Privatization CP – RGVThis is not the privates CP, it is the privatization CP.

NEG

CP Solvency

One Massive Solvency Mechanism – The Heritage CP

List of Various MechanismsLoris 11 (Nicolas Loris, analyst at the Heritage Foundation’s Roe Institute of Economic Policy Studies, July 26, 2011, “no more energy subsidies: prevent the new, repeal the old” http://www.heritage.org/research/reports/2011/07/no-more-energy-subsidies-prevent-the-new-repeal-the-old)

Abstract: Are Americans energy dependent? Yes—dependent on government energy subsidies. In 2007, American taxpayers subsidized government-preferred energy sources to the tune of nearly $17 billion. Increasingly, it is politicians in Washington who

decide how Americans produce and consume energy. But subsidies for special interests stifle competition, raise energy prices, and decrease economic opportunities. It is time for Washington to eliminate all government subsidies and special policy treatments that benefit certain industries at the expense of others . Energy companies should rely on innovation and efficiency, not American taxpayers, to thrive in a system of free enterprise. Americans are becoming too energy dependent. But it is not dependence on foreign sources of energy that is the problem; it is growing dependence on the federal government. According to the Energy Information Administration, the United States spent $8.2 billion on energy subsidies in 1999. That spending more than doubled to $16.6 billion in 2007, and with the stimulus funding and other provisions, it promises

to have a much higher price tag in the years ahead. With direct expenditures, targeted tax breaks, mandates, loan guarantees, and other preferential treatment, Washington is deciding how Americans produce and consume energy. Increasing America’s access to energy resources creates competition, lowers prices, drives innovation, and creates economic opportunity. Subsidies do the opposite.

Congress should make it a priority to ensure that no new subsidies are put in place and remove the ones already in place. What Are Subsidies and Why Are They Harmful? In public policy , subsidies come in many shapes and sizes and are thus often difficult to define comprehensively. The definition “direct transfer of money to a group or industry” is too narrow, so for the purpose of this paper, a better definition is

“Using the political process to support the production or consumption of one good over another.” Providing subsidies is bad economic policy for a number of reasons. Government support that targets one group or industry artificially props up that market. Rather than increase competition, a special endorsement from the government gives one technology an unfair price advantage over other ones . Further, subsidies reduce the incentive for that technology to become cost- competitive and encourage dependence on the preferential treatment that government gives them. Those energy

sources that needhelp from the government are those that cannot compete economically without them. If a project makes economic sense, however, the investments will occur without the subsidy. In that

case, the subsidies simply offset the private-sector investments that would have been made

either way. Another destructive feature of subsidies is that they allow Washington to direct the flow of private-sector investments. Targeted direct expenditures, tax breaks, loan guarantees, and other government subsidies allocate resources away from more competitive projects. If the government gives a tax credit to banana producers only, it shifts more labor and capital towards banana production and away from other economic activities, like strawberry or grape production. The market, not

politicians in Washington, is a good determinant of how to allocate resources and meet consumer demand. Furthermore, when the government dictates how private-sector resources are spent, those industries that benefit greatly from such policy decisions will spend more money lobbying for government handouts. The banana producers will push for tax-credit extensions. The apple producers will complain that they are at a disadvantage and lobby for their own handouts. This process results in the continuous picking ofwinners and

losers. It is not the role of the government to determine what type of energy consumers use and using the political process to pick winners and losers distorts

the marketplace and increases the incentive to energy companies to lobby for handouts. Conversely, reducing government control of the energy economy reduces the incentive to use the political process for gain. Congress should make it a

priority to prevent any new subsidization of energy sources and technologies and peel back the ones in place. Forcing sunsets of preferential tax credits and offsetting the tax increases with lower rates across the board would simplify and improve the tax code. Prevent and Remove Direct Spending There has been a growth in direct energy expenditures in the United States, largely because of the more than $40 billion awarded to the Department of Energy (DOE) from the American Recovery and Reinvestment Act (ARRA), known as the stimulus bill. Of that amount, $16.8 billion went to the Office of Energy Efficiency and Renewable Energy (EERE). But even through its yearly budget process, the Department of Energy spends billions of dollars to fund applied-research programs. Another program the Energy Information Administration (EIA) lists as a direct expenditure is the Low Income Home Energy Assistance Program (LIHEAP). To prevent more direct government market distortions in the energy sector and prevent wasting taxpayer dollars, Congress should:

Prohibit any new funding. Congress should ensure that no taxpayer dollars go directly to energy production, storage, efficiency, infrastructure, or transportation for non-government consumers.

While this type of spending may be important, it is better financed through the private sector, which is

better positioned to make efficient investments that meet consumers’ needs. Eliminate government attempts to commercialize technologies. The DOE has spent billions ofresearch dollars on technologies to reduce carbon dioxide emissions, including energy efficiency technologies, renewable energy sources, carbon capture and sequestration, clean

coal technologies, nuclear energy, and alternative-energy vehicles. All these energy sources and technologies are available today, but they are not commercially viable, whether due to burdensome regulations or simply because they are still prohibitively expensive. It is not the government’s role to force these technologies into the marketplace and Congress should remove all funding for DOE-funded commercial activities and focus on removing the onerous regulatory barriers that prevent energy technologies from reaching the market.[1] Congress should focus on a more efficient system in

which the private sector can use government resources such as national laboratories funded by the private sector. Eliminate LIHEAP. LIHEAP is meant to help low-income households pay fuel bills, but it has rapidly expanded, is duplicative, and has been riddled with fraud and abuse. A 2010 Government Accountability Office (GAO) study found that the Department of Health and Human Services distributed funds to thousands of deceased and incarcerated people and claims that LIHEAP-application

processors awarded funds to GAO officials using fake addresses and fake energy bills.[2] Eliminating LIHEAP certainly does not mean there will be no money for low-income households to pay for energy costs. The federal government runs more than 70 means-tested aid programs that provide cash for food, housing, medical care, and social services. Total federal and state spending on means-tested assistance to low-income persons will exceed $900 billion this year.[3] Furthermore, cash, food, housing, and energy aid are highly fungible when they reach the household level, so households are in the best position

to determine which good they need most. While President Barack Obama proposed to significantly cut LIHEAP in his FY 2012 budget request, Congress should eliminate LIHEAP funding entirely. Tax Credits Special tax treatment can serve the same purpose as a subsidy by uniquely favoring one industry. Targeted tax credits divert resources to the special interests that Congress wants to succeed and moves the decision-making process away from the marketplace.[4] This has been an increasingly attractive way for the government to award preferential treatment to certain energy industries. The number of energy tax programs expanded from 11 in 1999 to 38 in President George W. Bush’s 2007 budget.[5] According to the EIA, tax expenditures comprise almost two-thirds of electricity

subsidies.[6] Ideally, Congress should immediately remove all distortionary energy tax policy—meaning any tax policy that picks certain industries as winners and losers in the market—and offset those repeals with a broad lower tax cut. In order to wean industries off preferential treatment, Congress should create a three-year window for all energy tax expenditures in effect. This should not include broadly available tax deductions that apply across multiple sectors.[7] Three priorities for Congress should be:

No new tax credits. Congress should not implement any new tax credits for energy production, energy infrastructure, transportation (production and consumption), or energy efficiency initiatives. This will prevent the federal government from continuing to pick winners and losers, and will also ensure that

Congress cannot use the tax code to direct investments. Force sunsetting tax credits to sunset. One of the larger problems with targeted tax credits is that upon expiration, industry groups will lobby Members to expand them for another year, or multiple years. Congress should specify that any tax credit set to expire December 31, 2011, or on December 31, 2012,

cannot be extended and should be accompanied with an offsetting tax reduction. Expedite sunsetting . Congress should set expedited sunset clauses for any energy tax expenditure not set to expire at the end of the 2012. Moreover, Congress should create a three-year window for all other tax credits that extend multiple years or do not expire and reduce the percentage by one-third after every year. Any tax credit tied to production should follow the same schedule.[8] This timeframe will give industries a predictable window to lower costs and determine whether they can compete without the federal government’s help. Congress should then reduce other taxes by the amount of revenue that expediting the elimination of these unsound policies would raise. Immediate Expensing Rules Another way in which certain industries benefit over others relates to how companies can expense capital costs. For instance, oil and gas

companies receive more generous treatment than do other industries through expensing of intangible drilling costs. A simple solution is to allow all companies, including oil and gas companies, to be able to expense their full capital costs immediately. Immediate expensing allows companies to deduct the cost of capital purchases at the time they occur rather than deducting that cost over many years based on cumbersome depreciation schedules. Expensing is the proper treatment of capital expenditures. Depreciation raises the cost of capital and discourages companies from hiring new workers and increasing wages for existing employees. Immediate expensing for all new plant and equipment costs—for any industry or type of equipment—would allow newer equipment to come online faster, which would improve energy efficiency and overall economic efficiency. Immediate expensing is good policy and Congress should simplify the tax code and make immediate expensing permanently available for all business investments. Prevent and Remove Other Market Distortions The government distorts the energy market in several other ways, too—through loan guarantees, insurance programs, mandates, tariffs on imported energy, and energy sales at below-market costs. To eliminate these distortions, Congress should:

Prohibit any new loan guarantees or other capital subsidy programs. The Energy Policy Act of 2005 (EPACT) included loan guarantees for nuclear power, and Section 1705 of the American

Reinvestment and Recovery Act of 2009 amended EPACT to include loans for renewable energy and biofuel projects and electric power transmission systems that begin construction before October 1, 2011. Congress appropriated $6 billion for the credit subsidy costs of the Section 1705 loans. A new capital subsidy program gaining some traction in Congress would be to create a Clean Energy Deployment Administration within DOE, also known as a “green bank” to provide loans, loan guarantees, and clean-energy-backed bonds to carbon-free technologies that

commercial lenders believe are too risky. The DOE has no role to play as a banker. These capital subsidy programs distort normal market forces and encourage dependence on government because the government subsidizes a portion of the actual cost of a project and directs capital away from more competitive projects.[9]President Obama proposed expanding the program by $200 million, which could cover an additional $2 billion in loans. No loan guarantee program should be expanded, nor should the government implement any new capital subsidy programs. Restructure public power. Federal utilities, known as Power Marketing Administrations (PMAs), were set up to provide cheap electricity to rural areas. PMAs can sell electricity at below-market rates because of favorable financing terms—they receive federal tax exemptions and receive loans at

below-market interest rates. Construction, rehabilitation, operation, and maintenance costs for PMAs are financed through the main DOE budget, offset collections, alternative financing, and a reimbursable agreement with the Bureau of Reclamation. Furthermore, rural electric cooperatives (RECs) are private organizations, in many cases non-profit, that provide about 12 percent of the

nation’s electricity sales. RECs receive special tax exemptions and low-interest loans from the government. Congress should remove privileges for federal utilities, municipal power companies, and electricity cooperatives and, ultimately, sell off PMAs to private buyers. Restructure insurance and risk mitigation . Several government programs

offer liability insurance schemes for specific industries. While some of these programs may have been justifiable in the past to protect private entities that engaged in high-risk

operations in support of vital national interests, they now often serve to subsidize insurance costs for private, profit-seeking industries. Two examples are the $75 million liability cap for offshore oil and gas operations and the Price–Anderson Act of 1957, which provides a liability regime for the nuclear industry that extends through 2025. Given the problem of uncapped tort liability that leads to frivolous lawsuits, removing the cap entirely without implementing a new system would subject covered industries to artificially high costs. Instead, Congress should reform liability caps, reforming Price–Anderson when it expires, in a way that accurately assigns risk and liability to those engaged covered activities. [10] Eliminate production mandates and tariffs on imported energy. Mandates such as the ethanol production quota guarantee ethanol producers a share of the marketplace. The tariff makes it more costly to import ethanol at a cheaper price. Congress should repeal both

policies. Removing Subsidies Benefits Consumers, Taxpayers, and Industry Energy industries should be freed from all government subsidies and special policy treatment that benefit certain industries at the expense of others. This would allow companies to rely on innovation and efficiency, not American taxpayers, to remain competitive and thrive in a system of free enterprise. Removing market distortions would allow resources to be allocated to their most efficient use. The industries and companies that provide the most benefit to the consumer will be the ones that are successful.

Small MechanismsRemoving loan guarantees prevents market distortion Loris 11 (Nicolas Loris, analyst at the Heritage Foundation’s Roe Institute of Economic Policy Studies, July 26, 2011, “no more energy subsidies: prevent the new, repeal the old” http://www.heritage.org/research/reports/2011/07/no-more-energy-subsidies-prevent-the-new-repeal-the-old)

Prohibit any new loan guarantees or other capital subsidy programs. The Energy Policy Act of 2005 (EPACT) included loan guarantees for nuclear power, and Section 1705 of the American Reinvestment and

Recovery Act of 2009 amended EPACT to include loans for renewable energy and biofuel projects and electric power transmission systems that begin construction before October 1, 2011. Congress appropriated $6 billion for the credit subsidy costs of the Section 1705 loans. A new capital subsidy program gaining some traction in Congress would be to create a Clean Energy Deployment Administration within DOE, also known as a “green bank” to provide loans, loan guarantees, and clean-energy-backed bonds to carbon-free technologies that commercial lenders

believe are too risky. The DOE has no role to play as a banker. These capital subsidy programs distort normal market forces and encourage dependence on government because the government subsidizes a portion of the actual cost of a project and directs capital away from more competitive projects.[9]President Obama proposed expanding the program by $200 million, which could cover an additional $2 billion in loans. No loan guarantee program should be expanded, nor should the government implement any new capital subsidy programs.

Selling public power to private buyers prevents government interventionLoris 11 (Nicolas Loris, analyst at the Heritage Foundation’s Roe Institute of Economic Policy Studies, July 26, 2011, “no more energy subsidies: prevent the new, repeal the old” http://www.heritage.org/research/reports/2011/07/no-more-energy-subsidies-prevent-the-new-repeal-the-old)

Restructure public power. Federal utilities, known as Power Marketing Administrations (PMAs), were set up to provide cheap electricity to rural areas. PMAs can sell electricity at below-market rates because of favorable financing terms—they receive

federal tax exemptions and receive loans at below-market interest rates. Construction, rehabilitation, operation, and maintenance costs for PMAs are financed through the main DOE budget, offset collections, alternative financing, and a reimbursable agreement with the Bureau of Reclamation. Furthermore, rural electric cooperatives (RECs) are private organizations, in

many cases non-profit, that provide about 12 percent of the nation’s electricity sales. RECs receive special tax exemptions and low-interest loans from the government. Congress should remove privileges for federal utilities, municipal power companies, and electricity cooperatives and, ultimately, sell off PMAs to private buyers.

Restructuring risk mitigation solvesLoris 11 (Nicolas Loris, analyst at the Heritage Foundation’s Roe Institute of Economic Policy Studies, July 26, 2011, “no more energy subsidies: prevent the new, repeal the old” http://www.heritage.org/research/reports/2011/07/no-more-energy-subsidies-prevent-the-new-repeal-the-old)

Restructure insurance and risk mitigation. Several government programs offer liability insurance schemes

for specific industries. While some of these programs may have been justifiable in the past to protect private entities that engaged in high-risk operations in support of vital national interests, they now often serve to subsidize insurance costs for private, profit-seeking industries. Two examples are the $75 million liability cap for offshore oil and gas operations and the Price–Anderson Act of 1957, which provides a liability regime for the nuclear industry that extends through 2025. Given the problem of uncapped tort

liability that leads to frivolous lawsuits, removing the cap entirely without implementing a new system would subject covered industries to artificially high costs. Instead, Congress should reform liability caps, reforming Price–Anderson when it expires, in a way that accurately assigns risk and liability to those engaged covered activities. [10]

No Tax Credits – Energy

Sunsetting tax credits and prevent future tax credits solves Loris 11 (Nicolas Loris, analyst at the Heritage Foundation’s Roe Institute of Economic Policy Studies, July 26, 2011, “no more energy subsidies: prevent the new, repeal the old” http://www.heritage.org/research/reports/2011/07/no-more-energy-subsidies-prevent-the-new-repeal-the-old)

Tax Credits Special tax treatment can serve the same purpose as a subsidy by uniquely favoring one industry. Targeted tax credits divert resources to the special interests that Congress wants to succeed and moves the decision-making process away from the marketplace.[4] This has been an increasingly attractive way for the government to award preferential treatment to certain energy industries. The number of energy tax programs expanded from 11 in 1999 to 38 in President George W. Bush’s 2007 budget.[5] According to the EIA, tax expenditures comprise almost two-thirds of electricity subsidies.[6] Ideally,

Congress should immediately remove all distortionary energy tax policy—meaning any tax policy that picks certain industries as winners and losers in the market—and offset those repeals with a broad lower tax cut. In order to wean industries off preferential treatment, Congress should create a three-year window for all energy tax expenditures in effect. This should not include broadly

available tax deductions that apply across multiple sectors.[7] Three priorities for Congress should be: No new tax credits. Congress should not implement any new tax credits for energy production, energy infrastructure, transportation (production and consumption), or energy efficiency initiatives. This will prevent the federal government from continuing to pick winners and losers, and will also ensure that Congress cannot use the tax code to

direct investments. Force sunsetting tax credits to sunset. One of the larger problems with targeted tax credits is that upon expiration, industry groups will lobby Members to expand them for another year, or multiple years. Congress should specify that any tax credit set to expire December 31, 2011, or on December 31, 2012, cannot be extended and should be accompanied with an offsetting tax reduction. Expedite sunsetting . Congress should set expedited sunset clauses for any energy tax expenditure not set to expire at the end of the 2012. Moreover, Congress should create a three-year window for all other tax credits that extend multiple years or do not expire and reduce the percentage by one-third after every year. Any tax credit tied to production should follow the same schedule.[8] This timeframe will give industries a predictable window to lower costs and determine whether they can compete without the federal government’s help. Congress should then reduce other taxes by the amount of revenue that expediting the elimination of these unsound policies would raise.

Stop Spending – Energy

Prohibiting spending, eliminating government attempts at commercialization and eliminating LIHEAP solves Loris 11 (Nicolas Loris, analyst at the Heritage Foundation’s Roe Institute of Economic Policy Studies, July 26, 2011, “no more energy subsidies: prevent the new, repeal the old” http://www.heritage.org/research/reports/2011/07/no-more-energy-subsidies-prevent-the-new-repeal-the-old)

Prevent and Remove Direct Spending There has been a growth in direct energy expenditures in the United States, largely because of the more than $40 billion awarded to the Department of Energy (DOE) from the American Recovery and Reinvestment Act (ARRA), known as the stimulus bill. Of that amount, $16.8 billion went to the Office of Energy Efficiency and Renewable Energy (EERE). But even through its yearly budget process, the Department of Energy spends billions of dollars to fund applied-research programs. Another program the Energy Information Administration (EIA) lists as a direct expenditure is the

Low Income Home Energy Assistance Program (LIHEAP). To prevent more direct government market distortions in the energy sector and prevent wasting taxpayer dollars, Congress should: Prohibit any new funding. Congress should ensure that no taxpayer dollars go directly to energy production, storage, efficiency, infrastructure, or transportation for non-government

consumers. While this type of spending may be important, it is better financed through the private sector, which is better positioned to make efficient investments that meet consumers’ needs. Eliminate government attempts to commercialize technologies. The DOE has spent billions ofresearch dollars on technologies to reduce carbon dioxide emissions, including energy efficiency technologies, renewable energy sources, carbon capture and sequestration, clean coal technologies, nuclear

energy, and alternative-energy vehicles. All these energy sources and technologies are available today, but they are not commercially viable, whether due to burdensome regulations or simply because they are still prohibitively expensive. It is not the government’s role to force these technologies into the marketplace and Congress should remove all funding for DOE-funded commercial activities and focus on removing the onerous regulatory barriers that prevent energy technologies from reaching the market.[1] Congress should focus on a more efficient system in which the private sector can use

government resources such as national laboratories funded by the private sector. Eliminate LIHEAP. LIHEAP is

meant to help low-income households pay fuel bills, but it has rapidly expanded, is duplicative, and has been riddled with fraud and abuse. A 2010 Government Accountability Office (GAO) study found that the Department of Health and Human Services distributed funds to thousands of deceased and incarcerated people and claims that

LIHEAP-application processors awarded funds to GAO officials using fake addresses and fake energy bills.[2] Eliminating LIHEAP certainly does not mean there will be no money for low-income households to pay for energy costs. The federal government runs more than 70 means-tested aid programs that provide cash for food, housing, medical care, and social services. Total federal and state spending on means-tested assistance to low-income persons will exceed $900 billion this year.[3] Furthermore, cash, food, housing, and energy aid are highly fungible when they

reach the household level, so households are in the best position to determine which good they need most. While President Barack Obama proposed to significantly cut LIHEAP in his FY 2012 budget request, Congress should eliminate LIHEAP funding entirely.

Remove Subsidies – EnergyRemoving energy subsidies prevents government intervention and allows the free market to control investmentLoris 11 (Nicolas Loris, analyst at the Heritage Foundation’s Roe Institute of Economic Policy Studies, August 3, 2011, “power down the subsidies to energy producers” http://www.heritage.org/research/commentary/2011/08/power-down-the-subsidies-to-energy-producers mp) [we do not endorse the ableist language]America has an energy addiction - and it’s not an addiction to oil, as many politicians would have you think. It’s an addiction to

government subsidies. The addicts, you see, are energy producers, not the consumers. Their growing dependence on federal handouts is the real cause of America’s energy crisis.

Energy subsidies have needlessly wasted taxpayer dollars, retarded commercialization of new technologies and failed to reduce our reliance on foreign energy sources. Washington would do well to end all energy subsidies. Energy subsidies come in numerous forms ranging from direct expenditures

to targeted tax breaks, from production mandates to loan guarantees. Basically, any public policy that favorsthe production or consumption of one type of energy over another can be considered a subsidy. None of them come cheap. According to the Energy Information Agency, the federal government gave the energy industry $8.2 billion in subsidies and financial aid in 1999. This figure more

than doubled to $17.9 billion in 2007 and more than doubled again to $37.2 billion last year. But the damage subsidies inflict on our economy extends well beyond direct costs. A special endorsement from the government artificially props up that technology. This reduces the incentive for the producer to become cost-competitive, stifles innovation and encourages government dependence . The federal government has no business picking commercial winners and losers. That’s the job of the marketplace. Indeed, it’s doubly damaging when government decides to manipulate the market through subsidies, because government - almost invariably - picks losers.

That’s not surprising, because companies that seek handouts most strenuously are those that cannot compete without them. If a project makes economic sense, however, the private sector can and will provide all the investment needed. Of course, sometimes government offers subsidies to viable technologies. In those cases, your

taxpayer dollars simply offset the investments the company would have made anyway. Subsidies also allow government to steer the flow of private-sector investments - another destructive feature.

