Gangster politics: a handful of GOP senators came close to blocking sound energy policy

National Review, Oct 20, 2008 by Stephen Spruiell

IN a year otherwise favoring Democrats, high gas prices served up a potential windfall for the GOP. House Republicans rallied around a shared opposition to the congressional ban on offshore drilling, and even John McCain got in on the act. By mid-September, two-thirds of the public supported lifting the ban. The Democrats, lacking the votes to renew it, let it lapse on Oct. 1.

The victory, such as it was, almost didn't happen. In early August, when pressure on Democrats was at its highest point, five Republicans and five Democrats formed a "Gang of 10" in the Senate and put forward energy legislation that would have kept the ban in place for all but a small portion of the Outer Continental Shelf. In exchange for this tiny bit of drilling, the gang's proposal called for a big chunk of subsidies for "green" energy, giving Democrats a soft place to land on the drilling issue. The gang ended up falling apart, but its flawed compromise will undoubtedly serve as a model when Democrats attempt to reinstate the ban next year.

The gang's compromise legislation started taking shape in June--before public anger over high gas prices really peaked. An aide to a senator who opposed the gang's efforts tells NATIONAL REVIEW that the gang started as a working group being run by Georgia Republican Saxby Chambliss, which Senate GOP leader Mitch McConnell allowed "under the guise of being able to go out and negotiate with Democrats." According to the aide, McConnell told Chambliss to "negotiate, but don't come up with an agreement that negates our principles."

Chambliss's Democratic counterpart in the negotiations was Senate Budget Committee chairman Kent Conrad of North Dakota. At the time, Chambliss had just finished working closely with Conrad on the passage of a new farm bill. Chambliss, the ranking Republican on the Agriculture Committee, needed Conrad's help to square that bill's $300 billion price tag.

Chambliss and Conrad are both farmstate senators and supporters of the handout-dependent biofuels industry. The farm bill they put together authorized billions in new subsidies for biofuels, including loan guarantees for the construction of biofuel refineries, $400 million in direct payments to biofuel producers, and over $1 billion to subsidize the conversion of domestically produced sugar into ethanol. (Brazil has plenty of cheap sugar-based ethanol, but the farm bill renewed the 54-cent-per-gallon tariff that keeps it locked out.)

Biofuel supporters in Congress can feed from both the agriculture and the energy troughs, and this summer presented an excellent opportunity for Chambliss and Conrad to move seamlessly from one to the next. Most of the gangsters they recruited--including Republicans Johnny Isakson of Georgia, John Thune of South Dakota, and Bob Corker of Tennessee--also come from states with significant biofuel interests. (The fifth Republican, Lindsey Graham, saw the bill as an opportunity to promote nuclear power in his home state of South Carolina.)

The gang's proposal called for a sevenfold increase in federal funding for biofuels research--from around $350 million to nearly $3 billion per year. Most of this money would fund research into cellulosic ethanol, which is produced from nonedible plant matter like wood chips and switchgrass. The concept is similar to the "Mr. Fusion" device from Back to the Future: Take a bunch of garbage that nobody wants and turn it into energy. And, like Back to the Future, cellulosic ethanol is pure fantasy.

Economic barriers to the cost-efficient production of cellulosic ethanol are so numerous that time travel seems more probable. Breaking down the indigestible mass normally requires the use of expensive enzymes, and even methods that avoid this process run into problems of scale involving the transport of enormous quantities of feedstock. Suffice it to say that cellulosic ethanol cannot currently compete with its also-inefficient corn-based cousin, much less gasoline, on a cost-per-gallon basis.

Unfortunately, pro-biofuel politicians have taken an "If you build it, they will come" approach to cellulosic ethanol. A 2007 law mandates its use in gasoline beginning in 2010, creating a market where there was none, and the Department of Energy has started pumping money into the construction of refineries. Last year, the DOE awarded $76 million to Range Fuels for the construction of the nation's first commercial-scale cellulosic-ethanol plant in Chambliss and Isakson's home state of Georgia.

The idea behind the gang's massive increase in funding for biofuels research is that the industry needs to solve the cost-efficiency problem before the mandates kick in and the refineries come online. This explains not just Chambliss's and Isakson's support, but also Bob Corker's. Last year, Corker put out a press release bragging about his role in securing $125 million for a bio-energy research center at Oak Ridge National Laboratories in Tennessee. Oak Ridge would be perfectly placed to compete for billions of additional research dollars.