McCain’s Power Outage

McCain has spent the week focusing on energy policy, making some surprising, and inaccurate, statements.

Among them:

• He said that ending a moratorium on offshore oil drilling "would be very helpful in the short term in resolving our energy crisis." But according to a government report, offshore oil wouldn’t have much of an impact on supply or prices until 2030. Update, June 24: At a town hall event on June 23, McCain didn’t claim that offshore drilling would lower prices in the short term, but that it would provide "psychological impact that I think is beneficial."
• McCain tried to paint Obama as an opponent of nuclear power, yet Obama has said he is open to nuclear energy being part of the solution and has supported bills that contained nuclear subsidies.
• He has soft-pedaled the "cap" portion of his cap-and-trade proposal for greenhouse gases, even denying that it would be a mandate. The cap is a mandatory limit, however, and McCain even says so on his Web site.
• McCain’s new ad, running this week, rightly says that he bucked his party in supporting action on climate change years ago. But its images of windmills and solar panels are misleading in that he supports subsidies for nuclear power, which isn’t pictured, and opposes them for wind and solar energy.

• McCain continues to say that a suspension of the federal gas tax will lower prices for consumers, though hundreds of economists say he is wrong.

Sen. John McCain spent much of the week focusing on energy policy and the pain that drivers are feeling every time they fill their tanks. He outlined his solutions in speeches on Tuesday and Wednesday, and he began running an ad touting his early willingness to break with the GOP on the issue of climate change. 

On Board for Offshore Drilling

On Monday, McCain told reporters that permitting offshore drilling "would be very helpful in the short term in resolving our energy crisis." Tuesday, he formally unveiled the proposal in a speech to oil industry executives.

What McCain wants to do is expand the offshore areas, commonly referred to as the "outer continental shelf" that are open to oil exploration and drilling. The OCS is composed of the "submerged lands, subsoil, and seabed" under the seas extending from 3 to 9 nautical miles from the U.S. shoreline, depending on the state, to at least 200 nautical miles outward, according to the federal government.

But among the biggest questions about McCain’s proposal to lift the moratorium are how soon any new drilling would produce a significant flow of oil, and how much oil is sitting there in the first place. As recently as May 29, at a town hall appearance in Greendale, Wis., McCain noted that lifting the moratorium would be at best a band-aid for the nation’s energy problems and that the oil it would provide wouldn’t be available anytime soon: "[W]ith those resources, which would take years to develop, you would only postpone or temporarily relieve our dependency on fossil fuels," McCain said. "We are going to have to go to alternative energy."

He certainly has the right to change his opinion on policy options. But the facts are more in line with his earlier statement that drilling would not offer short-term relief for energy prices. The Energy and Information Administration concluded in a 2007 report that:

EIA: The projections in the OCS (Outer Continental Shelf) access case indicate that access to the Pacific, Atlantic, and eastern Gulf regions would not have a significant impact on domestic crude oil and natural gas production or prices before 2030.

Something that takes 22 years to deliver significant results hardly qualifies as a "short-term" solution.

Why would it take so long? To vastly oversimplify: First, the government has to identify properties to be leased and hold a lease sale. Then, winning bidders need to contract with drilling rigs (all of which are booked for the next five years, according to the New York Times), drill exploratory holes and analyze core samples – "They drilled 75 holes in the North Sea before they figured out the geology" sufficiently to begin drilling productive wells, says Lucian Pugliaresi, president of the oil industry-funded Energy Policy Research Foundation Inc. And then, if oil is found, companies would have to order and put in place production equipment, build pipelines to get the oil to shore, and get various permits and environmental analyses every step of the way.

Update, June 24: On Monday, June 23, McCain was asked about his offshore drilling proposal at a town hall event in Fresno, Calif. According to MSNBC, he didn’t claim that it would bring short-term relief in terms of supply or gas prices. Instead, he said there could be a psychological benefit. Here’s his response:

McCain, June 23: I don’t see an immediate relief, but I do see that exploitation of existing reserves that may exist — and in view of many experts that do exist off our coasts — is also a way that we need to provide relief. Even though it may take some years, the fact that we are exploiting those reserves would have psychological impact that I think is beneficial.

Been Down This Road Before

Also in his Tuesday speech, McCain was wrong to imply that regulation was the only thing standing in the way of building more refineries:

McCain: There’s so much regulation of the industry that the last American refinery was built when Jerry Ford was president.

McCain is correct that the last oil refinery was built during Ford’s presidency; however, he was incorrect to conclude that it is because "there’s so much regulation."

