them altogether, will focus taxpayer funds on high priority projects, and not on wasteful programs.
The fifth reform of the plan is that it encourages more involvement from the private sector in infrastructure projects. The plan calls for leveraging transportation loan programs, and adopting new policies that will make investment in infrastructure more attractive to the private sector. As an example, the plan sites building upon the Transportation Infrastructure Finance and Innovation Act loan program which has so far, proven a success. The TIFIA, as it is known for short, is a loan program that provides Federal assistance in the form of loans, loan guarantees and lines of credit to finance regional and national infrastructure projects. The plan contends that embracing more private sector involvement will generate more revenue for projects as well as greater job growth.
So those are the major reforms announced in the plan. And that brings us to the last major facet of the deal, how it will to be paid for. Now, the Speaker contends that the plan can be paid for by expanding domestic energy production. Now, that expansion would be accomplished mainly by removing barriers the Speaker contends exist, to domestic energy production. Specifically, the plan calls for 3 initiatives: Lifting the ban on offshore drilling, promoting research and development of oil shale, and opening around 3% of ANWR acreage in Alaska, for oil and natural gas development. Let’s go over some details for each of these, starting with the ban on offshore drilling.
In 1972 Congress passed a law that set aside certain areas off the coasts of the United States, as National Marine Sanctuaries. The law banned certain activities including oil and gas drilling from these offshore areas. Over the years, several Presidents, as well as Congress, have extended the ban and have expanded the territories which the ban covers. Today the ban covers areas off the East and West coasts, as well as the northern Aleutian basin in Alaska.
In 2010, President Obama announced that he was ending the ban, and was opening up areas off the east coast and Alaska to drilling and exploration. It was part of an initial push for a new, broader, more comprehensive energy policy for America. But less than 1 month after the announcement was made, there was an explosion on an oil rig in the Gulf of Mexico, off the coast of Louisiana. The explosion killed 11 men and caused oil to spill unabated into open waters from the damaged underwater well. The leak lasted nearly 3 months, and dumped nearly 5 million barrels of oil into Gulf waters before it was contained. The BP oil spill, as it is known, was the worst maritime oil spill in history.
In December 2010, in light of the oil spill, and the industry’s perceived poor response to it, the Obama administration announced that it was reversing its previous decision, and keeping the ban on offshore drilling in place. And it has remained in place since. Speaker Boehner’s plan calls for a lift of that ban. It contends that allowing offshore drilling and exploration would create revenue as well as jobs.
Now the second initiative for domestic energy production the plan calls for, is developing oil shale research and technology. Oil shale is sedimentary rock that contains a substance called kerogen, which is basically a building block of oil. Kerogen is oil that hasn’t yet had a chance to become oil in nature. The rocks that contain Kerogen would have to remain buried for a few million more years, in order for it to turn into petroleum. However, there are ways that are currently being developed, and are continually being improved on, to speed nature’s process up and turn oil shale into oil.
Now, the place where the largest oil shale reserves have been discovered is right here in the US. The area that forms the “T” shaped border between Colorado, Utah and Wyoming, have been found to contain the largest oil shale reserves in the world. More than the proven oil reserves found in Saudi Arabia. An estimated one and a half trillion barrels worth are thought to be buried there. Enough, it is estimated, to fuel America’s daily energy needs for almost 200 years.
Now the catch is, the process that turns oil shale into oil, is very intensive and requires a lot of energy. The rocks that contain the Kerogen need to be heated to almost 900 degrees before the substances can be extracted and turned into oil. The process requires a lot of water and a lot of electricity, both of which are already in short supply in that part of the country. Additionally, vast amounts of land would have to be transferred to oil shale development, raising concerns about wildlife displacement. So there are a lot of environmental concerns surrounding this issue.
The third initiative in Speaker Boehner’s plan calls for opening a small amount of ANWR land up for oil and gas exploration. ANWR is the Arctic National Wildlife Refuge in northern Alaska. The area was placed under federal protection in 1960 as a wildlife refuge, and has been expanded over subsequent decades. Today it encompasses about 19 million acres in the northeast corner of Alaska.
Now the controversy over ANWR surrounds whether parts of the refuge should be opened up for oil exploration and drilling. Geological studies have determined that there may be sizable oil reserves in the part of ANWR known as the Coastal Plain. It’s the northern part of ANWR that is bordered by the Beaufort sea to the north, and the Canadian border nearby to the east.
Although studies have indicated that there are large quantities of recoverable oil in ANWR, drilling would be required to know how much there is for sure. Now, advocates of drilling indicate that areas to the west of the Coastal plain and areas to the east, across the Canadian border, contain land where major oil reserves have been discovered. They also argue that the areas where drilling would occur contain very little wildlife that would be displaced or affected. They contend that these areas are not just undeveloped, they are basically barren.
Environmentalist argue that development would indeed have a detrimental effect on wildlife. They point to the fact that the coastal plain is calving ground for tens of thousands of caribou. They also contend that the oil reserves that appear to be present, are of such small quantities that they wouldn’t reasonably affect our oil supplies in any significant way. They claim that such small quantities would not be worth the irreversible damage drilling would do to one of the nation’s most pristine wildlife refuges. Speaker Boehner’s plan would open up part of ANWR, about 3%, for gas and oil exploration. The plan claims opening up even a small portion of ANWR would create tens of thousands of jobs.
So those are the major facets of the plan and how it would be paid for. The fact that Speaker Boehner attempts to address the nation’s energy agenda is commendable. The US has gone very long, and many believe too long, without a comprehensive energy policy. Expanding domestic energy production is a goal worth exploring. It would be hard to argue that the US becoming more self-sufficient when it comes to energy is not a good thing.
But something that jumps out at you right away is how a major aspect of this plan involves, basically, an attack on the environment. The plan does need to be paid for, because we have to be conscious of our ever growing national debt. And some of the energy initiatives proposed are not without merit. There is great potential, for example, in the area of oil shale. But is settling old scores with the environmental movement the best, most imaginative solutions we can come up with?
We detailed President Obama’s job’s plan a few weeks ago and his plan also called for major investment in infrastructure. It seems that infrastructure development is something both parties agree on. The sticking point seems to be how that development gets paid for. The President proposed paying for his plan with tax increases on the wealthiest of Americans. Speaker Boehner seems to be proposing reversing decade’s long protections on the environment. I’m certain a compromise can be found. But it can only be found if parties are acting in good faith. No compromise will be found if the only goal is political opportunism.
It’s time our elected officials get us on the road to recovery. Our problems are long term problems, and we need long term solutions. Solutions that focus on short term politics and currying favor with special interest groups will not get us where we need to go. It will only get us more stagnation and more wasted time. It’s time America gets put first. Ahead of party and ahead of politics.