Supporters call this “investment for job creation.” But subsidies create jobs only in the politically-preferred industries. Economists are quick to point out that there’s no free lunch. When government gives a tax credit to banana producers, more labor and capital shift toward banana production. But

the money underwriting the tax credit is extracted from other economic activities,

like strawberry or grape production. There’s no net job creation. Similarly, the government can spend money to subsidize windmills, solar panels and natural gas vehicles, but those subsidies drain labor, capital and materials that could be used more efficiently elsewhere. The caustic nature of subsidies does not end there. When government dictates how the private sector allocates resources, those industries that benefit from such policy decisions will spend more money lobbying Capitol Hill . The banana producers will push for tax-credit extensions. The apple producers will complain that they are at a disadvantage and lobby for their own

handouts. This process results in the continuous picking of winners and losers, at ever higher stakes. Reducing government control of the energy economy decreases the incentive to use the political process for gain. The best way to do that is to 1) stop creating new energy subsidies ; 2) start removing those already in place ; and 3) use the money saved by repealing the special-interest subsidies to

implement a broad tax cut . Doing so would tremendously benefit Americans as taxpayers and energy consumers. Americans have no addiction to any particular energy source. They’ll buy whatever delivers a good value: Reliable energy at an affordable price. The real problem is the energy sectors’ addiction to subsidies. Central planning didn’t work for the Soviets, and it’s not working for the U.S. energy market. Eliminating subsidies for all energy sources would force all segments of the energy industry to develop the innovations and efficiencies needed to earn the business of American energy consumers.

Tax Incentives – Wind Renewing wind tax incentives is key to private investment Grassley et. al 14 (April 1, 2014, Sen. Chuck Grassley, Sen .Mark Udall, Rep. Steve King, Rep. Dave Loebsack, “Don’t pull the plug: wind energy empowers America” http://www.realclearenergy.org/articles/2014/04/01/dont_pull_the_plug_wind_energy_empowers_america_107648.html MP)

Specifically, we are pressing leaders in the House and Senate to prioritize extensions of thejob-creating investment and production tax credits for wind energy. This federal tax policy has helped to launch a carbon-free energy source and diversify America's portfolio of homegrown, alternative sources of energy. The tax credits have helped to support 85,000 U.S. jobs; trigger $105 billion in private sector investment; reduce the carbon footprint by displacing carbon-emitting energy with clean generation wind energy (U.S. wind power capacity of more than 60,000 megawatts avoids 100 million metric tons of carbon dioxide emissions, the equivalent of taking 17 million cars

off the road); and, harness an inexhaustible source of affordable, domestic electricity for consumers. Opponents of wind energy tax incentives argue the industry doesn't need any government support, yet there are plenty of tax policies for various industries that have been on the booksfor decades longer than those for wind. If one measure is on the table for potential removal, all of them should be on the table. Everything deserves

consideration on its merits, and wind energy stands up to scrutiny. Technology, tax incentives and private investment work to strengthen the renewable energy sector's position in the free marketplace and power America's carbon-free energy policies forward. Consider that 72 percent of a wind turbine's value today is made in the United States, compared to 25 percent in 2005. Over the past few decades, wind energy in the United States has changed the economic and energy landscape with nearly 900 utility-scale wind projects on the nation's electricity grid and more than 550 wind-related manufacturing facilities. Wind farms and/or factories have cropped up in all 50 states, putting people to work in good-paying jobs, diversifying farm and ranch income with an organic, drought- and weed-resistant cash crop, revitalizing rural communities and creating pollution-free electricity for millions of homes and businesses across the country. Under one estimate, if the United States reaches 20 percent of wind-generated electricity, carbon emissions by the electricity sector would fall by up to 25 percent. That's the equivalent of taking 140 million vehicles off the road. In fact, at 27.4 percent, Iowa leads the nation, powering the equivalent of 1.3 million homes - Colorado is not far behind, powering roughly a million homes. Critics looking for additional proof that wind energy tax incentives make good policy and goodpolitics

need to consider that wind energy is good for consumers, constituents and taxpayers. Wind energy projects operate in 70 percent of congressional districts. They require no oil spill liability fund to clean up environmental disasters. The U.S. taxpayer doesn't have to pay for catastrophic insurance as with nuclear power. But despite its successes in the last two decades, the still-emerging wind industry is working to rebound after setbacks from the uncertainty of expiring tax policy. It suffered 4,500 job losses in 2012 within its manufacturing sector as orders

and investment dwindled. Investment dropped from $25 billion to $2 billion. And this debate is not

taking place within a vacuum. A failure to renew wind energy tax credits not only jeopardizes U.S. manufacturing and our pursuit of energy security, but it also threatens U.S. leadership in the global energy race. If Congress pulls the rug out from under wind energy firms, other places like China are more than willing to step into the breach. The United States can't afford to pull the plug on wind energy tax incentives that foster responsible environmental stewardship, encourage entrepreneurs to innovate clean-energy technologies and investors to finance the job-creating infrastructure that delivers clean electricity to America's homes and businesses.

Private Investment – Green TechMarket forces are the best way to control green energy Taylor 12 (Jerry Taylor, senior fellow at the Cato Institute, critic of federal energy and environment policy, Jan 18, 2012, “It’s up to the private sector to invest in new technology” http://www.usnews.com/debate-club/should-the-government-invest-in-green-energy/its-up-to-the-private-sector-to-invest-in-new-technology)

In free-market economies, decisions about whether to invest in a technology or an industry are made by market actors with private capital. The promise of profit induces investment in promising ventures and the sting of loss penalizes those investments that turn out to be misguided. Of course, we live in a mixed economy in which government frequently assumes tasks that were once left to private individuals and corporations. Whether the government should invest in green energysuggests two questions. Are major green energy investments worthwhile in the first place? And should the Obama administration be spending $80 billion in grants and loans to make these investments on our collective behalf? Although proponents of green energy note that the sheer enormousness of the federal subsidy effort is helping to expand green energy generating capacity, stock prices for green energy firms are in free fall, even in China, because investors understand that this industry would disappear if the lavish federal and state subsidies were to end. [See a collection of political cartoons on energy policy.] The "green jobs" argument most commonly marshaled is thus looking thinner by the day. Data recently released by the U.S. Department of Energy reveal that the $38.6 billion of federally guaranteed loansto green energy projects have thus far produced only 3,545 new, permanent jobs ($5 million per job), far short of the 65,000 jobs promised by the administration. The DOE's Energy Information Administration reports that new renewable energy power plants will continue to be far less economically competitive than new gas-fired generation plants over the foreseeable future, even after federal subsidies are taken into account. Things look even worse in the transportation sector. The Obama administration has spent $5 billion to promote the manufacture of electric vehicles so as to put 1 million EVs on American roads by 2015. Butlayoffs and bankruptcies have plagued those receiving EV handouts because the technology is still problematic and the final product so expensive that consumers won't buy it, even with $7,500 rebates. Consequently, only two tenths of 1 percent of the cars sold this year were EVs, and the vast majority of those were in development long before President Obama took office. EV sales would have to be almost nine times greater per year to meet the administration's objective. The only good argument for federal handouts to green energy projects is the contention that there areenvironmental costs associated with fossil fuel consumption that are not internalized in fossil fuel prices, distorting the market and leading to more "brown" energy consumption than is economically efficient. But the most credible estimates about climate externalities put the cost at no more than $12 per ton of CO2. Internalizing that cost into fossil fuel prices would increase gasoline prices by no more than 12 cents per gallon, not enough to make EVs economically efficient or commercially competitive. If all the nation's electricity were coal-fired, a $12-a-ton CO2 tax would increase the price of electricity by about 1.3 cents per kWh, just over 10 percent above the average retail price of 12 cents per kWh. Given that a little over half of the nation's electricity is coal-fired, the actual increase would be even less. If green energy is commercially promising, then profit-hungry capitalists will make those investments. If it isn't, no amount of government subsidy will turn those economic sows' ears into wealth-creating silk purses.

Private investment solves and federal energy fails – mismanagement, cost overruns, unproductive. Edwards 09 (Chris Edwards, February 2009, “Energy Subsidies” http://www.downsizinggovernment.org/energy/energy-subsidies)

Federal energy research should be phased-out as an unneeded cost in an era of massive government budget deficits. The private sector is entirely capable of performing research into coal, nuclear, solar, and alternative energy sources for itself. Businesses will fund new technologies when there is a reasonable chance of commercial success, as they do

in every other private industry. Federal subsidies may even be actively damaging to our energy future by steering markets in the wrong direction, away from the best long-term energy solutions. Federal energy research has a poor track record. With regard to fossil fuels research, for

example, the Congressional Budget Office has concluded: "Federal programs have had a

long history of funding fossil-fuel technologies that, although interesting technically, had little chance of commercial implementation. As a result, much of the federal spending has not been productive."1 That is a

polite way of saying that these programs have been a waste of taxpayer money. This essay discusses the record of waste and mismanagement in Department of Energy projects during recent decades. The number of major spending boondoggles in this department is remarkable. The problem is that departmental leaders and members of Congress have shown an unfortunate urge to try and centrally plan the energy sector. But they have been responsible for throwing tens of billions of dollars of taxpayer money down the drain on projects of little

value. Policymakers often make grandiose promises, such as proposing to make America "energy independent" or to convert the nation to a "green economy." Those visions don't make any sense, but even if they did history shows that the Department of Energy would be incapable of putting them into place with any degree of competence.

Federal energy schemes are often poorly managed and generate huge cost overruns, or they aim at objectives that make little economic sense, as the following case studies illustrate.

Free markets solve better than the government Bradley 11 (Robert Bradley Jr., May 6, 2011, CEO and founder of the Institute for Energy research of Washington, D.C. and Houston, Texas, “A free market energy vision (Part I: worldview)” http://www.masterresource.org/2011/05/free-market-energy-vision-worldview-i/)

The argument for allowing free markets, rather than government planning, to address the four sustainability issues can be summarized as follows: 1. Estimated quantities of recoverable oil, gas, and coal have been increasing over time according to the

statistical record. Human ingenuity in market settings has and will continue to overcome nature’s limits, leaving in its wake errant forecasts of resource exhaustion. The

resource challenge is political: allowing access and incentive so that the ultimate resource , human innovation and entrepreneurshi p, can expand new energy supplies and multiply its

productive uses. Resourceship is a useful term to describe human inguenuity applied to minerals. 2. Statistics of air and water quality in the United States show dramatic environmental improvement and, in fact, indicate a positive correlation between energy usage and environmental improvement. While improvements have been achieved by politicized, command-and-control environmental regulation, the results have come at a higher cost than necessary. Worse-case events–such as the BP Horizon oil spill last year–inspire reform that drives the improvement process. Problems lead to improvement in a market process where actual damage is subject to restitution (as noted by Julian Simon). 3. Energy security in the electricity market is assured by abundant domestic coal and the fact that almost all of U.S. gas imports are from Canada. Most of the oil needed for transportation comes from domestic supplies supplemented by imports from a variety of countries led by Canada and Mexico. Oil imports from unstable or unfriendly nations, such as Venezuela and those in the Middle East, can be more effectively addressed by allowing greater access to U.S. oil and gas resources for development than by government discrimination

against oil imports that cannot discriminate between “good” and “bad” barrels. Even if the U.S. were to use the powers of government to pare domestic oil consumption, the resulting drop in world oil prices would encourage non-U.S. demand and subsidize foreign industry at our expense. The world oil market will continue to exist and thrive even with reduced U.S. participation, and this will become more so over time. 4. The global warming scare is plagued by open scientific questions, economic tradeoffs, and the reality that carbon-based energy is requisite to economic growth. Carbon rationing (via the Kyoto Protocol) is a failed policy for the developed world and a nonstarter for the developing world. Not only have targeted reductions proved to be elusive, the economic costs of carbon rationing are not unlike

those from (postulated) deleterious climate change. Opinion polls indicate that Americans have tired of false alarms concerning global warming and the human influence on climate. The public is wary of proffered remedies (government-this and government-that) which so happen to hamper the free market’s ability to provide affordable, reliable, consumer-driven energy. Rather than expand government, public policy should end preferential subsidies for politically favored energies, depoliticize access to public-land resources, and privatize such assets as the Strategic Petroleum Reserve and the federal power marketing agencies . Multi-billion-dollar energy programs at the U.S. Department of Energy can be eliminated. Such policy reform can simultaneously increase energy supply, improve energy security, reduce energy costs, and increase the size of the private sector relative to the public sector.

Private Investment – GeneralPrivate investment is critical for federal ocean policiesJOCI 12 (Joint Ocean Commission Initiative, 6-6-12, “U.S. Ocean Policy Report Card 2012” Meridian Institute http://www.jointoceancommission.org/resource-center/2-Report-Cards/2012-06-06_2012_JOCI_report_card.pdf)

what needs to be done to improve the grade? Funding for most federal ocean agencies and many state and local programs that

manage coastal and ocean resources has been level funded or reduced over the past years . In a time of stressed federal and state budgets, it is critical to maintain programs that support fundamental research, routine observations, and ongoing management of ocean and coastal resources. As a

long standing priority, the Joint Initiative strongly urges Congress to establish a dedicated ocean investment trust fund to provide the financial support for national, regional, state, and local programs working to understand and manage our

ocean and coastal resources. The monies for an ocean investment fund are readily available from an assessment of resource rents generated by private commercial activities occurring in federal waters on the outer continental shelf. These revenues should not replace existing, regular appropriations but rather be available to all coastal states and federal ocean agencies to maintain and expand core ocean and coastal science, observing, education, and management functions.

Privatization – Army CorpsPrivatization solves Army Corps projects – seaports, hydropower and maintenanceEdwards 12 (Chris Edwards, March 2012, “Cutting the Army Corps of Engineers” http://www.downsizinggovernment.org/usace) The first step toward cutting the budget of the Army Corps is to end passage of new water resource authorization bills. It makes no sense for Congress to keep putting new civilian projects into the Corps' pipeline when the agency already has hundreds of projects previously authorized but not funded. Then Congress should go through the Corps' budget and cut out all those activities that could be financed and operated by state and local governments or the private sector. Given the agency's long-standing mismanagement and misallocation of spending, it should be removed from those activities where federal involvement is not essential. Many of the Corps' activities should be privatized. Activities such as harbor construction and maintenance, beach replenishment, and hydropower generation could be provided by private construction, engineering, and utility companies. Those companies could contract directly with customers, such as local governments, to provide those services. Consider the Corp's harbor maintenance activities on the seacoasts. These activities are funded by a Harbor Maintenance Tax (HMT) collected from shippers based on the value of cargo. The tax generates about $1.4 billion a year and is spent on projects chosen by Congress and the Corps. But the federal government is an unneeded middleman here—port authorities could simply impose their own charges on shippers to fund their own maintenance activities, such as dredging. By cutting out the middleman, ports could respond directly to market demands, rather than having to lobby Washington for funding. Groups representing shipping interests complain that Congress is not spending enough on harbors to keep America competitive in international trade. But the current federal system allocates funds inefficiently, creating large cross-subsidies between seaports. The Congressional Research Service notes that harbor maintenance funds are often "directed towards harbors which handle little or no cargo" and "there is no attempt to identify particular port usage and allocate funds accordingly."91 The Port of Los Angeles, for example, generates a large share of HMT revenues, but it receives very little maintenance spending in return. The Congressional Research Service further explains: Examining where trust fund monies have been spent indicates that little or no shipping is taking place at many of the harbors and waterways that shippers are paying to maintain. . . . Given the amount of HMT collections not spent on harbors, and the amount spent on harbors with little or no cargo, a rough estimate is that less than half and perhaps as little as a third of every HMT dollar collected is being spent to maintain harbors that shippers frequently use.92 The solution to these sorts of inefficiencies is not more federal funding, but greater port independence and self-funding. One step toward that goal would be to privatize U.S. seaports, which are generally owned by state and local governments today. Britain pursued such reforms in 1983 when it privatized 19 seaports to form Associated British Ports (ABP).93 Today ABP operates 21 ports, and its subsidiary, UK Dredging, provides dredging services in the marketplace. ABP and UK Dredging earn profits and pay taxes. Today two-thirds of British cargo goes through efficient privatized seaports.94 One advantage of private seaports is that they can expand their facilities when market demands warrant, free of the uncertainties created by government budgeting. Privatization is also a good option for the Corps' 75 hydropower plants. More than two-thirds of the roughly 2,400 hydropower plants in the nation are privately owned.95 While federal facilities—including those of the Army Corps—dominate hydropower in some states such as Washington, other states such as New York and North Carolina have substantial private hydropower. The point is that the private sector is entirely capable of running hydropower plants, and thus Congress should begin selling the generating facilities of the Corps.

Business Form – Arctic CouncilA Circumpolar Business Form allows business to solve policy in the arctic council Pacific NorthWest Economic Region (PNWER)

Myers 13 (Steven R. Myers, eArctic Caucus Program Manager for the Pacific Northwest Economic Region, The Importance of Public and Private Sector Engagement in the Arctic, Arctic Portal, 2013, http://www.arcticyearbook.com/index.php/commentaries-2013)//BDS It is significant that Prime Minister Stephen Harper has chosen the Honourable Leona Aglukkaq as Chair of the Arctic Council for Canada's two year term which began this May. The Harper government has a clear focus on the importance of the Arctic, and the U.S. should work closely with the Canadian Chair to support Canada's initiatives, and be ready to assume the Chair in 2015 with a cohesive approach to leadership in the Arctic Council. Over the past four years, the Pacific NorthWest Economic Region (PNWER) has been engaging public and private sector stakeholders from Alaska, Yukon and the Northwest Territories on a number of sustainable economic development issues through the PNWER Arctic Caucus. To ensure local people are included in the discussion about the Arctic, the Caucus established a coordinated approach of shared solutions to address common challenges. The Caucus has been a valuable tool for PNWER to bring sub-national concerns to national Arctic decision makers, especially in the U.S. PNWER also works to ensure the voice of the Arctic is heard across the rest of the region that includes the U.S. states of Washington, Oregon, Idaho, Montana, as well as Alaska, and the provinces of British Columbia, Alberta and Saskatchewan. The goal has been to develop action items for the region that will lead to specific solutions for common challenges. Because the PNWER Arctic Caucus is a cross-border forum, the differences between the U.S. and Canada on Arctic policy are evident. Canada has a long established connection to the Arctic. The majority of Canadian people identify themselves as an Arctic Nation. The Canadian federal Arctic Strategy was developed in close coordination with people that live in the Arctic. Conversely, the U.S. federal government has several agencies looking at Arctic issues but no one agency coordinating the federal strategy. Also, the majority of U.S. citizens do not identify the U.S. as an Arctic Nation. In comparison to other Arctic nations and even non-Arctic countries that want to do business in the region it has been noticeable in how little the U.S. invests federal dollars in the Arctic for search and rescue, icebreakers, and environmental protection. At a recent PNWER meeting, Alaska's U.S. Senator Lisa Murkowski spoke to the PNWER delegates and stated: "we in Alaska recognize that we [U.S.] are an Arctic nation, but it's tough to get that recognition from some of our colleagues in other states. The senators from Iowa don't necessarily think that they are in an Arctic nation, but they are by virtue of the state of Alaska." The Senator went on to say, "the disconnect between the interest of the United States in investing in the Arctic compared to other nations was made all the more clear at a recent Arctic Council meeting in Sweden. While other nations with no Arctic coastline but plenty of interest jockeyed for a place as observers to the Council take action, the United States was only just putting forth a policy for future investment in the region." The Canadian government has called for the development of a Circumpolar Business Forum , which has been initially identified as an entity that will be a conduit for businesses to engage the Arctic Council . This proposal by the Canadian government is a movement towards increasing the discussion about how to improve the lives of citizens in the Arctic through sustainable economic development, recognizing that the private sector needs to be at the table in some of the policy discussions. As opportunities emerge for private sector engagement, the PNWER Arctic Caucus will continue to bring the state and territorial governments together with the private sector and Aboriginal communities to promote best practices for peoples of the North. The work of the Caucus will highlight the strong partnership between the respective regional governments and bring people together to communicate community interests and to influence policy. The objectives of the Arctic Caucus are to: • Increase the visibility and priority of Arctic issues in PNWER activities • Build cross-jurisdictional support to achieve

shared goals • Identify areas of opportunity for mutual sustainable economic development in the Arctic • Provide support to member jurisdictions to help them achieve their individual goals Alaska, Yukon and the Northwest Territories can be viewed as a network of communities with interests and priorities vital to the well-being of the people that live and work in the region. As the Arctic becomes more of a focus for development, collaboration is an essential component for those who live in the Arctic and everyone who does, or desires to do, business in the North. It is also important to ensure that any development in the North is done with the highest environmental practices and is supported by the people that live there. In some cases, research done in the North has not been shared with the residents who live there. The Caucus will encourage new research in collaboration with local inhabitants, and urge that the findings are shared within those communities. As conversations about the Arctic continue, the PNWER Arctic Caucus is a framework for lasting dialogue that develops a shared, cross-jurisdictional voice. It is important to look at the Arctic as a place where people live and work, rather than only as a place for study and research. As the Canadian government leads the Arctic Council, PNWER will work with its jurisdictions to ensure the interests of the local people are presented. The PNWER Arctic Caucus will also continue to be a voice for the region's needs to our federal partners in both countries. As the U.S. federal government implements and develops a policy for the Arctic, it must formally engage people in Alaska and learn from the best practices that the Canadian federal government has implemented in close partnership with its northern territorial governments and their Aboriginal communities. PNWER Background The Pacific NorthWest Economic Region (PNWER) is a public/private non-profit created by statute in 1991 by the states of Alaska, Idaho, Oregon, Montana and Washington, the Canadian provinces and territories of British Columbia, Alberta, Saskatchewan, the Northwest Territories and Yukon. PNWER's mission is to increase the economic well-being and quality of life for all citizens of the region; coordinate provincial and state policies throughout the region; identify and promote "models of success"; and serve as a conduit to exchange information. The PNWER Arctic Caucus Forum was initially formed as a group to focus on Arctic issues within PNWER. After meeting at the 2009 PNWER Economic Leadership Forum in Regina, Saskatchewan and the 2010 Annual Summit in Calgary, Alberta, the group decided to meet at the Annual Summit each year, as well as hold an annual Arctic Caucus Forum in the North. The first official Arctic Caucus Forum was held in December 2010 in Barrow, Alaska. The Caucus is made up of public and private sector PNWER members from Alaska, the Northwest Territories, and Yukon. Since 2010 the Caucus has held meetings in Yellowknife, Whitehorse, and Anchorage, along with two meetings in Washington, D.C. with federal Arctic officials and congressional members.