Regulation certainly plays a contributing role, but the bottom line is that owning a refinery is tough business. We’ve laid out the cost/benefit analysis of operating a refinery here and found that it would take 13 years of operation for one to turn a profit. However, there are still groups that are trying.

Quote Meltdown

McCain was off the mark in his Wednesday speech when he said, "Senator Obama says, ‘I am not a nuclear energy proponent.’ I think that makes him a nuclear energy opponent, though he does have a knack for nuance and it’s not entirely clear."

Obama’s answer to a question about alternative energy sources at an Iowa town hall in December was certainly nuanced: It was nearly three minutes long. But it also made clear that he is not an opponent of nuclear energy:

Obama, Dec. 30, 2007: There is no perfect energy source; everything has some problems, right now. We haven’t found it yet. … I have not ruled out nuclear as part of that package, but only so far, as it is clean and safe. I have the same attitude with respect to coal. … There is no one single optimal solution and we have to try everything to see what works.

In addition, Obama signed on as a cosponsor to the McCain-Lieberman cap-and-trade climate change bill, which contains billions in subsidies for nuclear power, and he supported the 2005 energy bill, which has billions more.

Cap-and-Trade: Game or Mandate?

McCain has lately taken to denying that he favors "mandatory" limits on greenhouse gas emissions, even though a government-imposed limit is central to the "cap and trade" legislation that he favors and has sponsored.

The 2003 bill he sponsored jointly with then-Democratic Sen. Joe Lieberman (now an Independent) laid out a cap-and-trade system, which would put the brakes on the release of carbon dioxide into the atmosphere by requiring utilities and other industries to limit emissions. Companies would be issued credits for carbon dioxide emissions; those that ratcheted down their CO2 production sufficiently could sell unused credits to others that needed them. But the cornerstone of any serious cap-and-trade proposal is the "cap" on the overall amount of CO2 being released, which would shrink over time. That’s also part of a 2007 bill McCain sponsored and the energy proposal he has put forth as a presidential candidate.

Yet McCain has been soft-pedaling the "cap" part of the equation. In several recent appearances, he has denied that his plan contains any mandates. In January, NBC moderator Tim Russert asked McCain about cap-and-trade at a Republican debate:

Russert, Jan. 24: Senator McCain, you are in favor of mandatory caps.

McCain: No, I’m in favor of cap-and-trade. And Joe Lieberman and I, one of my favorite Democrats and I, have proposed that – and we did the same thing with acid rain. They’re doing it in Europe now, although not very well.
And all we are saying is, "Look, if you can reduce your greenhouse gas emissions, you earn a credit. If somebody else is going to increase theirs, you can sell it to them." And, meanwhile, we have a gradual reduction in greenhouse gas emissions.

That sounds easy, doesn’t it? McCain followed up in an interview with the subscription-only newsletter Greenwire when he said:

McCain, Feb. 13: It’s not quote mandatory caps. It’s cap-and-trade, OK. It’s not mandatory caps to start with. It’s cap-and-trade. That’s very different. OK, because that’s a gradual reduction in greenhouse-gas emissions. So please portray it as cap-and-trade. That’s the way I call it.

At his press conference last Monday, he dodged the mandate once again:

Q: The European Union has set mandatory targets on renewable energy. Is that something you would consider in a McCain administration?

McCain, June 16: Sure. I believe in the cap-and-trade system, as you know. I would not at this time make those – impose a mandatory cap at this time. But I do believe that we have to establish targets for reductions of greenhouse gas emissions over time, and I think those can be met."

Without a mandatory cap, of course, there would be little incentive for companies to participate in the buying and selling of credits. The whole idea depends on the government setting a firm ceiling for emissions.

We’ll leave it to you to judge whether McCain misunderstands his own proposal, is hesitant to offend fellow Republicans who tend to shy away from government mandates or uses a different definition of the word "mandate" than most people.

But we’ll let McCain have the last word. From his Web site:

JohnMcCain.com: Climate Policy Should Be Built On Scientifically-Sound, Mandatory Emission Reduction Targets And Timetables.

[TET ]

Watch McCain for President Ad: "Global"

Announcer: John McCain stood up to the president and sounded the alarm on global warming, five years ago. Today, he has a realistic plan that will curb greenhouse gas emissions. A plan that will help grow our economy and protect our environment. Reform. Prosperity. Peace. John McCain.

John McCain: I’m John McCain and I approve this message. [/TET]