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Obama's Plan To Fund Clean Cars with Oil Royalties Faces Tough Test

Some see the president’s plan as an opportunity to expand drilling to protected public lands, including the Arctic National Wildlife Refuge.

Feb 25, 2013
President Obama delivers the State of the Union address on Feb. 13, 2013

WASHINGTON—With a couple of lines tucked into his State of the Union speech this month, President Obama pitched the tent for a three-ring circus starring advocates with competing agendas: controlling greenhouse gases, expanding fossil fuel development and conserving open spaces.

The idea Obama proposed would siphon $2 billion from the swelling oil and gas royalties the government expects to collect over the next decade and devote it to federally sponsored clean-car research that has been starved for cash. The question is what he will have to give up in negotiations to get what he wants.

"Much of our new-found energy is drawn from lands and waters that we, the public, own together," he said in the speech. "So tonight, I propose we use some of our oil and gas revenues to fund an Energy Security Trust that will drive new research and technology to shift our cars and trucks off oil for good."

The program Obama wants to bolster pays for research into batteries and other technologies that could expand the use of efficient, affordable cars that emit little or no carbon dioxide. Nearly every hybrid electric vehicle sold in the United States uses batteries developed in part through the Energy Department. But like other spending aimed at confronting climate change, the program is anathema to many conservatives.

Obama's sweetener—paying for clean-car research with drilling royalties—immediately attracted praise from those who favor more drilling and see it as an opening to expand drilling to areas where it is currently prohibited. But it has raised the hackles of some land conservationists, who have long fought for more royalty money to flow into the Land and Water Conservation Trust, which they say has been underfunded for years.

Like all spending decisions, the amount to be provided for clean energy research and the uses to be made of royalties are matters that only Congress, with its power of the purse, can decide.

What this all presages is an intense period of backroom horse-trading among parties who have long mistrusted each other, and who all have as much to lose as to gain.

"Obama is setting up the pieces for a game of chess," said David Friedman, a clean vehicles expert at the Union of Concerned Scientists.

Sam Ori, director of policy for Securing America's Future Energy, or SAFE, the group that first came up with the funding plan that Obama endorsed, was more blunt: "We believe there has to be something in a program like this for Republicans," he said. "Otherwise it is not going to go anywhere."

SAFE Supports Drilling in Protected Areas

SAFE is a group of leading business executives and retired generals, admirals and diplomats dedicated to maintaining reliable sources of domestic energy and minimizing the nation’s exposure to price disruptions.  In his speech, Obama embraced SAFE’s ideas without reservation.

"If a non-partisan coalition of CEOs and retired generals and admirals can get behind this idea, then so can we," Obama said. "Let's take their advice and free our families and businesses from the painful spikes in gas prices we've put up with for far too long."

What the president did not mention is that SAFE's plan expressly recommends expanding drilling on public lands, even in off-limits areas like the Arctic National Wildlife Refuge that he has previously pledged to protect.

As envisioned in a detailed report issued in December by SAFE's leadership council, the Trust would be "seeded with revenues from the development of oil and natural gas in federal lands currently inaccessible to industry due to either Congressional or Administrative action. These areas include: the Pacific, Atlantic, and Eastern Gulf of Mexico planning areas of the federal Outer Continental Shelf (OCS) and the 1002 area of the Arctic National Wildlife Refuge (ANWR)."

The 1002 area of the refuge, named after a section of the governing statute, comprises 1.5 million acres of coastal plain that contain substantial oil and gas reserves as well as prime wildlife habitat.

The day after Obama’s speech, Robbie Diamond, SAFE's president, called the moment "a unique opportunity to have our cake and eat it too."

But in the days that followed, White House officials distanced themselves from that part of SAFE's plan, saying the administration would rely on cash flow from existing leases.

A White House official, speaking on background, said the administration has no plan to open the refuge to drilling or to go beyond its current five-year plan for offshore leasing. Indeed, the Interior Department is putting the final touches on a plan that recommended, in its first draft, designating as untouchable wilderness the very section of the wildlife refuge that SAFE wants to open up.

SAFE expects the details to be a matter of continuing negotiation, according to Ori. "We are interested in continuing to work not just with the White House but on the Hill, hopefully to get to something that both sides can support," he said.

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