Private Expedition – ExplorationBroad empirical studies conclude the private sector achieves greater success at less cost at a statistically significant rateJonathan M. Karpoff, Norman J. Metcalfe Professor of Finance at the University of Washington's School of Business. MA (1980) and Ph.D (1982) degrees from UCLA. Visiting Professor at the University of Chicago's Graduate School of Business at the Emory University's Goizueta Business School (2000-02). co-Managing Editor of the Journal of Financial and Quantitative Analysis and Associate Editor of the Pacific-Basin Finance Journal, Public versus Private Initiative in Arctic Exploration: The Effects of Incentives and Organizational Structure, Journal of Political Economy, Vol. 109, No. 1, February 2001, http://www.jstor.org/stable/10.1086/318602//BDS

In this paper I use historical data on Arctic exploration to examine the relative efficiencies of public and private initiative, support, and control. Anecdotal evidence indicates that privately funded expeditions achieved most of the major Arctic prizes, whereas publicly funded expeditions constitute the greatest tragedies. This conclusion is broadly supported by more systematic evidence from 35 public and 57 private Arctic expeditions from 1818 through 1909. In particular, I come to the following conclusions. 1. Public expeditions were relatively well funded and large, deploying an average of 69.7 crew members per expedition, compared to 16.0 for private expeditions. Among those based on ships, public expeditions deployed 1.63 ships representing 596 vessel tons, on average, compared to 1.15 ships and 277 vessel tons for private expeditions. 2. Public expeditions experienced more deaths and a higher rate of deaths than private expeditions. On average, 5.9 men died on public expeditions, an average death rate of 8.9 percent, compared to 0.9 men, or 6.0 percent, for private expeditions. The differences in deaths and death rates are statistically significant in multivariate tests that control for the expedition's size, timing, nation of origin, objectives, and leader's experience. 3. Public expeditions lost and destroyed more and larger ships than private expeditions. On average, public expeditions lost 0.53 ships per expedition, representing 198 tons, compared to 0.24 ships representing 60 tons for private expeditions. The difference arises partly but not wholly because public expeditions deployed more and larger ships. 4. Nearly one ‐ half (47 percent) of all public expeditions lasting longer than one year had significant health problems as indicated by advanced symptoms of scurvy, compared to 13 percent for private expeditions. In multivariate tests, however, the incidence of scurvy is not consistently related to an expedition's source of funding when crew size is included as a regressor. 5. Private expeditions achieved most of the major Arctic prizes, including the initial navigation of the Northwest Passage and the first claim to the North Pole. Public and private expeditions achieved a broader set of less significant Arctic geographic discoveries at roughly equal rates, although private expeditions achieved their discoveries at significantly lower cost (as measured by crew size or vessel tonnage). I also find evidence that death rates were relatively high for expeditions seeking the Northwest Passage (in part because of the 1845 Franklin tragedy), that scurvy was a problem particularly before 1860, and that U.S. expeditions were relatively inefficient in achieving Arctic discoveries. Overall, however, the most persistent influence on success and failure is whether the expedition was privately or publicly funded. A closer analysis of the expeditions' characteristics suggests that there is nothing magical about the source of funding. Rather,

publicly funded expeditions tended to have three specific handicaps: they deployed poorly motivated and prepared leaders, they separated the initiation and implementation functions of leadership, and they adapted slowly to important innovations regarding clothing, diet, shelter, modes of Arctic travel, organizational structure, and optimal party size. These handicaps resulted from, and contributed to, the poorly aligned incentives of expedition organizers, leaders, crew members, and suppliers. That is, men died and ships were lost not because of the public nature of the funding per se, but rather because of the perverse incentives, slow adaptation, and ineffective organizational structures that frequently accompanied public funding.

Private Actors -- EEZOcean private zoning worksAndrews 08 (Katherine Andrews, July 2008, “Governing the Exclusive Economic Zone: The Ocean Commons, Cumulative Impacts and Potential Strategies for Improved Governance” http://www.economistinsights.com/sites/default/files/pictures/World%20Ocean%20Summit%20-%20Governance%20within%20EEZs%20working%20group%20-%20suggested%20reading%201.pdf)

Ocean Zoning with Property Interests This section discusses ocean zoning as a privatisation regime for improving governance. The primary distinction between the government mechanism and the market mechanism is that a property interest vests with the market mechanism. Ocean zoning in a privatised framework does not mean alienation, and does not entail government selling the ocean.215 It grants some exclusive, alienable rights to private parties, be they individuals, sectors, or groups. The closest land-based analogy would be a long-term lease in real estate. The first step to privatisation of a commons resource such as the EEZ is that government must create the market. Since the EEZ is currently a common pool resource where very limited spatial property rights exist, the government would have to create the market of property rights. To design a new system of property rights, fundamental design issues must be addressed.216 These include: • flexibility/divisibility: whether rights holder can lease part or all of the rights; • exclusivity: whether rights holder can exclude others; • quality of title: whether it is a right to all the resources or a proportional share; • duration: life term of the right and whether a preference exists for renewal; and • transferability: basis for initial vesting; whether there are limits on transferability.217 How Would Zoning with Property Interests Work? A private property zoning regime could be created pursuant to these five property characteristics. This report will focus on two general types of zones: dominant (including exclusive)-use zones and multiple use zones. The choice of the type of zone for a particular area would ideally be accomplished by government development of a comprehensive plan. Under this plan, conservation and cultural zones would need to be created and set aside first because non-use values are not adequately protected in a market-based regime.218 Dominant use zones would be used primarily to protect existing uses or to encourage development of particular resources in specific areas. Multiple use zones would allow for the market to determine what would be the most economically efficient use of the zone. For both types of zones, the interests would probably have to be of long-term duration, i.e. a minimum of 20 years, to provide enough certainty for the buyer. Dominant use zones could be vested in one individual, sector or group. For example, the government could decide to designate four types of dominant use zones: commercial fishing, oil and gas, seabed minerals, and conservation zones. The government could then decide whether the zone would be granted to the sector as a whole or auctioned to individuals. Given the existing ITQ market for fisheries and the mobility of these resources, it is most appropriate for the fishing dominant zones to vest in the entire fishing sector. For nonmobile resources such as minerals and oil and gas, it would be more appropriate to auction those zones to the highest bidder and have the property interest vest in one entity. Control over conservation zones could be granted to the environmental sector, i.e. a consortium of environmental NGOs. A series of multiple use zones could also be created by auctioning off with no particular use set as the dominant use. An auction would be held for the zones and the winner of the auction would have the rights to that zone, subject to other laws and regulations. This regime would not necessarily mean that all EEZ space would be auctioned. Government could choose to do that but given the uncertainties of a new “market” it would be prudent for most of the EEZ to remain unzoned. If, however, someone wanted to propose a use for an unzoned area then the government could choose to expand the zoned area via an open auction for that area, or decline to put additional zones in the market. If the government did not proceed this way, the market would be

undermined because new users could go to the government instead of the marketplace. It should be noted that under a private property regime Maori rights would need to be accounted for and respected. Given their legal rights and cultural interests, Maori would likely have a claim to at least a portion EEZ resources and the government income derived from them. The zone rights holder would have the right to develop, exclude, and to sell. In a dominant use, the zone rights holder would be limited to developing that zone for the dominant use. Any development would also be subject to the relevant laws regulating that use. With some limited exceptions, such as rights to navigation and submarine cables, the zone rights holder would have the right to exclude other users.219 The dominant zone rights holder could sell their right to another user but the zone would still be subject to the dominant use. For a multiple use zone, the zone rights holder could develop the zone subject to the law and regulations for whichever use was pursued. A multiple use zone would permit but not require the rights holder to allow for multiple uses. If the uses conflict, the users’ recourse would be to the zone rights holder (not the government) under whatever agreement the parties had signed amongst themselves. The government could deny application for a use that did not comply with existing laws. The risk involved in the chance of government approval would ostensibly be addressed by the parties in their negotiations and reflected in the price. If there was a violation within the zone, the government could pursue both the user and the zone rights holder, and could revoke the zone rights. This means the zone holder would have an incentive to ensure user compliance. After the initial auction, the government would collect no rents or royalties; they would go to the rights holder. The ITQ system of fishery management would stay in place, but the quota holders would have to respect the property rights of zone holders. There would be a layering of the ITQ system with the spatial rights of the zoning regime. If the fishing industry believed it did not have enough fishing dominant zones, it could purchase more rights in multiple use zones, either by purchasing the zone rights or by entering into agreements with the zone right holders. The zones create an interest in real property and would have value in the marketplace. It is not clear, however, that anyone buy zones at a price that resulted in a “fair” return to the public. There would probably be a limited number of bidders, and the high level of uncertainty as to the benefits of purchase means the prices could initially be low. This woud leave the risk of valuation in a new market on the government, which means the public good could suffer. This zoning regime would probably achieve greater market efficiency. By allowing zone holders to buy and sell their rights and enter into agreement about the use of the zones, the rights of use would end up in the hands of those who valued it most. It is doubtful, however, that this sort of zoning regime would promote nonuse values, such as conservation goals or cultural values. For nonrenewable resources, the zone rights holder will have incentive to remove all the valuable resources if it can be done in a cost effective manner. The issue becomes how the resource is extracted and what the long and short-term effects are of the extraction. For example, the rights holder in a mineral rich zone such as a seamount may not be at all concerned with detrimental effects on biodiversity or on fish stocks. In the realm of renewable resources, the primary resource at issue for the foreseeable future is fishing stocks, and the ITQ system manages these resources. This zoning regime would not create any new incentives for sustainability that do not already exist.

Solves efficiency, innovation, negotiations and cooperation Andrews 08 (Katherine Andrews, July 2008, “Governing the Exclusive Economic Zone: The Ocean Commons, Cumulative Impacts and Potential Strategies for Improved Governance” http://www.economistinsights.com/sites/default/files/pictures/World%20Ocean%20Summit%20-%20Governance%20within%20EEZs%20working%20group%20-%20suggested%20reading%201.pdf)

Advantages Enables tradeoffs. One of the main advantages of a private zoning approach is that it allows for tradeoffs between sectors on a direct basis. Negotiations can be conducted and terms reached without need for a government intermediary. This will lead to greater economic efficiency because the right to use the resource go to the individual who values it most economically. Increases innovation. Markets reward innovation and this system would allow individuals to be rewarded for their innovation. For example, if someone develops technology to extract deep seabed minerals more affordably then they will be able to buy out the zone rights of less efficient mineral developers. Private parties in the marketplace are also very

creative in structuring deals that are mutually beneficial to each party. Adaptable. Democratic governments will never be as nimble or adaptable as markets because they are not designed to be. A private zoning regime allows for uses to change over time as market benefits change. If a zone being used for minerals becomes more marketable as a site for renewable energy development then the parties can enter into an agreement to change the use in a short period of time via buyouts. 44 Sharing of compliance activities. This regime would take some of the pressure off government for enforcement activities. The zone rights holder would have an incentive to ensure users’ compliance or his rights to the zone could be revoked. Government would still have to do monitoring and compliance but incentives would exist for someone to share in that task. Many disputes or conflicts would be resolved between private parties. The retreat of government, however, can be problematic which leads us to the disadvantages.

Private Actors – Data CollectionPrivate sector key to data collection—innovation, cost reduction Woll 12 (Steve Woll, WeatherFlow Inc, “The Role of the Private Sector in Ocean Sensing,” 2012, http://ieeexplore.ieee.org/stamp/stamp.jsp?tp=&arnumber=6405082)I. INTRODUCTION The last twenty years have seen an increase in the number and breadth of various public-private partnerships in both oceanography and meteorology, and the policies of the National Oceanic and Atmospheric Administration (NOAA) specifically encourage those efforts. On the oceanographic side, the National Ocean Service (NOS) operates the Integrated Oceanographic Observing System (IOOS), which has been very successful at coordinating the efforts of federal government agencies, universities, and private sector companies, establishing a robust Data Management and Communications (DMAC) capability and providing funding to performers through a set of Regional Associations (RAs) that coordinate activities within their regions. On the meteorological side, the National Weather Service (NWS) operates the National Mesonet Program (NMP), which provides limited funding

support to non-federal operators of existing mesoscale observing networks (mesonets), including state, university, and private mesonets. At the same time, the technological boom of the last half century has begun to see the broader deployment of some specific types of oceanographic and marine meteorological sensors by private companies for private purposes (e.g. oil exploration, operation of port facilities, wind energy prospecting, etc.). Because specific companies or customers fund the collection of this data for specific business

purposes, the resulting data sets have generally been kept proprietary and not shared with the government or the public. In those cases where it has been attempted, the incorporation of such

private sector data into public-private partnerships has at times proven to be problematic. These efforts have the benefits of reducing overall cost to the enterprise, providing data to fill in known data gaps, and improving the general knowledge of the oceans for all users, including the private sector data owners. Yet many private data owners have been reluctant or unwilling to share their proprietary data, usually motivated by the assumption that such disclosure would act to reduce the company's competitive advantage and thereby threaten its business model. As a result of this tension, unknown (but presumably large and getting larger) amounts of highly useful private sector data remain untapped, leaving significant gaps in the Oceanography Enterprise's data recordsII. DISCUSSION Many stakeholders in the Oceanographic Enterprise have identified large and persistent gaps in our oceanographic data sets. In many cases, these data gaps could be filled in a cost- effective manner if previously untapped private data sources could be brought to bear. However, a vigorous and open discussion of data policy is needed before the integration of such private sector data can be optimized. Let us examine a fictional company, OceanData Inc., which offers an illustrative example of the spectrum of options available from private sector data suppliers. OceanData owns and operates a private network of several hundred coastal and marine weather, surf, and offshore observing assets. Because of the high variability of the coastal zone and the relative scarcity of official weather and oceanographic observing stations in that coastal zone, the data from OccanData's stations can be of great value to those who are working to understand the coastal oceans. Clients for OceanData include multiple federal government agencies, state and local governments, businesses, and individual consumers. OceanData owns its stations, retains ownership of all of the data collected from them, and sells that data via licenses to its various clients (as well as providing other value-added products and services). Those data licenses fall into two broad categories as indicated below. a. Restricted Licenses. These licenses permit client organizations and individuals to download and use the OceanData data for their own internal purposes, but they are not permitted to further distribute the data to any of their own customers, users, or any other parties. (Many private sector data providers, including OceanData and others, do grant exceptions that allow the free and immediate distribution of their data in cases where there is an imminent threat to persons or property.) Restricted licenses arc available for a relatively low price - usually much less than it would cost for a customer to install, operate, and maintain an equivalent weather station on its own. Because these licenses limit the distribution of the data to the licensee alone, OceanData retains the ability to offer equivalent licenses to other users and can thereby spread the costs of the network out over multiple paying users (including government agencies). b. Unrestricted Licenses. These licenses permit client organizations or individuals to not only download and use the OceanData data for their own internal purposes, but also allow the client to freely re-distribute the data to any set of users and/or the public at large. Not surprisingly, these unrestricted licenses are priced significantly higher (frequently 200-300% of the price of a restricted license, and in some cases significantly more). These higher prices are necessitated by the fact that OceanData must recoup all of its expenses from a single client (rather than being able to spread it out over multiple clients), since it is unreasonable to expect any potential client to pay OceanData a fee to access its data when that same data is provided for free elsewhere. In fact, in many cases, such arrangements also make OccanData's data available to competing companies, who are free to use it to field competitive products. While each of these business models is sustainable from OccanData's perspective, the substantial differences in price have a significant impact on the ability of budget-constrained customers to pay. When the federal government is the client purchasing the dala, there arc also varying approaches in how to handle private sector observational data. NOAA's National Weather Service (NWS) is one of the primary consumers of oceanographic and meteorological data, and in fact two of its subordinate organizations handle private sector data in different manners. The Meteorological Assimilation Data Ingest System (MAD1S) i-s a repository established by the National Weather Service to collect, store, and disseminate observations from various non-federal weather observing networks. MADIS has several categories that designate how contributed data will be handled, including a category for proprietary data (usually from private network operators) that is authorized for use within NOAA. bul is not authorized for further distribution outside of NOAA. Under the National Mesonct Program (NMP) and through the use of restricted licenses, MADIS received observations from nearly 10,000 professional grade private sector weather stations in August 2012. The National Data Buoy Center (NDBC) serves as an NWS repository for oceanographic data and for related meteorological data from the coastal zone. NDBC does not employ a data categorization system like that used at MADIS. Instead, the general practice is for all submitted data to be made fully available to all NDBC users, which include government agencies, universities, private sector companies, and individual consumers. An August 2012 survey of NDBC partner stations coordinated under the IOOS program showed observations from 24 private sector oceanographic and coastal meteorological stations. Note that the raw numbers of stations arc not directly comparable, (since weather observing stations arc far more numerous than oceanographic observing stations), but a relative comparison is also illuminating. Within MADIS, private sector stations represent approximately 90% of the combined (private, government, university) inventory of professional grade weather stations. Within NDBC, private sector stations represent less than 5% of the combined inventory of professional grade oceanographic and coastal meteorological stations. III. RECOMMENDATIONS As

IOOS, NOAA, and most of the federal government face severe budgetary constraints for the foreseeable future, it is prudent for the Oceanography Enterprise to review all of the options available to help IOOS, NOAA, and the broader Oceanography Enterprise meet their collective mission requirements. The NMP has been very successful at getting the NWS access to large numbers of high quality, professional grade meteorological observations via restricted licensing and the MADIS data architecture. Given this demonstrated success, implementing a similar data policy and supporting data architecture at NDBC and other oceanographic repositories should be given serious consideration. At the same time, a data policy of unrestricted licensing and an unrestricted data architecture should also be considered, since such an arrangement is the most flexible, gets the most data into the most hands, and can reasonably be expected to directly support more users and generate more economic activity. Review of these options should be conducted by IOOS and the Oceanographic Enterprise leadership and a working group representing government, university, and private sector interests. Debating the merits, costs, and benefits of these and other options would be an extremely healthy and useful exercise for IOOS and the broader oceanographic community. The resulting decisions and subsequent policy guidance would serve to

provide a much-needed clarity, thereby allowing all participants and the Oceanography Enterprise as a whole to optimize their planning for the next decade and beyond.

Private sector activity has empirically increased support for ocean projectsWoll 12 (Steve Woll, WeatherFlow Inc, “The Role of the Private Sector in Ocean Sensing,” 2012, http://ieeexplore.ieee.org/stamp/stamp.jsp?tp=&arnumber=6405082)=Recent years have seen the development of innovative and often lower-cost ocean observing technologies, putting more capability than ever into the hands of private sector companies, in some cases for the first time. At the same time, activity by private sector companies in the coastal oceans has increased in support of oil and gas exploration, offshore wind energy, homeland security, maritime shipping, fisheries, and other drivers. Oceanographic data from private sector sources has the potential to fill in existing data gaps in a cost-effective manner. In order to

optimize our ability to make use of such data, a discussion of the policy surrounding the use of private sector data (and of the underlying data infrastructure needed to support it) is needed. This paper discusses some of the background, history, and considerations that have a bearing on the use of such private sector data.

Private Actor – Deep Sea ExplorationPrivate companies solve deep sea exploration—have successfully supported scientific efforts in the pastSchrope 13 (Mark Schrope is a freelance journalist based in Florida. He was a paid blogger and photographer on a Schmidt Ocean Institute trip last September, “Wealthy backers support scientific efforts to explore deep seas,” 27 May 2013, http://www.washingtonpost.com/national/health-science/wealthy-backers-support-scientific-efforts-to-explore-deep-seas/2013/05/24/486c6430-b716-11e2-aa9e-a02b765ff0ea_story.html)

A small but growing number of wealthy patrons, enamored of the possibilities of undersea exploration, are donating the use of ships, submersibles and other resources to support missions that might otherwise be unaffordable. Funding pure ocean exploration — going where no person has gone before — has always been hard for researchers. Federal agencies do support exploratory work, but they generally award grants to pursue answers to well-formed questions. This can create a Catch-22, in which scientists don’t know which questions to ask until they get into unexplored areas. Beginning in 2001, the National Oceanic and Atmospheric Administration had an Ocean Exploration program that provided grants for open-ended work, but the program’s priorities have shifted toward more limited work aboard the agency’s exploration vessel

Okeanos Explorer. Most oceanographers rely on support from the National Science Foundation, but its budget, level at best

for several years, has had to deal with rising fuel prices and other costs required to maintain its fleet of research vessels, leaving less available for grants. The challenge of raising money for sea exploration “is the hardest it’s ever been in my career,” says Edith Widder, a deep-sea biologist and founder of the Ocean Research and Conservation Association in

Fort Pierce, Fla. Enter the elite benefactors. Hollywood director James Cameron is perhaps the most well known of this group. Having donated the Deepsea Challenger, his deep-diving submersible, to the Woods Hole Oceanographic Institution in Massachusetts in March and giving the institute $1 million to help keep the vehicle operational and to support efforts to transfer technologies developed for the sub to other uses. Cameron also will support collaboration between Woods Hole scientists and engineers who worked with Cameron on filming his 1989 science fiction thriller “The Abyss” and the construction of his specialized sub. “I wanted to be sure to fund this enough so that they would have the people and

resources to absorb this stuff, describe it and publish it, to have it available” said Cameron, He is also an adviser for Woods Hole’s new Center for Marine Robotics, which aims to speed development of advanced ocean technologies through partnerships with private companies in fields such as oil and gas exploration. “I think that what we see going forward is that this is just the beginning,” said Woods Hole oceanographer Tim Shank of partnerships with more-engaged donors such as Cameron. “There’s no doubt

discovering things is an absolute drug in some ways.” Last year in his sub, Cameron did the first solo dive to the deepest spot in the ocean, nearly 36,000 feet deep in the western Pacific. Only two people had visited before, in 1960, and only two robotic

vehicles have been capable of diving there, one of which has been lost. Oceanographers say the lack of exploration of this and other deep-sea trenches shows the huge potential for discovery, while the lack of vehicles capable of reaching such depths illustrates that in some ways it is more difficult to do so than it is to reach space. Though deep trenches encompass just a small portion of the ocean floor, their unexplored area is as large as Australia. “How did we manage to get into the 21st century and just happen to

miss a continent?” asked Cameron, “The answer is that it’s the hardest place.” Among the technologies Cameron is transferring to

Woods Hole is a patented method for manufacturing foam that is strong enough to withstand the massive pressure of the deep ocean and sturdy enough to act as a structural component of the sub. Also included in the technology transfer are lightweight cameras built from scratch for the

Challenger. The sub’s camera equipment and lighting enabled Cameron to capture high-resolution, 3-D images of geologic scenes and deep-dwelling species in the pitch-black depths reached during his dives. Woods Hole scientists will be using Cameron’s spare cameras, which are much better suited to the work than what researchers could normally afford, on an upcoming expedition. Shank is leading an international team exploring the world’s deepest ocean trenches through the Hadal Ecosystem Studies project. Cameron may participate in at least one of the project’s expeditions, which could include dives by the Deepsea Challenger, although funded work will be done mainly with the Woods Hole remotely-operated vehicle Nereus. Scientists know little about deep trenches, which are in the hadal region 20,000 feet and more beneath the surface. Questions persist about even their most basic characteristics, such as how far down fish are found and which other animals live there. Exploration has been so limited that much of what scientists do know is from Danish, Soviet and Swedish expeditions more than 50 years ago. “It’s rather embarrassing,” Shank said. “We just have a catalogue of some species names and things in jars.” Hollywood and hedge funds Cameron is not the only person investing in Woods Hole research. Billionaire hedge fund founder Ray Dalio has just donated $5 million to support ocean exploration missions and technology development. Dalio has also given Woods Hole scientists use of his adventure yacht/research vessel, Alucia, along with his submersibles, scuba support system and other equipment, and other donations to support such work. A 2012 expedition using Alucia that didn’t involve Woods Hole captured the first-ever video of a giant squid in its deep-sea habitat. Widder, who was on that trip with Dalio, said he “was surprised at how little is spent on ocean exploration, and he recognized that with his considerable resources he could actually have a major impact.” Woods Hole’s collaboration with Dalio has supported coral reef studies in Micronesia and sperm whale research off New Zealand. The institute’s researchers have also been able to test new camera and remotely operated vehicle systems from Alucia. “One thing that makes this exciting is that [Dalio] is prepared to fund things that might not get funded through traditional sources,” says Rob Munier,

Woods Hole’s vice president for marine facilities and operations, “because they might be considered higher risk or might have [only] longer-term payoffs.” A friend at Google Eric Schmidt, Google’s executive chairman, and his wife, Wendy, have also become heavily involved in ocean exploration.

Their Schmidt Ocean Institute, based in Palo Alto, Calif., operates Falkor, a 272-foot research vessel dedicated to ocean research. The ship, formerly a German fishery protection vessel, was retrofitted at a cost of $60 million. Falkor is far more comfortable than the average research vessel, with large staterooms, outdoor lounges with teak furniture and even a sauna. More important, the ship boasts such assets as a well-equipped command center for controlling remotely operated vehicles and an advanced seafloor-

mapping sonar system. “While federal funding is often available for ocean researchers, we understood that ship time is at a premium and so set out to make the most advanced tools and systems more broadly accessible aboard our ship,” Wendy Schmidt said.

Scientists apply to use the ship on specific expeditions at no charge. The institute uses a peer review process to choose proposals and then plans a route for the year. Falkor began full operations in March, and this year it will be taking scientists to locations in the Atlantic and Pacific. Projects will include hunting for hydrothermal vents and studying microbes around a submerged volcano. Victor Zykov, the director of research for the Schmidt institute, said the patrons set no bounds for the types of marine science supported other than placing an emphasis on rapid dissemination of research findings. The Schmidt family hopes to join the expeditions on occasion. “We are seeing a significant increase in interest in the donor community, and the high-net-worth population as a whole, in participating in unique experiences that show firsthand what oceanography is all about,” says Stuart Krantz, executive director of development at the Scripps Institution of Oceanography in La Jolla, Calif. Scripps offers its donors the chance to join expeditions — to locations such as the remote Line Islands in the South Pacific — doing research that might not be possible without their support. Last September,

Scripps donors helped pay for an expedition to study microbial life in the 35,000-foot-deep Tonga Trench in the South Pacific. Shank, at Woods Hole,says he hopes the interest in private, hands-on scientific exploration is just beginning. “This may indeed be the wave of the future,” he said. “Private-public partnerships are . . . how we’re going to get more and better oceanography done.”

Private Investment – Generic ExplorationPrivate sector investment leads to effective ocean exploration policiesNOAA & AP (NOAA and Aquarium of the Pacific, “The Report of Ocean Exploration 2020: A National Forum,” 2013 July 19-21, pp. 2-3, http://www.aquariumofpacific.org/downloads/oe2020report.pdf)OCEAN EXPLORATION PRIORITIES In 2020, dear priorities are identified by the exploration community and revisited on a regular basis. Having a clear, focused set of ocean exploration priorities is a critical element in developing and sustaining a national program of ocean exploration. No group is better qualified to identify these priorities than the community of ocean explorers. The community identified the polar regions, particularly the Arctic; ocean acidification; and the water column (noting that exploration extends from the sub-seafloor to the surface) as important exploration priorities. The Indo-Pacific and Central Pacific regions are also important for further exploration. Participants agreed that a clear mission statement for national ocean exploration is critical as is a process to engage ocean exploration stakeholders on a recurrent basis in determining priorities. PARTNERSHIPS In 2020, there is an extensive and dynamic network of partnerships that link public agencies, private sector organizations , and academic institutions. There was near unanimity that in 2020 and beyond, most dedicated ocean exploration expeditions and programs will be partnerships—public and private, national and international. NOAA has been assigned a leadership role in developing and sustaining a national program of ocean exploration under the Ocean Exploration Act of2009, one that "promotes collaboration with other federal ocean and undersea research and exploration programs." PLATFORMS In 2020, a greater number of ships, submersibles, and other platforms are dedicated to ocean exploration. There is a critical need for new ships and other platforms. The need for autonomous underwater vehicles and remotely operated vehicles is greater than for human occupied vehicles. A national program requires a mix of dedicated and shared ocean exploration assets. Participants agreed that ocean exploration should take advantage of all sources of available and relevant data. For example, cabled observatories, recoverable observatories, the various ocean observation networks, and satellites are all important in a national program of ocean exploration. TECHNOLOGY DEVELOPMENT By 2020, private sector investments in exploration technology development specifically for the dedicated national program of explora- tion exceed the federal investment, but federal partners play a key role in testing and refining new technologies. Forum participants agreed that a top priority for a national ocean exploration program of distinction is the development of mechanisms to fund emerging and creatively disruptive technologies to enhance and expand exploration capabilities. In addition to the significant federal government investment in ocean exploration technology development—whether by the U.S. Navy, NASA, NOAA, or other civilian agencies—many felt strongly that increased investment would come from the private sector to achieve the kind of program they envisioned. Participants also felt that national program partners should continue to play a key role in testing and refin- ing these technologies as well as working to adapt existing and proven technologies for exploration.

Private incentives are preferable for ocean exploration—key to innovationDiamandis 13 (Peter Diamandis, Chairman, XPRIZE / Exec. Chairman & Co-Founder, Singularity University / Co-Founder & Co-Chairman, Planetary Resources, “A New Age of Ocean Exploration May Just Save Us,” 23 October 2013, http://www.linkedin.com/today/post/article/20131023220148-994365-a-new-age-of-ocean-exploration-may-just-save-us

A renewed golden age of exploration in the 21 century might just be the key to a healthy and valued planet. Although we have already ignited unprecedented advances into space, there is still so much of our planet left unexplored. For starters, we know remarkably little about the ocean covering the majority of our planet’s surface: almost 95% of our ocean remains undiscovered. The time is right to reignite the discovery of new places and new knowledge here on Earth, as individuals are now empowered more than ever to do what was once only possible for governments and large corporations. The history of ocean exploration reminds us that we have always longed to explore the unknown, and that innovative and ambitious explorers will push those horizons no matter what. Yet with reduced government spending, especially in comparison to space exploration, and the fact that the ocean is not owned by one specific entity, there is a void. What will catalyze ocean exploration? Who will steward the ocean and dive to its depths to uncover its mysteries? There was a long-held notion that audacious exploration needed primary support from the government. When we launched the Ansari XPRIZE in 1996, many scoffed at the idea that private citizens, using private financing, could build innovative spacecraft that successfully launch into space. Their response to what we were attempting to achieve often makes me think of a quote, “Some men see things as they are and ask why. Others dream things that never were and ask why not.” ― George Bernard Shaw. Our proof is the new market that developed with the Ansari XPRIZE; private space transport is now a $1.5 billion industry. It’s clear that exploration in the 21 century is not just for government-supported programs anymore. With the challenges we currently face, environmentally and economically, we cannot leave exploration of our blue planet up to governments alone. Instead, quite the opposite: We need to crowdsource innovators from around the globe to take up the charge of discovering the secrets our ocean holds, while working to preserve it. Consider the challenges facing the ocean: carbon dioxide absorbed from the atmosphere has made the ocean 30% more acidic than it was just 200 years ago, with devastating consequences for corals, mollusks, fish, and entire ecosystems. Pollution from plastics to fertilizers creates massive “dead zones” and swirling gyres of garbage that further sicken the seas upon which the health of the planet depends. Unabated overfishing has shown that 90% of the big fish in the sea are now gone. How can we turn back this tide of challenges affecting the health of our ocean unless we first value the ocean? And valuing it means not just taking a personal interest, but taking the time to understand the challenges and creating real incentives, particularly financial incentives, behind the sustainable use of our ocean. By building industries that have a vested interest in the ocean, we stand a much better chance of protecting the health of the planet. This is the model of XPRIZE: to catalyze industries that not only build economies based on new frontiers, but industries that become the leaders in serving humanity’s needs now and in the future. There is a very real opportunity with our ocean to build these industries. Because they remain unexplored, there is tremendous value still ready to be discovered. Indeed, the opportunities for things like pharmaceuticals from deep-sea creatures bring us new biochemical discoveries from nearly every deep-sea mission. And with an estimated 91% of sea life still unknown, this gives us a literal ocean of opportunity to discover more. By properly measuring and documenting the chemical and physical characteristics of our seas, we can initiate whole new industries in ocean services – the type of data-driven information and forecasting that can be used by every company dependent on the ocean, from tourism to trade to weather services. I believe now is the critical time to ignite a new age of ocean exploration. At XPRIZE we recently launched our second ocean prize, the Wendy Schmidt Ocean Health XPRIZE, to spur development of breakthroughs in pH measuring tools that explore the chemistry of our seas. And we are, for the first time, committing to launch three additional ocean prizes by 2020. Because we trust that by harnessing the power of innovation, and the dreams of explorers around the world, valuable new discoveries can help us achieve a healthy ocean.

Private Actor – OTECPrivate companies can solve OTEC—already investingFerris 12 (David Ferris, Forbes contributor, writes about energy, business, and climate, “Market for Deep Ocean Energy Heats Up,” 31 March 2012, http://www.forbes.com/sites/davidferris/2012/03/31/market-for-deep-ocean-energy-starts-to-heat-up/)

A technology that could provide electricity to naval bases and islands with the use of super-cold seawater is finally gaining momentum after a hiatus of more than 30 years. The action

is in the Bahamas, where the local utility has signed an agreement with a Pennsylvania company to build two 10-megawatt commercial-scale plants, the first of their kind in history. Meanwhile, established military contractors like DCNS and Lockheed Martin are making progress on their own power plants.

Even more intriguing is that the Bahama builder, OTE Corporation, plans to pipe far more cold seawater to land than is needed to create power. This rush of cold may allow the archipelago to run water desalination plants or to grow commodities that otherwise wouldn’t thrive in a warm climate, like salmon or berries. The technology, known as ocean thermal energy conversion (OTEC), creates electricity with the temperature difference between warm and cold seawater. Cold water is drawn with a pipe from depths of a 1,000 meters or more, where the sun’s heat can’t reach. Meanwhile, warm seawater is sucked from near the surface. The warm seawater is run through a heat exchanger with a chemical with a low boiling point, like ammonia, which creates chemical steam that runs an electrical turbine. Then the steam is condensed back to liquid form with the chilled seawater. Scientists have entertained the idea of OTEC since the 19th Century and Lockheed Martin created a working model during the 1970s energy crisis . But the budding market withered in the 1980s as fuel prices dropped. Now, with energy prices rising again, OTEC is back. Ted Johnson, a veteran of some early Lockheed experiments, is a

senior vice president at OTE Corporation. Johnson told me that OTEC systems are becoming cost competitive because the technology for pipes, heat exchangers and other equipment has improved greatly, thanks in

part to innovations by the oil and gas industry. Meanwhile, creating electricity on remote islands is

expensive as ever. OTE Corporation expects to build the plants on shore at a cost of about $100 million each and run them for the duration of a 25- to 30-year power purchase agreement, said CEO Jeremy Feakins. Next year, the company plans to begin construction on a similar project that would pipe cold seawater to cool Baha Mar, a luxury resort being financed and built by China. That project is expected to reduce the cost of air conditioning by 80 to 90 percent and open in 2014. The company’s OTEC plant would draw prodigious quantities of frigid seawater from the depths through a pipe eight feet in diameter. Much of the water would be directed, not toward making electricity, but toward an “eco-industial park” that would produce fresh water, mariculture, aquaculture, or produce from temperate greenhouses. A similar plant is in operation on the island of Hawaii, producing high-end products like lobster, oysters

and premium bottled water. OTE Corporation claims to have projects lined up in the Virgin Islands, the Cayman Islands, Puerto Rico, and the Tanzanian island of Zanzibar. So

far the company’s principals have invested $7 million, said Feakins. Lockheed Martin is a competitor in the field, though its approach is very different. Instead of basing its plants on land, the company would build offshore platforms. A platform would generate electricity, possibly desalinate water, and even produce hydrogen fuel — another potential offshoot of an

OTEC sytem. Lockheed plans a five- to 10-megawatt pilot project in the next three to five years with a commercial plant following soon after, said Gary Feldman, the director of business

development for new business ventures. Eventually the company wants to build plants of 100 megawatts or larger. “It’s a very scalable technology,” Feldman said. “This is a very exciting time for OTEC.” In 2009, the Navy gave Lockheed

$12.5 million to develop an OTEC system. Another entrant in the field, OTEC International, is poised to sign an agreement to install a one-megawatt offshore OTEC demonstration plant near the Big Island in Hawaii, and is negotiating with Hawaii Electric Company for a 100-megawatt plant. The company also is in talks with a utility in the Cayman Islands, said Barbara Hastings, a company spokeswoman. A Netherlands startup called Bluerise just flipped the switch on a miniature pilot plant at Delft University and is hoping to create an OTEC plant as part of an ambitious eco-industrial park being planned at the airport on the island of Curacao, in the Lesser Antilles. Yet another company, the French military contractor DCNS, proposes to build a 10-megawatt plant by 2015 on the island of Martinique, with other plans underway in the Reunion Island and Tahiti.

Private Actor – Satellites/IOOSOcean satellite systems can be handled by the private sector—leads to improved data and techOTA 93 (Office of Technology Assessment, U.S. Congress, “The Future of Remote Sensing from Space: Civilian Satellite Systems and Applications,” Chapter 7: The Role of the Private Sector, pp. 85-88, July 1993, https://www.princeton.edu/~ota/disk1/1993/9348/934811.PDF)The United States annually invests hundreds of millions of dollars in remote sensing satellite systems and services. Some of this

investment has stimulated a market for commercial products. Private industry con- tributes to U.S. satellite remote sensing systems in several ways. Under contract to the Federal Government,

private companies build the satellites, ground stations, and distribution networks. In the case of the Landsat system, a private firm, Earth Observation Satellite Co. (EOSAT), markets data from Landsats I through 5 and will soon sell data from Landsat 6. In a new financial and organizational arrangement. Orbital Sciences Corp. (OSC) plans to launch1 and operate the SeaStar remote sensing satellite, which will carry a sensor capable of monitoring the color of the ocean surface. Among other ocean attributes, ocean color data indicate ocean currents, fertile fishing grounds, and ocean health. OSC will sell

the data generated by this sensor to an assortment of customers, including the Federal Government. 'Finally, the remote sensing value-added sector develops useful information from the raw data supplied by aircraft, satellite, and other sources, and sells the resulting information to a wide variety of users. The value-added sector is part of a much larger information industry that employs geographic information systems (GIS) and other tools to turn raw data from satellites, aircraft, and other sources into useful information. Industry products include maps; inventories of crops, forests, and other renewable resources; and assessments of urban growth, cultural resources, and nonrenewable resources. According to market estimates, sales of data, hardware, and software currently total about S2 billion annually.4GIS hardware and software have the unique advantage of being able to handle spatial data in many different formats and to integrate them into usable

computer files. For the next several years, at least, the private sector is likely to derive greater profits from the provi- sion of value-added services than from owning and/or operating remote sensing satellites. Private firms will also likely continue to be a source of improved methods of accessing, handling, and analyzing data. Improved market prospects for the sales of land remote sensing data will depend directly on the continued development of faster, more capable, and cheaper processing systems. In addition, the continued improvement of GIS software and hardware will make remotely sensed data accessi- ble to a wider audience. In turn, the growth of the GIS industry will be aided by the development of the use of remotely sensed land data, including the extensive archives of unenhanced Landsat data that are maintained by the U.S. Geological Survey Earth Resources Observation Systems (U. S.G.S. EROS) Data Center, Sioux Falls, South Dakota.'OTA will assess the prospects for enhancing the private sector involvement in

remote sensing in two forthcoming reports. Despite professed interest among private entrepreneurs in building and operating land remote sensing satellites systems, ‘the

high systems costs and the lack of a clearly defined market for remotely sensed data have inhibited private offerors.'For example, although EOSAT has stream- lined the operations and data distribution system of Landsat, and achieved sufficient income to continue its efforts without government support, projected increases in revenues from data sales do not appear sufficient to enable a system operator to finance the construction and operation of the Landsat system. Despite several technological advancements since the 1970s when the National Aeronautics and Space Administration (NASA) launched the first Landsat satellites, Landsat system costs have remained high. The Landsat 6 satellite cost about S320 million to build. Landsat 7, which improves on the sensors of Landsat 6, will cost between $440 and $640 million to build, depending on whether or not it will carry the High Resolution MultiSpectral Stereo Imager (HRMSI) desired by the Department of Defense (DoD) and NASA.

Future commercialization efforts will depend on whether firms can raise sufficient private and/or public funding to pay for a system that is privately developed and operated. The future viability of a private remote sensing system will depend on drastically reducing the costs of a satellite system through technology development and/or dramatic market growth. It may also rest on

allowing private operators to determine their own data pricing policies." Since it launched the frost civilian remote sensing satellite in 1960, in support of the principles of "open skies" and free flow of information, the United States has followed a policy of making remotely sensed data available on a nondiscriminatory basis to potential custom- ers — in other words, on terms that are the same to all customers.*The Land Remote Sensing Policy Act of 1992 retains nondiscriminatory data availability "for government-supported systems, but it gives authority to the Secretary of Com- merce to license firms who wish to launch and operate privately funded systems. These firms may offer data on their own terms," provided they have not received funding from the U.S. Government to acquire their systems. In January 1993, the Department of Commerce (DOC) granted the first commercial remote sensing license to World View Imaging Corp. of Liver- more, California. The license allows WorldView to operate a pair of multispectral imaging satel- lites in low Earth orbit. WorldView expects to launch its satellites, which are designed to gather panchromatic data of 3 m resolution, in a few years."On June 10, 1993, Lockheed Corp. announced that it filed with DOC for a license to operate a satellite system capable of 1 m resolu- tion (panchromatic) .13 The greatest problem private industry faces in developing and operating a remote sensing sys- tem is the difficulty of obtaining sufficient private capital to finance the venture. The Federal Gov- ernment is the largest customer for land remote sensing data. If private industry were able to count on sufficient sales of data to the government for its needs, the financial markets might be more

willing to finance a remote sensing system. Therefore, if Congress wishes to encourage the development of a private satellite industry that builds and operates remote sensing satellites, it could direct Federal agencies to contract for the provision of data from a privately owned and operated satellite system, or systems, rather than contract for the construction of a system to be owned by the government. Such an approach would give greater discretion to private industry to use its innovative powers to solve technical problems. It might also involve greater technical and financial risk, both to the government and to private firms, than one in which the private

sector acts solely as contractor to the government. "In the long run, encouraging industry to take greater responsibility for the provision of remotely sensed data may also lead to wider data use, as industry would then be encouraged to find new uses for the data. The experiment with OSC's SeaStar satellite system should provide useful insights for the development of future privately owned satellite systems. NASA contracted with OSC to provide a specified quantity of data from the SeaWiFS sensor aboard SeaStar for a specified price. The arrangement allows NASA to provide some funding (S43.5 million) Up front that OSC has been able to use in developing the sensor and satellite. More important, NASA anchor tenant agreement with OSC also allowed the company to secure needed additional funding from the private financial market. If this arrangement proves successful, it might

pave the way for similar agreements for data from larger, more complicated satellites. In addition, Congress might wish to explore the option of funding a research program specifically designed to reduce the costs of remote sensing systems; cost reduction would take precedence over providing greater capability. It might, for example, wish to fund, on a competitive basis, the private development of sensors and small satellite buses specifically designed to reduce costs. Although such innovative programs involve greater risk than the usual way government procures new technology, as the development of amateur communications satellites has demonstrated, they also have a potentially high payoff in increased provision of inexpensive

services. "Among other things, an innovative program to reduce sensor and satellite costs, or to provide increased capability, might introduce greater competition into the development of remote sensing satellite systems. The government might also wish to involve the private sector in global change research by sharing data sets with private industry for re-search purposes. In a 1992 report, the Geosat Committee pointed out that the oil, gas, and mineral extraction industry is heavily involved in performing research on the environment in con- nection with its profit-making interests. The Geosat Committee proposed to institute pilot programs that would involve both private indus- try and the government in a research partnership, in which the government could gain useful global change information, and private industry would gain access to a wide variety of data to support its research interests. "Such research programs, in which the government and the private sector join forces in partnership, could enhance the signifi- cance of remotely sensed data for global change and even lead to innovative new methods for using them.

Tax Incentives – Ocean EnergyTax incentives result in privatized ocean energy projectsHarmon 11 (Robert K. Harmon, Oregon Wave Energy Trust (OWET) is a nonprofit public-private partnership funded by the Oregon Innovation Council. Its mission is to support the responsible development of wave energy in Oregon. “Incentivizing Ocean Energy,” July 2011, http://oregonwave.org/oceanic/wp-content/uploads/2013/05/Incentivizing-Ocean-Energy-%E2%80%93-July-2011.pdf)Analysis of Tax Incentives Within the patchwork of U.S. renewable energy incentives, not all policies and incentives are equally effective for every technology or each stage of project development. With only three states currently generating a combined ocean

energy capacity of 0.14 MW,30 the ocean energy industry is rightly focused on launching, testing, piloting and demonstrating projects that may not have significant production or performance certainty. Tax incentives that support early-stage ocean energy development may provide optimal support for moving the industry forward, as they can provide immediate or at least near-term support for an industry that still requires experimentation to determine the most compelling energy extraction designs. With upfront or near-term incentives that are decoupled from performance, the technology developer can put a device in the water at a fraction of its actual costs, quickly gain operational and design experience from pilot-scale testing, and revise the design to be commercially competitive. A number of tax incentives are specifically beneficial to early-stage experimentation and

pilot-scale testing. Sales tax exemptions, investment tax credits, and accelerated depreciation schedules are all excellent ways to incent early-stage ocean energy development. Sales tax exemptions directly reduce the cost of ocean devices by exempting sales tax on equipment purchases, while investment tax credits and accelerated depreciation incentives significantly reduce capital costs by decreasing an ocean energy developer’s total tax burden in the near term. Given the unique features and emerging state of the ocean energy industry, not all tax incentives will impact overall cost. These young technologies, particularly at the device testing and pilot scales, cannot rely on cost reductions from a PTC because their energy production is uncertain. The development of operations and maintenance best practices and the refinement of component design for survivability are the lessons derived from setbacks, such as component failures, which temporarily halt or reduce production. This performance unpredictably lowers the likelihood that current ocean energy technologies can take full advantage of a state or federal PTC. As the industry matures, a PTC will provide the consistent incentive necessary to refine and advance the industry’s most successful designs. In the meantime, a different incentive structure is needed to lower the cost of testing and demonstrating ocean energy. The realization of full subsidy from tax incentives also requires an entity to have an adequate tax appetite in order for the incentives to subsequently offset costs. This can give rise to complex financing arrangements between the initial project developer and later investors. ** Traditionally, this has been accomplished through a “flip” ownership structure where—in the simplest cases— large, outside investors become the active owners. This scenario allows for tax incentives to pass back to a parent company’s aggregate tax burden while tax incentives are accrued during the production period and/or during the eligible years of asset depreciation. Once the tax-based incentives have expired, ownership flips back to the initial investors who have a lower tax burden and, without utilizing the flip ownership, would not have been able to take full advantage of the tax incentives. For these reasons, flip investment structures have been widely used in the recent expansion of U.S. wind power, 31 and generally in

merchant generator development. It is likely that these structures will also be used for ocean energy development. Even complex arrangements such as these cannot allow tax-exempt entities, such as public power utilities, to leverage tax incentives (because they have no tax burden to offset). Therefore, tax-exempt utilities interested in supporting ocean energy development will likely enter into a power purchase ** During the early stages of technology

development, the project developer is also the developer of the ocean energy device. Later, as the industry matures and the technology becomes commercially viable, the developer can be a limited liability corporation. The later investors are typically what are referred to as “tax equity” investors, who invest in projects where they can gain a key financial advantage by making use of the tax incentives. agreement with private ocean energy developers that are eligible to use the tax incentives and then potentially assume ownership once the tax incentive expires.

Private Actors Good

Leadership/Enviro – ArcticIncorporating the private sector into the arctic leads to better leadership and environmental policy Ebinger et al 14 (Charles Ebinger, senior fellow and director of the Energy Security Initiative at Brookings. 35 years of experience specializing in international and domestic energy markets and the geopolitics of energy, and has served as an energy policy advisor to over 50 governments. professor in energy economics at Johns Hopkins and Georgetown, John P. Banks, senior fellow at the Energy Security Initiative at Brookings. He has worked with governments, companies and regulators for over 25 years in establishing and strengthening policies, institutions, and regulatory frameworks to promote sustainable energy sec- tors. Mr. Banks also serves as an adjunct professor at the School of Advanced International Studies at Johns Hopkins University. He has worked in over 20 countries. Alisa Schackmann, senior research assistant in the Energy Security Initiative at Brookings. With a background covering international energy policy and climate change negotiations from abroad, her research focuses on the impact of U.S. policies on global energy markets and security. She has a Master's degree from the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin and a B.A. from the University of Southern California., Offshore Oil and Gas Governance in the Arctic A Leadership Role for the U.S., Brookings Institute, 3-2014, http://www.brookings.edu/~/media/Research/Files/Reports/2014/03/offshore%20oil%20gas%20governance%20arctic/Offshore%20Oil%20and%20Gas%20Governance%20web.pdf//BDS)Private Sector Participation One message we heard in our discussions was the importance of involving the private sector. Since oil and gas companies are working in the Arctic and gaining operational experience on the ground, industry is generally ahead of govern- ments both in terms of knowledge and mutual cooperation. However, there is concern, not only among pri- vate sector entities with whom we spoke but also others, that the business community has not yet played a sufficient role. In particular, governments and multilateral organizations such as the Arctic Council need to emphasize and incorporate the private sector in all their deliberations. This view was highlighted by the president of a Chamber of Commerce in the Arctic, stressing that while the North holds the key to that country's future, its Arctic policy disappointingly overlooks the critical role of business as well as the tremendous growth forecast for business in the region. In addition to oil and gas companies, pertinent busi- nesses will include hydroelectric power, wind power, and minerals. Specifically, we heard that to date the Arctic Coun- cil has not been very effective at involving the pri- vate sector. At one level, this is not surprising: the Council initially was established primarily as an environmental and scientific research organiza- tion, and this character still permeates its operat- ing culture. However, insufficient incorporation of industry has had consequences. Icelandic Presi- dent Grimsson noted at the inaugural session of the Arctic Circle in October 2013, that while the Search and Rescue Agreement and the Arctic Oil Pollution Agreement are noteworthy, it is vital to realize that the lack of private sector participation in their development could hamper the agree- ments' viability given that the industry may have more resources readily at hand than the littoral governments. This view was echoed by another commenter, who acknowledged the success of the Council in

advancing these agreements but won- dered how much equipment is going to be needed to have effective response capability in both areas and who will finance it. The private sector can also play a role in the de- velopment of standards. As noted, the API and OGP are involved in developing recommended practices for the industry, including in the Arctic. However, some practitioners have cautioned that industry's voice in this process could overwhelm others, such as the indigenous community, and moreover the industry needs to do more to pro- pose standards directly applicable for Arctic op- erations, especially in ice-covered environments. Another issue raised is that of overseeing the per- formance and activities of sub-contractors, i.e., ensuring that standards are effectively applied to these entities. This links directly with some of the lessons emanating from the Deepwater Hori- zon oil spill, as well as Shell's experience in the Chukchi Sea in the summer of 2012: that suffi- cient management systems need to be in place for the larger oil and gas companies to guide, moni- tor, and evaluate the performance of contractors, often much smaller companies that may not have the resources or breadth of knowledge and expe- rience in a new and challenging environment. For example, one expert noted that in Russia, while large Russian companies are fairly effective and conscientious environmental stewards, it is the projects of smaller Russian companies where problems arise. According to this observer, one of the biggest problems the oil and gas industry confronts today in Russia is the activities of sub- contractors, whose performance schedules are often tight and who are incentivized to cut cor- ners while operating in highly vulnerable marine environments or areas of permafrost or other icy conditions. Another problem is that the break-up of vertically integrated companies has led to more outsourcing of project management with over- sight becoming very lax.

ClimateTop Scientist agrees private sector will play the key role in climate change if the government doesn’t interfere Tierney Smith, Junior Editor at Global Call for Climate Action based in London, chief scientist: Private sector innovation key to addressing climate change, Respond to Climate Change, 3-26-2012, http://www.rtcc.org/2012/03/27/uk-chief-scientist-private-sector-innovation-key-to-addressing-climate-change///BDS)

The UK’s chief scientist says ingenuity and innovation from the private sector will play a key role in coping with the huge changes the world will experience between now and 2050. Speaking at the Planet under Pressure 2012 conference in London John Beddington told an audience that government should put in place the right mechanisms – but the private sector should be allowed to experiment and develop the technologies needed over the next 30 years. Beddington stressed the public and private sector must work together but that state intervention, or the private sector merging into the public sector would be ‘disastrous’. “Where is the ingenuity? Where is the innovation? The answer, yes to some extent it is in the government labs but vastly more it is the private sector, working on the profit basis,” he said. Martin Haigh, Senior Energy Advisor for the Scenarios Team at Shell echoed Beddington’s thoughts but presents a different picture of a 2050 world. He predicts that it will not be till the later half of the century when renewable generation outstrips fossil fuels. “It is very difficult to paint a picture of 2050 without higher energy use in the world,” he said. “We all use a huge amount of fossil fuels in our daily lives to do the things we want and like to do, and at the same time we don’t want to deny people from the developed world that same lifestyle.” He points towards business engagement and further research into technologies including carbon capture and storage and biofuel production as key players in the 2050 energy sector – areas that Shell are currently investing in. He said, for a company such as Shell, they need to know they can still grow as a business while investing in more clean-tech options. He also warned that people can not expect these technologies to be workable overnight. “We would want to see ourselves larger in the future,” he said. “So for us it is about asking how to do that? If we change too early we will wither and die. But if we change too late we will wither and die. It is all about timing.” Whether or not this transition takes place now or whether it comes from the top down (i.e. G20 including natural hazards in talks) or bottom up (grassroots movements such as Transition Towns) one message is clear – business, science, politicians and consumers willd have a vital role to play in creating the world of 2050. “It is about satisfying individual needs, it’s about local and regional sustainability but at the same time bearing in mind global sustainability at that top level,” said Jill Jaeger, Senior Researcher, Sustainable Europe Research Institute in Austria. “It is utopian but it is also very realistic. Getting from here to there will not be easy and it will definitely not be linear. It will be a path of big transformations.”

Privatization solves warming-government policies failDawson 10-Graham, fellow at the Max Beloff Centre for the Study of Liberty at the University of Buckingham(Mises, “Privatizing Climate Policy” http://mises.org/journals/fm/jan10.pdf) patel

Climate-change policy ought to be privatized. All government policy instru- ments, including taxes, subsidies, regulation, and emissions trading to miti- gate climate change ought to be abolished. Instead, property rights to a cli- mate unchanged by human activity should be protected by tort litigation on the basis that strict liability is appropriate. There is no secure foundation in climate science for the current policy rhetoric; governments simply lack the knowledge to operate climate-change policy effec- tively. Moreover, policy is based on the neoclassical economics

assumption that climate change is a case of market failure. However, it is not markets that have failed but governments in failing to protect property rights. The earth's climate has always been susceptible to changes caused by natural factors over which human beings have no control. The Intergovernmental Panel on Climate Change uses its monopoly power in the dissemination of its own politically edited version of climate science to advance the hypothesis that climate change is caused by fossil-fuel use. Even the IPCC's scenarios of global-average surface-air warming for the next century range from mild temperature increases that would increase world food production to those that would have catastrophic effects on human life. We face radical uncertainty rather than calculable risk. Privatizing climate-change policy entails the abolition of all existing climate- change legislation. The tax treatment of fossil fuels should be revised to eliminate any tax contribution that had been imposed with the intention of reducing carbon emissions. Regulations aimed at reducing carbon emissions should be rescinded. National or supranational emissions-trading systems should be ended. There sim- ply should not be a public policy toward climate change.

Privatization solves warming better in the long-termDawson 10-Graham, fellow at the Max Beloff Centre for the Study of Liberty at the University of Buckingham(Mises, “Privatizing Climate Policy” http://mises.org/journals/fm/jan10.pdf) patel

Under a privatized climate-change policy, litigation would not impose a further burden of state intervention on industry. First, while some firms would face litigation, all would be free from the impositions of existing climate- change policies. Second, there would be no presumption of guilt. Third, the process of establishing guilt or inno- cence, probably through a series of court cases, would take time- Privatizing climate-change policy will delay severe reductions in carbon emissions. This outcome is to be wel- comed. If carbon emissions do cause climate change, it is their atmospheric concentration accumulating over a period of time that does so and not the additional carbon emitted in any one year. It is reasonable to exploit this opportunity to add to human knowl- edge of the possible effects of carbon emissions on the global climate and hence reduce the risk of incurring unnecessary costs through intemperate collective action. Litigation would improve the pub- lic understanding of the science of cli- mate change. Reports of the testimony of a range of expert witnesses would disseminate a more balanced account of climate science than the biased and artificially constructed dogma of the IPCC. Litigation would also further the advancement of climate science itself. It would achieve this worthwhile goal by intensifying competition among sci- entific hypotheses concerning climate change, so that falsified hypotheses might be discarded and others accepted as provisionally true.

Litigation solves for warmingDawson 10-Graham, fellow at the Max Beloff Centre for the Study of Liberty at the University of Buckingham(Mises, “Privatizing Climate Policy” http://mises.org/journals/fm/jan10.pdf) patel

The courts would call expert wit- nesses. So firms would have an incen- tive to fund research into the many uncertainties of climate change. This would give a boost to the growing number of climate skeptics and chal- lenge the monopoly position of the IPCC. The advantage of litigation is that it would replicate the process of competition, the friendly and yet hos- tile cooperation of scientists that Pop- per championed. Litigation also holds out the prospect of action on behalf of those without theresources to undertake it themselves. Indeed, litigation is a public good, in that its benefits are both nonexclud- able and nonrival. Litigation is non- rival in that A's seeking to show that B is strictly liable for a given environ- mental effect does not entail that there is less litigation "left over" for others to use. On the contrary, there may be bandwagon effects. The possible benefits of litigation concerning putative climate change would be nonexcludable. Climate change, if it is a problem at all, is a problem the world over. If carbon emis- sions are indeed causing dangerous cli- mate change, it does not matter where they are reduced; wherever the reduc- tions occur, the global atmospheric car- bon concentration will eventually be reduced. Tort litigation on the basis of strict lia- bility would protect the right to a climate free from human intervention if the cli- mate does need protecting, and, in case it does not, would save economic activ- ity across the world from the imposi- tion of unnecessary costs. By providing a public arena for the competitive test- ing of scientific hypotheses concerning climate change, litigation would also promote the advancement of climate science.

The private sector lowers emissions – status quo already solves the transition to Natural gasMatthews 13 – Merrill, resident scholar at the Institute for Policy Innovation (7/12/13, Forbes, “Mr. President, The Free Market Is Reducing CO2 Emissions,” http://www.forbes.com/sites/merrillmatthews/2013/07/12/mr-president-the-free-market-is-reducing-co2-emissions/)patel

Many federal lawmakers support President Obama in his desire to reduce carbon emissions by imposing the heavy hand of regulation. What they consistently fail to appreciate, however, is that the free market is already curbing energy-related carbon emissions. The best example of this market-induced transition? The widespread shift from coal to natural gas. Between January of 2007 and April of 2012, many electricity power plants—the largest single source of CO2 emissions—made precisely this shift. One reason was the exploding supply, and therefore falling price, of natural gas, which bottomed out at $1.86 per thousand cubic feet (MCF) in April of last year. According to the U.S. government’s Energy Information Administration (EIA), energy-related CO2 emissions fell to a little above the 1995 level and was trending lower, toward early 1990s levels. The Environmental Protection Agency says that natural gas produces about half of the CO2 emissions as coal. Thus that shift to gas has been helping the president achieve his goal. Gas is not only cleaner than coal, but the U.S. has become the largest producer of natural gas. So it is in both our environmental and economic interests to see an expansion of natural gas production and use. But carbon emissions are a global

challenge. Worldwide, coal is still the largest source of fuel for electricity power plants. China is the largest consumer of coal, 3.7 billion short tons, releasing 6,946 million metric tons (MMT) of CO2 in 2010. The U.S. comes in second at 1.05 billion short tons, releasing 1,985 MMT of CO2. Most countries use significantly less coal. Making it easier for not only the U.S. but other coal-using countries, especially China, to shift to natural gas would have a positive impact on energy-related CO2 emissions. Fortunately, innovation and the free market have produced a solution. The new extracting process known as fracking has dramatically increased U.S. natural gas production—and lowered its price. But gas isn’t as easy to store or ship as oil and coal, so excess capacity forces gas producers to cut back production, thus raising the price—which has been happening for about a year. The goal should be to expand the market for U.S. natural gas so that producers will expand their drilling, and that’s where Washington comes in. The Obama administration has approved two new facilities to export natural gas. These private sector operations will invest billions of dollars to build liquefied natural gas terminals that super-cool the gas, turning it into a liquid, to ship it to other parts of the world. But another dozen or so terminals are seeking Energy Department export permits. Quick federal approval would mean less CO2 emissions in the near future. Yes, the price of gas would likely be higher than its $1.86 MCF bottom last year, but it would likely also be lower than the current $4.00 MCF range, and production would be much more consistent, stabilizing the price—and creating a boon to the U.S. economy. With the ability to export cheap natural gas—the price in Europe can be three or four times the U.S. price, and even higher in Asia—it could become a viable global substitute for coal in producing electricity. Remember, for each megawatt hour generated by natural gas rather than coal, we potentially cut carbon emissions by half. You don’t have to buy into the president’s whole environmental agenda to think that’s a good idea. The changeover won’t happen overnight, but the rate of carbon emissions will decline each time a power plant switches from coal to gas. Elected officials and environmentally minded regulators don’t need to launch a regulatory assault on electricity power plants. They just need to ensure that gas producers have a market for their product—including overseas. The price will drop as production rises, and power plants will respond accordingly, just as they did between 2007 and 2012. Generating more power from natural gas will boost the U.S. economy and reduce our energy-related carbon emissions. Washington needs to allow the natural gas industry to flourish.

Ocean privatization solves innovation and the environmentBlock – Walter, Professor of economics (mises.org ,Water Privatization,” https://mises.org/journals/scholar/waterprivate.pdf) patel

This scenario assumes, of course, that the necessary complementary technological breakthroughs occur, such as either genetic branding, or perhaps better yet, electrified fences, which can keep the denizens of the deep penned in where deep sea fish farmers want them. Yes, this seems unlikely at present, given that under present law there would be no economic benefit to such inventions. But this is due, in turn, not to any primordial fact of nature or law. Rather, it is because the law has not yet been changed so as to recognize even the possible future scenario

where ocean privatization would be economic. The public policy recommendation stemming from this analysis is merely that the law should now be changed so as to recognize fish ownership in a given cubic area of ocean when and if such an act becomes technically viable. Then, whether or not it actually occurs is only an empirical question. It will, if and only if the complementary technology is forthcoming to make it feasible. But under this ideal state of affairs, there would be no legal impediment, as there now is, in this direction. That is, suppose that the needed innovations never occur, or are always too expensive, compared to the gains to be made by herding fish instead of hunting them. Then, of course, there can be no private property rights used in this manner in the ocean, as a matter of fact. But as a matter of law, things would still be different under the present proposal. There would always be the contrary to fact conditional in operation that if technology were such, then it would be legal to fence in parts of the ocean for these purposes. Under this state of affairs, there would be no legal impediments to the development of the requisite technology.40 Another benefit would be making the earth a more habitable place in which to live. Consider in this regard clouds, flooding, fog, hurricanes, storms, tidal waves, tornados, torrential rain, tsunamis, typhoons, whirlpools, winds, etc. At present, these are considered acts of God. If the oceans and the air, from which and in which these disasters emanate, were allowed by law to be owned by firms or individuals, at least in principle, this might well set up the first steps in mankind’s long journey to quelling these “natural” disasters. How else could this ever be done, other than by employing the institution of private property rights, which is responsible for so much else we include under the category of “good works?”

PiracyPrivatization incentivizes protection from piracyLeeson 9 - – Peter T. Leeson is BB&T Professor for the Study of Capitalism at George Mason University (4/13/9, “Want to Prevent Piracy? Privatize the Ocean,” http://www.nationalreview.com/corner/180288/want-prevent-piracy-privatize-ocean/peter-t-leeson) patel

Following the freeing of American ship captain Richard Phillips from a band of Somali pirates Sunday, commentators have turned their attention to what can be done to control and prevent future piracy. The solutions suggested so far are what you might expect: Hit the Somali pirates at home with overwhelming force; reestablish “law and order” in Somalia so that pirates can’t flourish; and, closely-related, focus on state building in Somalia so citizens have lucrative employments other than piracy to turn to. One suggestion that isn’t being considered, but should be, is to privatize the seas — especially those off Somalia’s coast. As the old adage (at least among economists) goes, “What nobody owns, nobody takes care of.” This is as true for oceans as it is for anything else. Piracy is just one manifestation of nobody taking care of what nobody owns when that “what” is the sea. Governments exercise a kind of de facto ownership over the waters off their coasts; states have jurisdiction over, and thus control, what goes on in within so many miles of their shores. But there’s no government in Somalia to control what goes in Somalia’s would-be territorial waters. And in any event, pirates have taken to plying their trade 200-plus miles off the coast — watery territories nobody owns. Predictably, the absence of ownership of these waters means no one has had much incentive to prevent activities that destroy their value — activities such as piracy. The result is a kind of oceanic “tragedy of the commons” whereby, since no one has an incentive to devote the resources required to prevent piracy, piracy flourishes. In contrast, if these waters were privately owned, the owner would have a strong incentive to maximize the waters’ value since he would profit by doing so. That would mean suppressing and preventing pirates. Rather than trying its hand at Somali state building, the international community should try auctioning off Somali’s coastal waters. According to some Somali pirates, greedy foreign corporations are exploiting valuable resources in these waters, which is allegedly why they’ve resorted to piracy (the large ransoms earned from pirating are a happy but unexpected byproduct of pursuing social justice, I suppose). If this is right, Somalia’s coastal waters should be able to fetch a handsome price. The international community can use the proceeds of the auction for humanitarian assistance in Somalia, or put it in a trust for Somalia’s future government, if one ever emerges. The “high seas” should be similarly sold. It’s not so important where the proceeds go. The important thing is that the un-owned becomes owned. Establishing private property rights where they don’t currently exist is the solution to about 90 percent of world’s economic problems. Piracy is no exception.

Bio-DOnly need to save 4%-privatization can solve for the long-termDyke 11 – Jeremiah (Mises, 11/8/11, “Marine Mammal Conservation With Just 4% Ocean Privatization,” http://archive.mises.org/18376/marine-mammal-conservation-with-just-4-ocean-privatization/) patel

Science Daily recently reported on a study that finds “Preserving just 4 percent of the ocean could protect crucial habitat for the vast majority of marine mammal species, from sea otters to blue whales.” The article, based on the research at Stanford University and the National Autonomous University of Mexico (as published in the The Proceedings of the National Academy of Sciences), shows that all 129 marine mammal species “can be represented in only 20 critical conservation locations [covering] 10 percent of the species’ geographic range.” Of the 20 critical conservation locations, the authors identify that “preserving just 9 of the 20 conservation sites would protect habitat for 84 percent of all marine mammal species on Earth” Though the researchers do not suggest privatization as a means toward conservation, the reader should recognize the potential benefits. It also should be noted that the privatization of even 4% of our massive ocean yields an extremely large piece of territory–about the size of the United States and Mexico combined. Nevertheless, the study suggests that complete ocean privatization need not be the short-term goal of the libertarian ocean conservationist. The ownership allocation of just 4% of the ocean might indeed be enough to protect their interests.

Federal involvement makes spills more likelySHELLENBERGER 10-David E. , Executive Director and Counsel, Regulatory Group at A major financial services company in NY Chief Counsel, New York Region at FINRA Chief of Licensing at Massachusetts Securities Division, Boston University School of Law (5/28/10, “Gulf of Mexico Oil Disaster: Privatizing the Gulf for Better Stewardship,” http://www.daveshellenberger.com/gulf-oil-disaster-privatizing-better-stewardship) patel

The federal government may have facilitated the disaster. Observers have raised three factors. Cap on Liability First, the oil industry influenced enactment of laws limiting BP’s liability to the remarkably low figure of $75 million. This cap may have influenced the company in its determination of the extent to which it would invest in preventing a spill. While all oil companies have an incentive to avoid the costs, lost revenue, and public relations damage from oil spills, BP’s risk tolerance may have been higher than desirable, and a cap would have exacerbated this. BP’s actual exposure now is far in excess of the cap. Firms are liable for clean-up costs, which are not capped, and BP has waived the cap. (“BP’s Escalating Costs Put Investors on Edge,” WSJ.com, May 1, 2010.) The waiver may be moot, since one or more statutory exceptions, including violation of safety rules, may be applicable. (“BP Cap Waiver May Be Moot in Light of Possible Lapses (Update1),” Bloomberg.com, May 21, 2010.) Nonetheless, the existence of the cap logically would have been a factor in BP’s calculations prior to the disaster. Restrictions on Safer Drilling Second, federal restrictions on drilling in shallower water and

onshore may have pushed BP to engage in the more hazardous drilling in deep water. The materiality of this factor will have to be explored through facts from the industry. Deepwater drilling may have made economic sense regardless of restrictions on other drilling. (See “BP’s murky deep-water future,” CNNMoney.com (Fortune), May 11, 2010: “The U.S. gets more than a third of the oil it produces domestically from the Gulf of Mexico. Already 20% to 25% of this is from ultra-deepwater; and that share is rising as fields in shallower water decline in productivity.”) The restrictions, though, at the least limit the availability of other drilling options, to some degree making deepwater drilling more attractive. The restrictions tend to be political rather than rational, reflecting ideological opposition to oil and gas. (See “No Energy from this Executive,” Fred Barnes, WeeklyStandard.com, June 15, 2009.) Where the disallowance of drilling is unreasonable, whether on land or offshore, this unnecessarily blocks productive economic activity. Regulatory Failures Third, the regulator, Minerals Management Service, a bureau of the Department of the Interior, as acknowledged by the Secretary, “could have done more to check that equipment used on off-shore drilling rigs met its standards …”(“MMS admits shortcomings in BP spill,” FT.com, May 18, 2010.) The MMS has a conflict of interest in that it leases and regulates. The government is planning to split the bureau between its two functions, though this may not only not make a difference, it may worsen decision-making. (See Jonathan H. Adler, “Splitting Up MMS to Avoid Oil Spills,” The Volokh Conspiracy, May 12, 2010.) The MMS also exempted BP from a detailed environmental impact analysis. (“U.S. exempted BP’s Gulf of Mexico drilling from environmental impact study,” WashingtonPost.com, May 5, 2010.) The industry and MMS failed to heed warnings concerning the risks of drilling and the limitations of controls. (“Oil industry failed to heed blowout warnings,” NewScientist.com, May 10, 2010; “Disaster Plans Lacking at Deep Rigs,” WSJ.com, May 18, 2010.) This meant not only that the drilling took place without adequate technology, but also without appropriate preparation for dealing with a major spill. In addition, BP’s own blunders in drilling the subject well suggest a recklessness that would not have occurred with proper regulation. (See “Unusual Decisions Set Stage for BP Disaster,” WSJ.com, May 27, 2010.)

Gulf ManagementPrivatization solves Gulf managementSHELLENBERGER 10-David E. , Executive Director and Counsel, Regulatory Group at A major financial services company in NY Chief Counsel, New York Region at FINRA Chief of Licensing at Massachusetts Securities Division, Boston University School of Law (5/28/10, “Gulf of Mexico Oil Disaster: Privatizing the Gulf for Better Stewardship,” http://www.daveshellenberger.com/gulf-oil-disaster-privatizing-better-stewardship) patel

The oil spill disaster exposed the federal government’s failures in connection with deepwater drilling. The issue is broader, though, since government’s management of any resources, including the Gulf as a whole, is always problematic. The disaster can encourage the reexamination of alternatives to government control of the Gulf. Background: Property Interests in Fisheries The federal government controls resources out 200 nautical miles, the exclusive economic zone (EEZ) under the Law of the Sea Convention. While the U.S. has not ratified the Convention, it recognizes the EEZ as customary international law. The creation of EEZs allows the creation of property interests in fisheries within the zones. (Donald R. Leal, Director of Research of Property & Environment Research Center (PERC), reviewing Rögnvaldur Hannesson’s The Privatization of the Oceans in The Independent Review, Winter 2007. The creation of property rights in fisheries, through Limited Access Privilege Programs (LAPPs), including Individual Transferable Quotas (ITQs) (or Individual Fishing Quotas, IFQs), is a well-established means of managing this resource. The market approach has been successful in restoring and maintaining fisheries resources. (See, e.g., Donald R. Leal, “Saving Fisheries with Free Markets,” PERC.org, Feb. 2006 (published in Milliken Institute Review), and Donald R. Leal, et al., “Beyond IFQs in marine fisheries,” PERC.org, 2008.) PERC has encouraged the use of transferable quotas for fisheries in the Gulf of Mexico. (See media release, PERC.org.) Such programs are in place for several species. (See Southeast Fishery Bulletin, March 9, 2010.) Commercial and recreational fishing are just two of the economic interests related to the Gulf of Mexico. Other interests include shell fishing, oil and gas development, commercial shipping, swimming, tourism, and recreational boating. In addition, there is the general environmental interest in maintaining water quality and preserving wildlife. The experience in creating property interest in fisheries demonstrates the feasibility of moving beyond government’s direct management of public resources, and substituting the market for government command and control. Beyond Property Interests in Fisheries: Privatizing the Gulf Government tends to be the worst manager of resources, because it lacks economic incentives to properly manage them, and because, pursuant to public choice theory, it favors special interests. Private ownership of resources leads to stewardship. (See generally, “Earth Day 2010: Protect Human Freedom as We Protect the Environment.”) Government’s control of the Gulf has allowed the occurrence of an environmental disaster, to the detriment of economic and environmental interests. Government is likely to continue to mismanage the Gulf, through, e.g., avoiding political risk by banning all drilling for years, without real

consideration of risk. This leads to the idea of exploring an alternative to government control, i.e., private ownership or control of either the Gulf or all natural resources in the Gulf (within the U.S.’s EEZ). Private control could take a number of forms. Any solution would have to recognize the multitude of economic and environmental interests represented by the Gulf. The most straightforward alternative would entail the sale or long-term lease of the Gulf or its resources. In order to accommodate the need for respect for all the interests involved, however, control by a purely commercial entity would be politically impossible, and probably economically infeasible.

Non-profits could own and use the money achieve their goalsSHELLENBERGER 10-David E. , Executive Director and Counsel, Regulatory Group at A major financial services company in NY Chief Counsel, New York Region at FINRA Chief of Licensing at Massachusetts Securities Division, Boston University School of Law (5/28/10, “Gulf of Mexico Oil Disaster: Privatizing the Gulf for Better Stewardship,” http://www.daveshellenberger.com/gulf-oil-disaster-privatizing-better-stewardship) patel

Non-Profit Ownership An alternative to pure commercial control would be granting ownership of the Gulf, or all resources in the Gulf, to a non-profit organization. The organization would have to be one that would implicitly respect environmental concerns, while also having an incentive to create and maintain revenue to fund its mission. The goal would be for the organization to intelligently balance the various interests, such as oil and gas development and fishing, while acting as a private regulator (or facilitator of self-regulatory organizations) of activities such as drilling. Non-profit organizations, such as the Nature Conservancy and the Audubon Society, successfully manage land, balancing economic and environmental objectives. (See, e.g., David J. Theroux, President of The Independent Institute, “The Tragedy of the Commons,” Commentary, Independent Institute, published in Las Vegas Review-Journal, June 12, 1994.) The same dynamic would apply in managing ocean resources such as the Gulf. In order to enhance the likelihood that the organization would be responsive to all the economic and environmental interests, a stakeholder board might be appropriate. This is the structure recommended by Robert Poole, Director of Transportation Policy and Searle Freedom Trust Transportation Fellow at the Reason Foundation, for the proposed non-profit entity to privatize air traffic control in the U.S. (“How to Commercialize Air Traffic Control,” Policy Study, Reason Foundation, Feb. 1, 2001.) The board would include representatives from the public, environmental organizations, the federal government, the states on the Gulf, the commercial and recreational fisheries industry, the shellfish industry, the oil and gas industry, and other interests. The owner would compensate taxpayers through paying the U.S. government a percentage of its revenue from the sale or lease of rights to resources, as well as user fees. A benefit of stakeholder representation is that this would limit the risk that the organization’s own interests could evolve to become inconsistent with those of the stakeholders. Just as foundations established by ideological capitalists often have become champions of statism or socialism, so an

organization without stakeholder representation could, over time, unacceptably favor certain interests.

Natural GasCongress should privatize oil and natural gas drilling to provide stimulus to the economyBradley 95 – Robert L, CEO and founder of the Institute for Energy Research, and the author of several successful books on energy economics (cato, “Cato Handbook for Congress ,” http://object.cato.org/sites/cato.org/files/serials/files/cato-handbook-policymakers/1995/9/104-27.pdf)patel

The dual attraction of selling federal energy assets to the private sector is (1) the accrual of billions of Treasury dollars that can be used for deficit reduction and (2) the significant stimulus that such a policy would provide to the energy economy. Accordingly, Congress should sell its five federal power marketing agencies, four naval pet-oleum reserves, three oil shale reserves, and all DOE research and development laboratories. All of those entities and programs should be privately reorganized. Power-marketing agencies such as the Bonneville Power Administration are poorly managed at taxpayer expense. They historically have caused serious environmental damage by utterly destroying river ecosystems and often generate more pollution than the industry standard. Moreover, their mission of subsidizing the use of electricity only serves to encourage inefficient energy consumption. The naval petroleum reserves and various federal oil shale reserves share all the problems of the SPR. And the federal energy laboratories are blatant subsidies to an energy industry that can "free ride" on taxpayer-funded research and development that most other industries rightly pay for themselves. Finally, the Rural Electrification Administration and its activities, a federal subsidy program whose time has long since passed, should be scrapped. Unshackle the Domestic Energy Industry The domestic energy industry operates in a regulatory straitjacket that prohibits the commercialization of vast energy holdings, micromanages commercial practices, and discourages market entry. The rationales for those anti-competitive practices are discredited relics of the Progressive Era: that government planners are better land managers than are private stewards and that energy corporations are natural monopolies that must be overseen by political bodies. It is time to jettison those myths. The U.S. petroleum industry has steadily lost market share to foreign oil suppliers. Although that partly reflects the fact that the lower 48 states are a very mature oil province, it also is because drilling in and production from the most promising regions of the country—the Arctic National Wildlife Refuge and other Alaskan areas, the outer continental shelf, and Point Arguello off California—have been blocked by Congress. Privatizing oil and gas lands would provide a tremendous windfall to the U.S. Treasury, make the much-maligned' 'high-cost'' U.S. energy industry more globally competitive, and provide a stimulus to the American economy. Federal land leasing for oil and gas development has been regulated by the Department of the Interior since the first claim was made in 1880. Not surprisingly, politicization has hallmarked public land development since. Yet economics, not politics, should dictate how land is used, and those decisions should be made by private landowners, not absenteegovernment planner-landlords. Congress should do more than simply change the rules about how certain public lands like ANWR are used. It should get

out of the business of owning commercially valuable real estate altogether and sell those lands to the public. If Boris Yeltsin can do it, so can the U.S. Congress

NASAPrivatization solves NASA projectsHudgins 12 – Edward, director of regulatory studies at the Cato Institute(“Time to privatize NASA,” Cato institute, http://www.cato.org/publications/commentary/time-privatize-nasa) patel

John Glenn’s 1962 spaceflight and the Apollo moon landings were inspiring achievements. Unfortunately, the recently announced plan to give the 77-year-old Mr. Glenn a seat on a space shuttle is NASA’s version of bread and circuses. It is entertainment, a way to draw attention from that agency’s truly astronomical costs. Why are no regularly scheduled commercial spaceflights available for Mr. Glenn to book? Because no government agency that runs with the efficiency of the Pentagon and the U.S. Postal Service will ever realize the dream of commercially viable orbiting stations or moon bases. A history of flight Put the progress in spaceflight in historical perspective. The Wright brothers’ first flight was in 1903, and Charles Lindbergh flew across the Atlantic Ocean in 1927. By the late 1930s, the first commercially viable aircraft, the DC-3, was flying. But 35 years after Mr. Glenn’s first flight, travel into space is still an expensive luxury. Should we have expected better? If the National Aeronautics and Space Administration had backed out of the civilian space business after the moon landing, yes. Consider the progress in other areas. The inflation-adjusted cost of commercial air travel has dropped by about 30 percent since the late 1970s, when airline deregulation began. And the cost of shipping oil has dropped by as much as 80 percent in a little over two decades. But the government’s reusable shuttle has actually made spaceflight more expensive. In his book “Space Enterprise: Beyond NASA,” space specialist David Gump calculates that even using NASA’s own very low cost-per-flight figures in the 1980s, the cost to put a pound of payload into orbit on the shuttle was $6,000. That compares to an inflation-adjusted figure of only $3,800 for the Saturn V expendable launch vehicles that carried men to the moon. But this analysis is too kind to the shuttle. Duke University Professor Alex Roland, taking into account shuttle-development costs that NASA ignores in its news releases, pegs the per-pound price at $20,000. Other overhead would mean a cost as high as $35,000 per pound. So if a 160-pound John Glenn were sent up as shuttle cargo, total postage would run between $3.2 million and $5.6 million. But as a passenger on a shuttle flight with a crew of seven, at more than $1.5 billion per flight, his ticket actually costs between $214 million and $286 million. Hardly the right stuff at the right price. No thanks, private sector The government has had many opportunities to turn over civilian space activities to the private sector. In the 1970s, American Rocket Co. was one of the private enterprises that wanted to sell launch services to NASA and private businesses. But NASA was moving from science to freight hauling, and planned to monopolize government payloads on the shuttle and subsidize launches of private cargo as well. The agency thus turned down American Rocket. In the late 1980s, Space Industries of Houston offered, for no more than $750 million, to launch a ministation that could carry government and other payloads at least a decade before NASA’s station went into operation. (NASA’s station currently comes with a price tag of nearly $100 billion for

development, construction and operations.) NASA, not wishing to create its own competition, declined Space Industries’ offer. In 1987 and 1988, a Commerce Department-led interagency working group considered the feasibility of offering a one-time prize and a promise of rent to any firm or consortium that could deliver a permanent manned moon base. When asked whether such a base were realistic, private-sector representatives answered yes — but only if NASA wasn’t involved. That plan was quickly scuttled. Each shuttle carries a 17-story external fuel tank 98 percent of the distance into orbit before dropping it into the ocean; NASA could easily — and with little additional cost — have promoted private space enterprise by putting those fuel tanks into orbit. With nearly 90 shuttle flights to date, platforms — with a total of 27 acres of interior space — could be in orbit today. These could be homesteaded by the private sector for hospitals to study a weightless Mr. Glenn or for any other use one could dream of. But then a $100 billion government station would be unnecessary. As long as NASA dominates civilian space efforts, little progress will be made toward inexpensive manned space travel. The lesson of Mr. Glenn’s second flight is that space enthusiasts ignore economics at their peril.

EnergyUS can be an energy powerhouse only if it privatizesLincicome13 – Scott, international trade attorney with extensive experience in trade litigation before the United States Department of Commerce, the US International Trade Commission (ITC), the US Court of International Trade, the European Commission and the World Trade Organization’s (WTO) Dispute Settlement Body (2/21/13, Cato, “License to Drill: The Case for Modernizing America’s Crude Oil and Natural Gas Export Licensing Systems,” http://www.cato.org/publications/free-trade-bulletin/license-drill-case-modernizing-americas-crude-oil-natural-gas) patel

Fossil-fuel extraction technologies, such as hydraulic fracturing (“fracking”) and horizontal drilling have revolutionized the U.S. energy market. According to the U.S. Energy Information Administration, domestic production of crude oil and natural gas has skyrocketed in recent years and is projected to stay at relatively high levels for decades, even assuming existing state and federal restrictions on production and transport.1 As summarized by economist Mark Perry, “U.S. oil production reached a 15-year high in 2012 with a yearly increase that was the largest in history, net oil imports fell to a 21-year low, and U.S. energy self-sufficiency rose to a 22-year high last year.”2 The production spike has driven down domestic gas and oil prices, creating a significant gap between U.S. and international market prices. As shown in the chart, natural gas prices in Japan, the world’s largest liquid natural gas (LNG) consumer, were more than five times higher than U.S. prices in 2012, and European prices were three to four times higher. The increase in domestic energy supplies and resulting decline in prices has been a boon to downstream industries, such as electricity generators and petrochemical producers that rely on fossil fuels for energy or feedstock. According to the Boston Consulting Group, low energy prices have contributed, and will continue to contribute, to an American “manufacturing renaissance” in terms of domestic employment and export competitiveness in these sectors.3 The resulting price differentials have U.S. energy producers positioned to become a global exporting powerhouse, and could reverse the United States’s historic position as a net energy importer. According to a November 2012 report by the International Energy Agency, the United States could become a net exporter of natural gas by 2020 and will be “almost self-sufficient in energy, in net terms, by 2035.”4 That same report estimates that the United States will become the world’s largest oil producer by around 2020, causing North America to emerge as a net oil exporter by 2035.5 Fossil Fuel Export Restrictions and Pending Applications It would be difficult for those market projections to materialize under the current regulatory environment. In particular, natural gas and crude oil exports continue to be governed by licensing systems adopted when the United States was a net energy importer and dependent on fossil fuels for energy production—a picture far different from the production, price, and trade realities that exist today

EconomyPrivatization benefits the economyLincicome13 – Scott, international trade attorney with extensive experience in trade litigation before the United States Department of Commerce, the US International Trade Commission (ITC), the US Court of International Trade, the European Commission and the World Trade Organization’s (WTO) Dispute Settlement Body (2/21/13, Cato, “License to Drill: The Case for Modernizing America’s Crude Oil and Natural Gas Export Licensing Systems,” http://www.cato.org/publications/free-trade-bulletin/license-drill-case-modernizing-americas-crude-oil-natural-gas) patel

According to the EIA report commissioned by DOE, increased natural gas exports would lead to higher prices followed by increased domestic production.17 But prices are not expected to skyrocket, and consumers will continue to benefit from hypercompetitive fuel and feedstock supplies. Independent reports from the Brookings Institution and Deloitte project that permitting gas exports would lead to a small and gradual increase in domestic natural gas prices.18 Such predictability and consistency is good for the industry and the overall stability of the U.S. energy market—it would prevent boom and bust cycles of high/low prices and high/low production that hurt the U.S. economy and prevent companies from implementing long-term investment, production, and hiring strategies. The current situation—in which oil and gas export decisions are left the whims of federal regulators—has the opposite effect. Second, restricting U.S. gas and oil exports could hurt the U.S. economy. Recent studies indicate that U.S. natural gas producers could earn up to $3 billion per year from exports.19 The Sabine Pass liquefaction facility—the lone DOE approval, thus far—is projected to create 30,000 to 50,000 new American jobs. The export benefits would not be limited to energy producers, however. The NERA report found that LNG exports, even in unlimited quantities, would produce gains in real household income.

Current systems violate WTOLincicome13 – Scott, international trade attorney with extensive experience in trade litigation before the United States Department of Commerce, the US International Trade Commission (ITC), the US Court of International Trade, the European Commission and the World Trade Organization’s (WTO) Dispute Settlement Body (2/21/13, Cato, “License to Drill: The Case for Modernizing America’s Crude Oil and Natural Gas Export Licensing Systems,” http://www.cato.org/publications/free-trade-bulletin/license-drill-case-modernizing-americas-crude-oil-natural-gas) patel

Beyond the economic problems, both export licensing systems raise serious concerns under global trade rules. First, the U.S. export licensing regimes for natural gas and crude oil likely violate U.S. obligations under the General Agreement on Tariffs and Trade (GATT). Under GATT Article XI:1, WTO Members are generally prohibited from imposing quantitative restrictions on imports and

exports. Under Article XI and related WTO jurisprudence, “discretionary” licensing systems (i.e., those in which the administering authority has the freedom to grant or deny a license) and systems in which applications are delayed for several months constitute impermissible restrictions on export quantities.20 On the other hand, licensing systems in which approval is automatic and relatively quick (e.g., five days) have been found to be lawful.21 Based on these standards, both the U.S. natural gas and crude oil licensing systems appear to violate GATT Article XI:1.22 Each system provides the administering agency (DOE or BIS) with the discretion to grant or deny an export license based on subjective and nonbinding criteria (the “public interest” or “national interest” standards). Moreover, the pending export license applications have been delayed for several months (and, in a few cases, years). Both of these facts support findings of GATT violations. One or both licensing systems might theoretically be defended under the national security exception of GATT Article XXI, which permits Members to impose WTO-inconsistent measures “which it considers necessary for the protection of its essential security interests … taken in time of … emergency in international relations.” No panel has ever ruled on the national security exception, but the standard is subjective: the text refers to a measure which the WTO Member considers “essential” for its security interests. Thus, a WTO panel might defer to a Member’s definition of what constitutes an “essential” security interest. Given that crude oil exports are regulated under the same apparatus, and by the same agency (BIS), as other goods regulated for express national security purposes, the U.S. government might be able to successfully invoke GATT Article XXI to defend the system from allegations of WTO-inconsistency. However, it is unclear whether the U.S. government would want to establish international legal precedent on “essential” security measures for a relatively obscure export restriction that has been in place since 1975 (i.e., during periods that were arguably not times of “emergency in international relations”). These same limitations could apply to the 1930s-origin natural gas licensing system, as could several others. For example, the laws that govern the export of products that could have national security concerns do not appear to apply to natural gas. Gas exports are regulated by DOE, rather than BIS (which, as noted above, typically handles national-security-related export controls). Finally, economic, not security, issues appear to drive the “public interest” standard and DOE’s application of it. Only one of the public-interest criteria (U.S. “energy security”) could be considered to relate to national security, but the available legislative history of the original 1938 Act and the subsequent amendments do not indicate that the export licensing system was implemented for national security purposes.23 Also, both the reports informing DOE’s decisions on the pending LNG export applications address only economic matters. Thus, the U.S. government could be even more hesitant to claim that the natural gas system is “essential” to the country’s national security.24 Second, restrictive export licensing systems also raise potential concerns under global anti-subsidy disciplines. There is limited WTO jurisprudence on whether an “export restraint” that lowers domestic input prices for downstream manufacturers constitutes a “subsidy” as defined by the WTO Agreement on Subsidies and Countervailing Measures. The WTO Panel in U.S.—Export Restraints found that certain export measures did not meet the WTO’s precise definition.25 However, the panel’s ruling

was specific to the measures at issue and was not appealed to the WTO Appellate Body, whose rulings have more precedential value. No other disputes have addressed this issue. Moreover, the Panel ruling has not stopped national governments from imposing anti-subsidy measures (called “countervailing duties” or “CVDs”) on downstream exports due to export restrictions on various upstream inputs. Most notably, the Department of Commerce has stated repeatedly that export restrictions are a type of “indirect subsidy.”26 And DOC continues to treat them as such in new CVD investigations.27 Furthermore, the European Commission in January 2013 recommended the imposition of anti-subsidy duties on Chinese exports of organic coated steel, finding that the Chinese government provided the subsidies “mainly through export restrictions that artificially lower prices of rolled steel for domestic manufacturers.”28 Thus, the crude oil and natural gas licensing systems might not only raise legal problems for the U.S. government, but could subject certain energy-intensive U.S exporters to anti-subsidy duties that negate the competitive price advantages created by the licensing systems.

Privatization solves the deficitRothbard 6 – Murray (mises, “Making Economic Sense,” https://mises.org/books/econsense.pdf, 144-146) pate

Privatization is the "in" term, on local, state, and federal lev- els of government. Even functions that our civic textbooks tell us can only be performed by government, such as prisons, are being accomplished successfully, and far more efficiency, by private enterprise. For once, a fashionable concept contains a great deal of sense. Privatization is a great and important good in itself. Another name for it is "desocialization." Privatization is the reversal of the deadly socialist process that had been proceeding unchecked for almost a century. It has the great virtue of taking resources from the coercive sector, the sector of politicians and bureau- crats—in short, the non-producers—and turning them over to the voluntary sector of creators and producers. The more resources remain in the private, productive sector, the less a dead weight of parasitism will burden the producers and cripple the standard of living of consumers. In a narrower sense, the private sector will always be more efficient than the governmental because income in the private sector is only a function of efficient service to the consumers. The more efficient that service, the higher the income and prof- its. In the government sector, in contrast, income is unrelated to efficiency or service to the consumer. Income is extracted coer- cively from the taxpayers (or, by inflation, from the pockets of consumers). In the government sector, the consumer is not someone to be served and courted; he or she is an unwelcome '"waster" of scarce resources owned or controlled by the bureau- cracy. Anything and everything is fair game for privatization. Socialists used to argue that all they wish to do is to convert the entire economy to function like one huge Post Office. Novsocialist would dare argue that today, so much of a disgrace is the monopolized governmental Postal Service. One standard argument is that the government "should only do what private firms or citizens cannot do." But what can't they do? Every good or service now supplied by government has, at one time or another, been successfully

supplied by private enterprise. Another argument is that some activities are "too large" to be performed well by private enterprise. But the capital market is enormous, and has successfully financed far more expensive undertakings than most governmental activities. Besides the government has no capital of its own; everything it has, it has taxed away from private producers. Privatization is becoming politically popular now as a means of financing the huge federal deficit. It is certainly true that a deficit may be reduced not only by cutting expenditures and raising taxes, but also by selling assets to the private sector. Those economists who have tried to justify deficits by pointing to the growth of government assets backing those deficits can now be requested to put up or shut up: in other words, to start selling those assets as a way of bringing the deficits down. Fine. There is a huge amount of assets that have been hoarded, for decades, by the federal government. Most of the land of the Western states has been locked up by the federal government and held permanently out of use. In effect, the fed- eral government has acted like a giant monopolist: permanently keeping out of use an enormous amount of valuable and pro- ductive assets: land, water, minerals, and forests. By locking up assets, the federal government has been reducing the produc- tivity and the standard of living of every one of us. It has also been acting as a giant land and natural resource cartelist—arti- ficially keeping up the prices of those resources by withholding their supply. Productivity would rise, and prices would fall, and the real income of all of us would gready increase, if govern- ment assets were privatized and thereby allowed to enter the productive system. Reduce the deficit by selling assets? Sure, let's go full steam. But let's not insist on too high a price for these assets. Sell, sell, at whatever prices the assets will bring. If the revenue is not enough to end the deficit, sell yet again. A few years ago, at an international gathering of free-market economists, Sir Keith Joseph, Minister of Industry and alleged free-market advocate in the Thatcher government, was asked why the government, despite lip-service to privatization, had taken no steps to privatize the steel industry, which had been nationalized by the Lalwr government. Sir Keith explained that the steel industry was losing money in government hands, and "therefore" could not command a price if put up for sale. At which point, one prominent free-market American economist leaped to his feet, and shouted, waving a dollar bill in the air, "I hereby bid one dollar for the British steel industry!" Indeed. There is no such thing as no price. Even a bankrupt industry would sell, readily, for its plant and equipment to be used by productive private firms. And so even a low price should not stop the federal govern- ment in its quest to balance the budget by privatization. Those dollars will mount up. Just give freedom and private enterprise a chance.

Privatization guarantees stability in theUSYeatts 10 – Guillermo (4/30/10, “Subsoil Oil and Gas Privatization: Private Wealth for the Common Good (Message for Latin America,” http://www.masterresource.org/2010/04/subsoil-oil-and-gas-privatization-private-wealth-for-the-common-good-message-for-latin-american/) patel

The history of oil and gas production in Latin America has been characterized by a continuing tug of war between the state as owner of the subsurface (Spanish

colonial tradition) and private producers in pursuit of profits. Private participation in the industry has been limited to brief periods and restricted to specific phases of oil and gas production. The typical pattern is that foreign oil and gas companies are allowed into a country to locate and initiate production. Once oil is flowing, governments nationalize the companies’ facilities – with or without compensation – and hand them over to government-owned and operated monopolies. Whether the oil or gas is produced by private corporations or by a government monopoly, it is almost always the government that receives most of the profits. All too often, the money is used to keep the heads of state in power. In the United States, by contrast, individuals own and control much of the nation’s subsurface rights to energy and other minerals. The results are starkly different. While the oil and gas industry in the United States expanded quickly, bringing prosperity to many areas that were once underdeveloped or deserted, oil revenues in other countries have propped up corrupt governments with little or no benefits to the general welfare. State ownership of the subsurface removes incentives for risk-taking, investment, and technological innovation. Farmers and ranchers are pitted against oil development. In Latin America, the prospect of an oil or gas discovery is a farmer’s worst nightmare. They reap no financial benefit from the discovery, but they do suffer land damage and the disruption to their lives from drilling and production operations. Consequently, a landowner’s incentive is to hide any mineral wealth his property might have and to fight any attempt to exploit such wealth. In the United States, on the other hand, landowners dream of oil being discovered on their property. If they own the mineral rights, they are compensated for the right to explore and receive a royalty for any minerals produced. This more than makes up for the inconvenience of oil and gas operations on their property. Spread of Oil Nationalism in Latin America Theories of political and economic nationalism espoused by Latin American intellectuals in 1920s provided the analytical framework for dissatisfaction with the distribution of wealth. Nationalists became convinced that the state had to play a major role in the operation and development of the oil and gas industry. This led to a domino strategy of government confiscations of privately owned energy facilities in both Latin America and the Middle East. Mexico led the way in the Americas, nationalizing its oil industry in 1938. Yet despite its oil wealth and other abundant resources, 70 percent of the country’s 105 million people still live in poverty. The border problem between Mexico and the United States speaks volumes about the economic system of the two countries. While most Latin American countries followed Mexico’s lead, some have since “privatized” operations. Venezuela, for example, nationalized in 1975 and then welcomed foreign companies back in 1992. Bolivia partially privatized its operations in 1993. In practice, however, “privatization” consisted only of allowing private companies (always foreign-owned, since private domestic operations are illegal) to explore for and produce a nation’s oil and gas reserves. Ownership of those reserves remained in government hands, and the proceeds for their sale continued to flow to the government – or rather to those who controlled the government. That is not to say that there are no real benefits even to such limited privatization. Private corporations, driven by the profit motive, are generally far more efficient and less wasteful than are government-owned companies that have no incentive to use resources to their best effect. Greater efficiency translates into

more careful development (less pollution) and more production at less cost. Nor is it to say that nationalization does not have additional costs beyond government mismanagement of natural resources. When private property is confiscated, capital investment flees the country, limiting chances for growth and prosperity. The real problem, however, is that regardless of who owns the company producing the oil or gas, the lion’s share of the proceeds still goes to the government as owner of the mineral reserves. All too often the money is used to: 1. Consolidate the ruler’s power by rewarding cronies and buying off opposition leaders. 2. Increase the ruler’s personal wealth (e.g., pre-war Iraq). 3. Build armies to subdue the populace and gain influence over neighbouring countries (e.g., Venezuela). 4. Finance terrorist activities to keep democratic ideas from undermining an authoritarian culture nurtured by radical Islamic leaders (Saudi Arabia). Even when the money is used to benefit citizens, it is typically spent on grandiose “infrastructure” projects that do more to help already wealthy contractors than to aid the nation’s citizens. As a result, wealth is squandered, people exploited, and society continues to be burdened with poverty in the midst of a rich pool of resources neither fully nor efficiently exploited. Perhaps just as bad, the de facto ownership of such vast wealth by a few leaders enormously increases the stakes of gaining or losing political power. Election winners gain the legal right to loot the country, and line their own pockets as well as those of their supporters. With so much riding on each vote, the battle for political power can become fierce and even deadly. Elections under such conditions are routinely rigged. Because neither nationalization nor “privatization” (as it has been practiced fundamentally) changes the lives of average citizens, unrest remains the political constant in the Middle East and in Latin America. Today, Bolivia’s people are in the streets demanding a re-nationalization of the country’s oil industry. Other than less efficient operations and more pollution, such an action will accomplish little. After a few decades of mismanagement by an inefficient and corrupt government-owned company, the pendulum may swing back, and “privatization” will again be tried. Breaking the Cycle Government ownership of the subsurface throughout history has had profoundly negative consequences for not only the domestic economy but also—in the case of petroleum—consumers around the world. The power to control production, to squander resources, to determine prices for domestic markets has produced political instability, corruption, and poverty. The surge in oil prices in recent years is due in part to socialist governments not being entrepreneurial enough to anticipate and meet rising demand. True privatization—granting individuals ownership rights to the subsurface—would enable mineral-rich but impoverished nations to break this vicious cycle. This could be done by simply granting land owners complete rights to any mineral wealth that lies below their property. These rights must include the right to buy, sell, trade, and inherit such property. In many of the nations in question, however, surface rights are not privately owned any more than are subsurface rights. In such cases, the land itself, together with what lies beneath it, would also have to be privatized. The mechanics of how this is accomplished, while irrelevant to theoretical economists, are of paramount importance. We have seen, for instance, how after the breakup of the Soviet Union, state property was given or “sold” to members of the old ruling regime – continuing the cycle of corruption and exploitation by the political elite in

different guise. Assignment of property rights must not only be just, it must be seen to be just. True privatization of the subsurface is the institutional change that will reduce the stakes in political elections, reduce corruption and political instability, reduce the waste of valuable resources, and allow individuals to break free of government control over their lives and destinies. Looking to the Future It is hard to predict what the new oil market will look like if subsurface ownership is transferred from state control to the surface owners. But the new environment will create a new set of incentives to increase growth and productivity. The change is about freeing minds from government restrictions. It will appeal to the initiative of thousands of surface owners who will discover new business opportunities and new means to obtain profits. Society at large will benefit hugely from a transfer of wealth from the political sector to the private sector. Greater resources will go to exploration and production, and the greater production will benefit consumers worldwide. At the same time, fewer resources will be available for political elites to distribute among their cronies, promote their own ambitions, and, in some cases, fund terrorism. Private ownership of the subsurface will ensure that benefits as well as the costs of oil production will remain in the private sector, rewarding the efficient and punishing those who are not. This, in turn, will increase productivity and general prosperity. As individual citizens gain economically, civil and social power will increase and political power will decline, leading to the end, or at least the weakening, of authoritarian regimes in Latin America, Africa, and Middle East. Petroleum, in particular, can literally be turned from a political bad into a social good, a noble vision for a world that needs affordable energy in ever greater quantities.

The free market brings more economic growthBradley 12 – Robert L, CEO and founder of the Institute for Energy Research, and the author of several successful books on energy economics ( 11/30/12, cato, “The Theatrics of Fossil Fuel Critics,” http://www.cato.org/publications/commentary/theatrics-fossil-fuel-critics)

In the recent round of third-quarter earnings reports, several oil and natural gas companies posted profits exceeding analyst predictions, including BP posting net profits of $5.2 billion and ConocoPhillips $1.8 billion. Such results reconfirm oil and natural gas as bright spots in an otherwise dull economy. In a free market, profits signal that a firm has transformed inputs into more valuable outputs. In the aggregate, more profits than losses equals economic growth. Compare this to the losses (resource misallocation) being registered by government-subsidized energy sectors such as wind, solar, battery makers, and electric vehicles. Yet anti-oil activists were quick to condemn the above third-quarter earnings as evidence of excess in the American oil and gas industry. This is hardly the case. The economic success of the industry boosts not only jobs but the investment of working Americans. In fact, a recent Sonecon study found that through both periods of expansion and recession, the average rate of return on investments in oil and natural gas stocks was seven times greater than the returns from other assets. No, industry profits aren’t going toward padding the pockets of greedy “big oil” executives. Less than 3 percent of shares are actually held by industry insiders,

with the remainder in the hands of everyday Americans in pension funds, mutual funds and IRAs. Fact is that oil and natural gas supports about 9.2 million American jobs. According to the Brookings Institution, oil and gas extraction alone added 28,000 direct jobs and 45,000 in drilling-support jobs between 2007 and 2011. Amid the good news, a new environmentalist campaign aims to convince institutional investors to cash out of fossil-fuel equities. Leading the effort is Bill McKibben, who routinely blames bad weather fossil-fuel usage and disparages industry leaders as threats to civilization. The latest from his organization, 350.org: “Sandy is what happens when the temperature goes up a degree.” So McKibben is traveling the country, hoping to convince individuals, pension funds, universities and churches to divest from fossil fuels. This move is supposed to somehow help the environment, although fossil fuels are what make the environment livable. What this crusade would do is to make many average Americans less financially secure. [McKibben will be speaking at the University of Colorado in Boulder on Sunday.] Left environmentalists often tout a variety of oil alternatives, like ethanol, methanol, and even algae-based fuels. But they seldom ask when these fuels will actually be capable of meeting the world’s energy needs. Meanwhile, more than a billion people globally languish in energy poverty without modern transportation or appliances. The simple fact is that right now there is no large-scale transportation alternative to petroleum. More than 90 percent of the energy used in transportation comes from oil. As nations such as China and India develop economically, their energy needs are swelling and the demand for oil will only increase. As Manhattan Institute scholar Robert Bryce has noted, “Nothing else comes close to oil when it comes to energy density, ease of handling, flexibility, convenience, cost, or scale.” To stop oil exploration would be to condemn the world to high energy prices and stunted economic growth. Divestment would represent an enormous hit to pension plans. It would make the retirement accounts of millions of average Americans less secure. Rather than improving the environment, divestment would actually slow the development of alternative energy technologies. Economist Milton Friedman once said: “One of the great mistakes is to judge policies and programs by their intentions rather than by their results.” Organizations like McKibben’s need to revisit their premises and abandon policies that threaten the income and investments of America’s middle class.

Fed Bad

Energy InterventionDOE intervention allows for control over consumers – disrupts the marketsCato 03 (Cato Institute, 2003, “Cato Handbook for Congress: Policy Recommendations for the 108th Congress “http://object.cato.org/sites/cato.org/files/serials/files/cato-handbook-policymakers/1999/9/hb106-13.pdf)Even if few of the actual functions of the DOE were eliminated ,eliminating the department and transferring its programs to other

agencies would be a worthwhile undertaking. Maintaining a cabinet-level energy depart- ment is risky because it provides a ready structure for the reintroduction of direct federal energy market interventions—a perfect command post from which some future ‘‘Energy Czar’’ could once again punish energy producers and consumers in the event of some temporary energy ‘‘emer- gency.’’ Elimination of the DOE would make it difficult for

government to launch any future interventions in the energy marketplace. In the event of a new energy crisis, Congress would be best advised to ensure energy supplies and fuel diversity by allowing markets to work unimpeded by bureaucratic second-guessing. The existence of an energy department presents too strong a temptation for intervention, which is widely acknowledged to have been disastrous in the past.

Intervention creates competition for support instead of innovation Grossman 09 (Peter Z. Grossman, professor of economics at Butler University, 2009, “U.S. energy policy and the presumption of market failure” http://object.cato.org/sites/cato.org/files/serials/files/cato-journal/2009/5/cj29n2-5.pdf)

But even if this premise is accepted, it is not immediately clear what government can or should do to correct it. That is, with respect to energy policy, what can government do that will lead to a success- ful new energy technology and not produce an even larger govern- ment failure? Policymakers have tried numerous schemes, some as low-cost and low-profile as simple information gathering. However, the most costly and the most visible by far have been efforts to induce innovation. Typically, policymakers have relied either on pro- grams that provide incentives (usually tax preferences) to adopt a new technology or that undertake technology development directly. Neither of those types of programs has been successful, but the second, direct development, is especially problematic in principle as well as practice. Government programs to create commercially viable alternative technologies of any kind

rest on three implicit assumptions—all of them, at best, dubious. First, and perhaps most important, is that government must assume that innovation is a demand-side phenomenon. U.S. energy policymakers appear to believe that since consumers want alternative energy technologies, someone should have built and marketed them. Since no one has, the assumption is that the market is failing to pro- vide the incentives for innovators to act. But the concept of demand-led innovation has very little empiri- cal support. In the 1960s, a few scholars—notably Jacob Schmookler (1966)—attempted to link the technological

developments of the Industrial Revolution to a surge in demand. This theory seemed especially inviting at the time because it echoed the Keynesian demand-side perspective that dominated macroeconomic theory. But the

demand-side explanation has not survived careful analy- sis. Today, nearly all scholars agree that innovation is a supply-side phenomenon (Mokyr 1977). As Nathan Rosenberg (1976), a leading economic historian of technology, has argued, scientific knowledge evolves if not randomly at least unevenly and its employment in mar- ketable developments is certainly unpredictable and not necessarily consistent with consumers’ desires at a given point in time. The com- plexity of science makes it hard to foresee, much less to program, what kinds of new ideas can generate what kinds of new products. Only after technological developments occur, will entrepreneurs evaluate opportunities for commercial development, and the verdict on whether they are right or wrong will be rendered in the market- place. Though supply-side theories of innovation have had much more success in explaining technological development, government alternative energy programs directed at correcting the market’s fail- ure to supply innovative products take for granted a demand-side explanation to the innovation process. Some experts argue that government can compel firms to inno- vate through the use of both incentives and disincentives. In the lit- erature, this concept is sometimes referred to as “technology forcing.” The catalytic converter in cars is the example most fre- quently noted (Gerard and Lave 2003). Government commanded a reduction in automobile pollution and the converter resulted (albeit a few years later than mandated). But the converter was not intend- ed to compete with an existing conventional technology as alternative energy technologies are

expected to do. In fact, there is simply no example of government “forcing” a commercially viable alternative energy product. The second assumption is that if a technology has been demon- strated to be possible, government support will be needed to make it commercially viable. Exactly what this is based on is unclear.

Government support is not by its nature designed to produce com- petitive market results. Instead, as Public Choice theory explains, government intervention creates competition among

entrepreneurs primarily to gain government support. In the very nature of the fund- ing process, money for development will often go to the entrepre- neur that (a) is most likely to meet political goals of legislators, and (b) does the best job of convincing government officials of the supe- riority of his approach . Once support has been obtained, the entre- preneur has no need to work toward market competition and, in fact, has a great motivation to prevent market competition from arising. Overall, this situation provides more of an incentive for innovative rent seeking than for commercialization of innovative technologies (Cohen and Noll 1991). The problem is not only how government dispenses support but also on what projects. Technology policy implicitly proceeds from the assumption that if there are competing technical ideas, government bureaucrats are competent to choose the winner. But governments worldwide have overwhelmingly failed at this sort of task. In the1980s, for example, Japan was touted as the model of successful government-led industrial policy. Of course, this assertion was wrong in almost every respect, but it was most obviously off the mark with regard to the development of new technologies. Japanese technology policy was a fiasco. Decisionmakers backed such ideas as an analog standard for HDTV and a so-called “next generation” computer, but they produced no significant commercial products and wasted enor- mous resources (Beltz 1993, Pollack 1992). The third assumption in U.S. technology policy is that if a technol- ogy is shown to be technically feasible and appears cost competitive with a conventional resource, rapid

and widespread adoption will soon follow. Put a bit differently, the assumption is government backing will lead quickly to market domination. In general, there is no consideration given to the process of technological adoption and the nature of market behavior. This process unfolds over time. It can take decades for full market saturation to ensue. Even when a tech- nology seems to offer superior benefits on some margins, consumers may resist, preferring to wait until a technology is proven at least as reliable as—and more desirable than—the conventional product it is to replace. For instance, compact florescent light bulbs save money in the long run versus the more familiar incandescent lights, but peo- ple resist them, it is thought, not only because of high consumer dis- count rates but also because of noticeable differences in the character of the light produced (Cole and Grossman 2004). In any case, government energy programs that typically include specific timetables for both the beginning and extent of market penetration necessarily assume that when a product is ready for the market it will be consumed (Cassedy and Grossman 1990).

Intervention misallocates resources and doesn’t solveGrossman 09 (Peter Z. Grossman, professor of economics at Butler University, 2009, “U.S. energy policy and the presumption of market failure” http://object.cato.org/sites/cato.org/files/serials/files/cato-journal/2009/5/cj29n2-5.pdf

Market failure is in theory a plausible argument for government sponsorship of alternative energy technologies. But in practice, even where the argument would be strongest—for example, nuclear fusion—there is little reason to believe that government programs actually have corrected the purported failures. One can certainly imagine the

benefits that would result from successful development of new technologies, but history has demonstrated that government energy programs reach for more than they are ever likely achieve, and end up misallocating resources. This historical record is pertinent today. Less than two years ago, an ethanol program was adopted that appears to embody all of the unfortunate characteristics of the programs for synfuels, fusion, and the high-mileage automobile. The program mandates technological progress according to a timetable with a goal of commercialization. The ethanol legislation, the Energy Independence and Security Act, as passed in late 2007 stipulates that by 2022 the United States will consume 36 billion gallons of ethanol annually, but to meet this goal there must be rapid commercialization of ethanol from cellulosic feedstocks. While the technology exists, it is not nearly cost compet- itive with conventional fossil fuel resources and requires break- throughs of the type that stymied previous alternative energy efforts (Grossman 2008). And more of these sorts of policies seem likely in the years ahead. During his campaign for the presidency, Barack Obama called for production of 60 billion gallons of ethanol by 2030, 1 million plug-in hybrid cars on the road by 2015, and 25 percent of electricity from renewable sources by 2025. He vowed to spend $150 billion on new technologies despite the fact that government spending has never produced any viable alternative energy products. Faced with an economic recession, President Obama has focused mostly on the vacuous idea of “green jobs” (Morriss et al. 2009) while still pledging to spend $150 billion over 10 years to “transition to a clean energy economy” (White House 2009). But the grounds for these expenditures are no different from the ones that gave us the synfuels,

fusion, ethanol, and PNGV programs. Government still believes that energy markets are deficient because they are not tran- sitioning to “a clean energy economy” on their own. But there is not the slightest reason to believe that that analysis is any more correct today than it has been for the last 35 years. Even if there is some sort of market imperfection, government is not likely to provide an improvement. Indeed, government failure, with its attendant waste of resources, seems certain to be the outcome.

Government intervention can’t absorb shocksMorano 6/3 (Marc Morano, 6/3/14, climate depot author, “Renewables Not Fossil Fuels Are A Threat To Energy Security Says New Report – ‘The widespread use of wind and solar energy poses a serious risk to the UK’s energy security’” http://www.climatedepot.com/2014/06/03/renewables-not-fossil-fuels-are-a-threat-

to-energy-security-says-new-report-the-widespread-use-of-wind-and-solar-energy-poses-a-serious-risk-to-the-uks-energy-security/) The GWPF point to the cuts in government funding for solar and wind feed-in tariffs and the beginnings of taxes on the profits

made by generating electricity with renewables. Furthermore, when it comes to energy policy, as in most other

arenas, government failures are often more far reaching than those of their private sector counterparts. “If the government implements an energy policy that turns out to be a mistake, all market actors are affected because the government normally forces all companies and households to comply with its policies”, says the report’s author

Philipp Mueller. Large and flexible markets are better able to absorb supply shocks and allow supply and demand to respond to the problem. The GWPF cites the example of

Venezuela’s oil workers strike in 2002. US consumers were protected by freedom to import and the absence of price regulation from the physical disruption of oil supplies.

Federal intervention is bad – constraints, inefficiency and misallocation. Bradley 11 (Robert Bradley Jr., May 6, 2011, CEO and founder of the Institute for Energy research of Washington, D.C. and Houston, Texas, “A free market energy vision (Part I: worldview)” http://www.masterresource.org/2011/05/free-market-energy-vision-worldview-i/) Government intervention with privately held resources also has unintended negative consequences. For example, a state law (such as in Texas) may force electric utilities to buy wind power, solar power, or

another politically correct energy under a state law. A mandate is required because a free marketplace would not support such expensive, unreliable—noncompetitive—supply. Oil and gas producers may be unable to access offshore reservoirs because of government constraint. In such cases, supply is not produced, and higher-cost substitutes elsewhere must substitute. Consumers are left with less supply and higher prices. Economists have a name for this: inefficiency. Government intervention may also give life to uneconomic projects. Such ventures may include carbon capture

and storage, a “smart” electricity grid, or even a nuclear plant that requires a federal loan guarantee. Resources that go to these projects do not go to other more economical projects (which may or may not be in the

energy sector) as judged by the marketplace. Resources are again misallocated.

Federal intervention can’t solve – gets politicized Bradley 11 (Robert Bradley Jr., May 6, 2011, CEO and founder of the Institute for Energy research of Washington, D.C. and Houston, Texas, “A free market energy vision (Part I: worldview)” http://www.masterresource.org/2011/05/free-market-energy-vision-worldview-i/) Proponents of government intervention cite “market failure” as the reason for regulating or subsidizing energy projects. Negative externalities created by self-interested exchange require the government to modify transactions in ways ranging from a

prohibition to a tax. But there are two other types of failure that also must be considered before rushing to policy judgment. One is analytic failure, in which the outside evaluator’s prescription for intervention (such as a per barrel “energy security” tax on oil imports or a per

ton “climate change” tax on carbon dioxide emissions) overcorrects or undercorrects for the “real” problem. The error might be purely intellectual—or it might reflect the personal prejudice of the analyst. Fallible self-interest

in the marketplace has a counterpart in the ivory tower. Secondly, there is government failure whereby even the “correct” analytical blueprint is altered and violated in the political process. Special-interest tinkering add to or subtract from the core proposal, and “log rolling ” (where extraneous issues are added to the legislation just to win votes) is resorted to. House passage of a cap-and-trade energy bill last year, and healthcare legislation enacted this year, are stark evidence of sausage making in Washington, D.C.—and something scarcely recognizable in “we the people” textbooks. Thus,

“market failure” does not automatically require a government correction. This suggests a different approach. Knowing that solutions are likely to be as or more imperfect than problems, alleged market failures should be scrutinized to see if they are really serious problems. And if so, can the real problems be addressed by novel voluntary approaches and reforms rather than by government dictates?

No Renewable SubsidiesMarkets will inevitably switch to renewables – subsidies now cause backlash against costsCato 03 (Cato Institute, 2003, “Cato Handbook for Congress: Policy Recommendations for the 108th Congress “http://object.cato.org/sites/cato.org/files/serials/files/cato-handbook-policymakers/1999/9/hb106-13.pdf)

The DOE funds numerous programs that are designed to directly and indirectly subsidize the adoption of energy-efficient technologies and the use of renewable fuels. Favored industries receive federal money for technical assistance, outright production subsidies, information programs, grants, export subsidies, accelerated depreciation preferences, and demon- stration projects. Over the last 20 years, the DOE has spent $11 billion to promote various sources of renewable energy that have managed to capture only 2

percent of the electricity market. Another $19 billion has been spent on energy conservation technologies and mandates despite the fact that such ‘‘demand-side management’’ programs, according to the DOE’s own figures, are twice as expensive as the fuels they’re trying to conserve. Those programs and preferences should be removed root and branch from the federal budget and all enabling legislation amended or repealed as necessary. Even the lowest cost source of renewable energy—wind- power—is three times more expensive at the margin than the lowest cost source of conventional energy, combined-cycle natural gas. And the economics of wind or other renewables are not expected to improve in the near term or the midterm, a fact even the DOE conceded in its most recent budget request when it noted that ‘‘the contribution of these fuels [coal, oil, and

natural gas] is projected to increase in coming years.’’ Once fossil fuels become relatively more scarce, markets will turn to alternative fuels and more energy-efficient technologies and practices out of economic self-interest. Subsidies and mandates are simply unnecessary.

Oil ControlFederal control over oil fields isn’t sustainable Cato 03 (Cato Institute, 2003, “Cato Handbook for Congress: Policy Recommendations for the 108th Congress “http://object.cato.org/sites/cato.org/files/serials/files/cato-handbook-policymakers/1999/9/hb106-13.pdf)

The federal government maintains a 591-million-barrel Strategic Petro- leum Reserve of unrefined, generally high-sulfur crude oil in five caverns in Texas and Louisiana and a Naval Petroleum Reserve consisting of major oil and natural gas fields in Buena Vista, California, Teapot Dome near Casper, Wyoming, and Naval Oil Shale Reserve Number 3 near Rifle, Colorado. The various oil reserves of the federal government should be privatized immediately. There is simply no reason for the federal government to own productive oil or shale fields. Nor can any petroleum reserve, no matterhowlarge,insulatetheUnitedStatesfromtheeffectsofinternational supply disruptions. Selling the SPR alone would bring $13 billion in revenue to the treasury. The SPR is not large enough to meet America’s oil demand even in the short term and could never provide significant help in the (extremely unlikely) event of wrenching supply disruptions. The effective withdraw capacity of the SPR is only about 2 million barrels a day, enough to replace but 25 percent of America’s daily oil imports for approximately 90 days. Fortunately, however, that willmake nodifference forthe military in the event of a complete cutoff of foreign oil. Joshua Gotbaum, assistant secretary for economic security at the Department of Defense, testified before the Senate in 1995 that the military could fight two major regional wars nearly simultaneously while using only one-eighth of America’s current domestic oil production. No serious energy economist expects oil prices to ever equal, on a sustained basis, the price of putting a barrel of oil—approximately $60— in the SPR. If one thinks of the SPR as the functional equivalent of an insurance policy, then the premium on the policy exceeds the benefits under the policy. Short of a seamless naval embargo, no oil boycott could prevent the United States from purchasing oil in the international marketplace. As noted by MIT economist Morris Adelman, the dean of energy economics, ‘‘The danger is of a production cutback, not an ‘embargo.’ The world oil market is one big ocean, connected to every bay and inlet. For that reason the ‘embargo’ of 1973–74 was a sham. Diversion was not even necessary, it was simply a swap of customers and suppliers between Arab and non- Arab sources.’’ The NPR doesn’t even pretend to operate for a ‘‘rainy day’’; instead it amounts to straightforward federal ownership of productive oil and gas lands. There is no economic rationale for such an arrangement, no military needforthefields,andnocredibilitytotheargumentthatfederalownership of the means of production is superior to private ownership.

Picking Winners Bad – GeneralGovernments will never be more successful than the free market at identifying and executing on projectsJim Powell, a senior fellow at the Cato Institute, is the author of FDR’s Folly, Wilson’s War, Bully Boy, The Triumph of Liberty and other books, Why Politicians Lose So Much Money Trying to Pick Winners, Forbes, 10-24-2011, http://www.cato.org/publications/commentary/why-politicians-lose-so-much-money-trying-pick-winners//BDS)

the Solyndra scandal offers us a reminder that government isn’t very good at picking winners and shouldn’t try to do it. Thanks to Obama administration connections, this California-based solar panel maker had a $535 million spending blowout at the taxpayers’ expense, then fired everybody — some 1,100 jobs. But there continues to be relentless lobbying for government to back other ventures touted as essential for our future. Perhaps we need to reflect a little on why government hasn’t been able to pick winners. For starters, nobody has a crystal ball. Media reports of official government news releases regularly describe as “unexpected” the latest numbers on unemployment, housing starts, the gross domestic product and other economic indicators. Financial bubbles, stock crashes, bond defaults, terrorist attacks, world wars, natural disasters, rising prices, falling prices and so much else have taken politicians by surprise. It can be just as difficult to predict all sorts of things in our lives, like which new car models will be successful. Every year for decades, automakers have introduced new models. There have been hundreds and hundreds, but most weren’t in production very long. Defunct models include the Capitol (1889), Whitney (1896), Stanley Steamer (1897), Packard (1899), Baldner (1900), Studebaker (1902), Acme (1903), Beebe (1904), Eagle (1905), Detroit Electric (1907), Economy (1908), Hudson (1909), Crosley (1913), Cartermobile (1915), Gem (1917), Heifner (1919), Hoskins (1920), Wing (1922), Barbarino (1923), Newark (1924), Diana (1925), Ruxton (1929), Littlemac (1930), De Vaux (1931), Jaeger (1932), New-Era (1933), Brewster (1934), Tucker-Miller (1935), Cord (1936), American Bantam (1938), Albatross (1939), Electricar (1950), Skorpion (1952), Rambler (1958), Edsel (1958) and Delorean (1981). Presumably there were entrepreneurs and investors who thought each new model offered an opportunity to make money, and many of them did for a while, but most turned out to be wrong. Although a business might develop a winning product, it’s likely to have trouble as consumer tastes change, as the business environment changes, as competitors arise more quickly, develop better products, cut prices and so on. The computer industry is littered with the wreckage of businesses that failed to continue making the right moves fast enough and were ultimately acquired or shuttered — like Compaq, Kaypro, Microdata, Mostek, Osborne, Wang, Control Data, Data General, Digital Equipment, Remington Rand and Tandem Computer, among others. Being a winner with one technology doesn’t mean a business will be a winner with the next technology. In part, this is because businesses have incentives to continue squeezing more revenue from old technologies they invested in. By contrast, new businesses have everything to gain from their new technologies and nothing to lose from the demise of old technologies they never invested in. During the 1940s, for example, the leading makers of vacuum tubes were Sylvania, Raytheon and RCA, which seemed most likely to dominate the next technological revolution. But it turned out to be germanium transistors manufactured by Texas Instruments, a firm that had started in an entirely different industry — oil exploration. Texas Instruments’ first transistors reached the market in 1952, and the company seemed to be riding the wave of the future, but along came Intel that hit the jackpot with microprocessors and random access memory chips. If business is challenging when entrepreneurs make decisions for sound business reasons, it’s doomed when politicians become involved, because they make decisions for political reasons. Politicians like to pay off big campaign contributors by steering government contracts their way, regardless of how dubious the campaign contributors might be as business executives. Politicians want projects they can brag about during an

election campaign, whether or not the projects make business sense. Politicians demand that projects be located in their districts or states, even when such locations create problems like higher costs. And of course, politicians expect that those who receive government funding will help their re-election campaigns. No surprise that many businesses have chief executives best known for their ability to find a place at the public trough, rather than boosting sales in free markets. Government attempts to pick winners are most likely to increase the amount of money lost betting on losers. This is because with the power to tax, subsidize and mandate, politicians are able to pour money into unprofitable projects that private investors would never touch voluntarily. For example, once upon a time politicians declared corn ethanol was our energy of the future, because supposedly it would reduce emissions of greenhouse gases and help the United States end its dependence on Mideast oil. Since producing ethanol cost more than consumers were willing to pay, the federal government began subsidizing ethanol production, and the government mandated that ethanol be mixed with all gasoline sold to motorists. But ethanol reportedly increases emissions of formaldehyde and other volatile organic compounds, contributing to smog. Moreover, according to a Cornell-University of California (Berkeley) study, producing a gallon of ethanol involves burning about 98,000 BTU’s (coal, natural gas or nuclear power), but a gallon of ethanol has only about 76,000 BTU’s. The net effect is to increase energy consumption! Meanwhile, the federal government has been doling out ethanol subsidies for more than 30 years, and they now cost over $7 billion annually. This will be going up because of legislated mandates, and subsidies are only one of ethanol’s costs — others include higher food prices. In 2010, ethanol’s greatest promoter, Al Gore, admitted it was a huge mistake. “Once such a program is put into place,” he said, “It’s hard to deal with the lobbies that keep it going.” Indeed, when government starts spending money on anything, it’s politically almost impossible to stop. This is because interest groups promoting a particular program have more at stake than taxpayers, each of whom pays only a small part of the total cost. Interest groups have incentives to fund an aggressive lobbying operation — Solyndra hired six lobbying firms — whereas taxpayers are being nickel-and-dimed for thousands of government programs and can’t possibly keep track of them all. The more industries politicians become involved with, the bigger the losses. In Britain, for instance, economist Alan N. Miller reported that “In aggregate, the performance of nationalized industries was below that of the private sector… [nationalized] industries’ total return on capital was close to zero… Customer satisfaction with the services and products of nationalized industries was often low… employment costs per employee in the large nationalized industries increased faster than the national average, without equivalent increases in productivity… Nationalized industries were characterized by high costs, high prices, low productivity and inefficient use of resources.” The most effective way to identify and nurture winners? Free market capitalism that can perhaps be understood as a discovery process. It involves continuous trial and error, trial and success as entrepreneurs search for ways to serve customers and make money. Precisely because one never knows where innovators might come from, free markets are open to all comers, foreign and domestic. Market economies are more flexible and dynamic than government-run economies. Unlike taxpayers who are dragooned into paying for political schemes, private investors are volunteers risking their own money or money they worked hard to raise. If they make mistakes, it will be harder for them to raise more. Investors constantly revise their estimates of business performance in light of the latest information. Investors pull capital away from laggards, which can help discipline them if anything will. Investors reward solid performers with more capital, helping them do more good work. As we know, entrepreneurs and investors back plenty of ventures that fail, but free market capitalism has a crucial advantage over government-run enterprises: namely, bankruptcy proceedings to limit the amount of money spent on unsuccessful business experiments. When a failed venture is shut down, resources are released for others to use. It is in free markets, where businesses must sink or swim,

that entrepreneurs will have the easiest time attracting talent, capital and other resources needed for businesses of the future.

Picking Winners Bad – Energy Picking winners is bad – prevents innovation and private sector investmentSandoval 13 (Michael Sandoval, January 28, 2013, investigative reporter for the Heritage Foundation“it’s time to stop picking winners and losers in the energy industry” http://dailysignal.com/2013/01/28/its-time-to-stop-picking-winners-and-losers-in-the-energy-industry/ )

Representative Mike Pompeo (R–KS) hopes his new bill calling for the repeal of all energy tax credits on both conventional and renewable energy sources will level the playing field for energy producers and consumers and prevent the government from picking “winners and losers.” The Energy Freedom and Economic Prosperity Act (EFEPA) targets billions of dollars in energy tax subsidies for repeal across a wide swath of production techniques and technologies currently receiving

energy-only tax credits. EFEPA allows tax credits to expire over the next two years in areas such as transportation, oil, renewable energy, nuclear, and other types of fuels. Eliminated tax credits would not only include the wind production tax creditthat received an eleventh-hour extension through the “fiscal cliff” deal for an additional year, but also tax credits for fuel mixtures and cellulosic biofuel. It would also eliminate

investment tax credits for solar and geothermal production, along with a variety of other targeted subsidies. “It gets rid of every single tax credit in the entire Internal Revenue code related to energy,” Pompeo said at a press conference. Pompeo has introduced a similar bill in the past. Pompeo invited a challenge on the comprehensive approach of examining and eliminating energy tax credits for both “green” energy and fossil fuels by scouring the tax code and not overlooking any particular energy source. “If we’ve missed one, please identify it,” he said. The Heritage Foundation’s Nicolas Loris pointed to the need to eliminate corporate welfare and corporate dependence on tax credits set aside for energy, noting the distortions caused to the energy market, but also the cost to taxpayers in the form of handouts to a variety of companies:

Rather than create a market in which the producer must innovate and lower costs to be competitive with other generating sources, companies spend more resources lobbying to receive these extensions. If a technology isprofitable, however, the investments will occur with or

without the subsidy. In that case, the subsidy offsets private-sector investments that would have been made anyway, and the taxpayer dollars are simply a generous handout to the company. Contrary to industry calls for continuing the tax credits, Loris argues that a return to a market-based and not a government-tilted energy economy not only “benefits economically viable producers” but also provides “consumers with reliable, affordable energy.” Pompeo stressed that his bill would be revenue neutral, providing a comparable reduction in tax

rates for every dollar generated from the tax credit repeals. “This is not about wind. This is not about solar. This is about good energy and good tax policy,” Pompeo said. “It matters because there are real peoplepaying for real energy out there.” “[Companies] don’t need to lean on the taxpayer to support them.”

Picking winners bad – misallocation of resourcesBeaufort Observer 13 (Beaufort Observer, November 06, 2013, “the folly of government trying to pick winners and losers” http://www.beaufortobserver.net/Articles-NEWS-and-COMMENTARY-c-2013-11-06-269778.112112-The-folly-of-government-trying-to-pick-winners-and-losers.html)

One of the real quagmires that government creates is when it attempts to pick winners and losers in the economic sector. The decision to choose one industry or

business to help while not treating all others the same is based on a false presumption that policy makers and bureaucrats know better than millions of individuals who are acting in their perceived best interests—otherwise known as the free market. Government interventions seldom produce as much net good as they cause hurt. For example, most business managers know about "opportunity costs." That is the concept that if you use your resources for one thing you can

seldom also use those same resources for something else. You pick and choose, usually which will produce the greater good,

according to your standards. But government does not do that. At least not very often. It will confiscate money from some businesses who would use those funds in a productive manner and give those funds to companies that will make less productive use of the resources—and call it "economic development" when what is actually going on is economic damage. Beaufort County has certainly seen its share of self-defeating picking and choosing between special interests that squandered millions of dollars in taxpayer resources. A recent report released by the John Locke Foundation show the folly of this foolishness by focusing on state energy policy. Dr. Roy Cordato writes: The ongoing debate over subsidies for traditional versus renewable energy sources offers an incomplete picture. A new John Locke Foundation Spotlight report urges advocates on both

sides of the debate to fill in the gaps by factoring in penalties along with subsidies. "Energy markets are riddled with government intrusions," said report author Dr. Roy Cordato, JLF Vice President for Research and Resident

Scholar. "All energy sources are both subsidized and penalized. Too often, advocates for both traditional and renewable energy sources focus only on the subsidies."

Picking winners fails, renewables still aren’t cost competitive Patrick Michaels, senior fellow in environmental studies at the Cato Institute and author of Climate Coup: Global Warming’s Invasion of our Government and our Live, Debunking the Phony Beliefs of the Modern Green Movement, Forbes, 10-13-2011, http://www.cato.org/publications/commentary/debunking-phony-beliefs-modern-green-movement//BDS)Myers isn’t running for the president of the young curmudgeon’s club like Tom was. He thinks global warming might be important, but that the “solutions” ginned up by the political process are counterproductive. For example, in the name of climate change we subsidize solar energy so that its cost in 2016 will be an “astounding $396.10 per MWh”(Megawatt-hour) compared to about $79 for natural gas. (My other brother, Bob, who is in fact a curmudgeon, testified last month to Congress that solar will be even more expensive than that). Why did we listen to environmental activists and become the first nation in human history to burn up its food supply to power automobiles? Why did we allow horrendously bad science — see the spotted owl — destroy the livelihood (and some of the lives) of so many in the Pacific Northwest? Why are environmental journalists so obsessed with horror stories and so repelled by good news? Why do we succumb to so many eco-fads, from grass-fed beef to locavorism to passive solar homes that leak heat like sieves? If you ask Myers, he’ll probably answer “it’s complicated”. But it gets down, largely, to incentives, summarized by his PPP model: personal, popular and phony. Personal: a Prius emits sanctimony (while a Chevy Volt confers sainthood). Popular: Green is the modern religion, and heretics are shunned. Phony: that new hybrid adds carbon dioxide emissions, because that Accord it was traded in for is going to be on the road another decade. Personal: “green buildings”, such as new schools that sprouted all over Washington. Popular: who would be against this? Phony: most of them consume more energy than their conventional counterparts. In a former life, Myers was Communications Director for the Washington Department of Natural Resources, where he no doubt got up close and personal with most of the organo cults. Now he’s the Environmental Director for the Washington Policy Center in Seattle, proving that all ecotopian garden parties need a skunk. Myers’ DNR beat was forest management, where he fought, somewhat successfully, the organo nostrum that forests left alone and protected from fires are healthy. In fact, they tend to be pretty sick, as the normal thinning from fires is suppressed, resulting in an unhealthy tree density, invasion and death from bark beetles, and then — surprise — a mega fire that takes down the entire woods. Just about every organo sacrament withers under Myers’ scrutiny. “Buying local” often means more dreaded greenhouse gas emissions from inefficient short-term shipment compared to the economies of scale when carloads of spuds ride the Burlington Northern Santa Fe across the country. “Certified Organic” means so much paperwork and oversight that mom-and-pop farms (another organo icon) get pushed out by corporate agriculture, which can afford to spend the time and resources satisfying bureaucrats. Then there are “green jobs.” Solyndra is no outlier; governments are just very bad at picking winners and losers in the energy world. Myers documents the decline and fall of biofuel plants throughout the

northwest. Inefficiencies destroy jobs. The Teanaway “Solar Reserve”, supported by an ever-increasing feed of taxpayer dollars, was supposed to be the “world’s largest”, supplying power to a grand total of 45,000 homes. That’s all you get? John Plaza, CEO of the failed biofuel facility Imperium Renewables (you would think a better name would have helped) thinks it’s all the government’s fault. “What the industry needs,” he said, “is a two-fold support, a mandated floor, and incentives and tax policy to get the outcomes we’re trying for.” In other words, more expensive energy subsidized by you and me, and the government rigging the market. That will create jobs! What is missing here (and everywhere else) is a comprehensive analysis of how much money the organo fads, follies and delusions cost us. Hopefully that will be in Myers’ next book. The incredible constellation of policy errors, wrongheaded logic and downright stupidity has to be extracting a dear cost from our very sick economy. It’s time to stop this. It’s time for you to read this book.

Picking winners bad – energy Forbes 13 (6/27/13, “In Energy, `Picking Winners' Isn't the Problem,” http://www.forbes.com/sites/lorensteffy/2013/06/13/in-energy-picking-winners-isnt-the-problem/)patel

The government shouldn’t pick winners. It’s a common refrain from the oil and gas side of the energy business, used to argue against subsidies and tax breaks for renewable fuels. There’s a bit of selective memory, if not collective delusion, in the argument. Energy isn’t a free market, and governments, including the U.S. government, have always played an active role in the development and control of energy markets. U.S. support for domestic energy programs dates to the land grants given timber companies in the 1800s, the Economist pointed out recently. That support continues today through things like production tax credits for renewable fuels. The concern isn’t so much picking winners as it is funding losers. In recent years, alternative fuels have gotten a bigger piece of the pie. In 2011, for example, two-thirds of the $24 billion in energy-related subsidies went to renewable energy and energy efficiency, the Economist noted. About $6 billion went to ethanol alone, while only $2.5 billion went toward fossil fuels. High-profile failures like Solyndra and the high cost of subsidies for programs such as wind energy raise the question of whether the government is getting its money’s worth. Parsing energy subsidies has never been easy. Even the definition of what constitutes a subsidy sparks debate. This week, the Institute for Energy Research unveiled this handy Federal Energy Spending Tracker, that allows anyone to crunch the data on who gets how much in the form of government grants, loan guarantees and tax subsidies. In announcing the new resource, IER President Thomas Pyle noted: In recent years, the wind, solar and biofuels industries have been feeding generously at the federal trough, to the extent that green energy spending is 7 times greater under the current administration than the previous one. More and more, layers of duplicative programs provide opportunities for waste, fraud, and abuse. Today, we are left with a mishmash of subsidies, mandates, and set-asides for pet energy technologies that are more expensive and unreliable than the energy sources they are supposed to replace. IER opposes energy subsidies in general, but the database is a good start for following how the government supports energy development. The institute carefully outlines what it does and doesn’t track. For example, the database includes only energy-specific

tax subsidies, not broad tax incentives such as the manufacturing tax credits that are available to many industries besides energy. Unfortunately, it doesn’t paint the whole picture. The data only goes back to 2009. A more comprehensive study, for example, found that on an inflation-adjusted basis, the subsidies for renewables in their first 15 years of development was a paltry $400 million, compared with $1.8 billion for oil and gas and $3.3 billion for nuclear. It’s not surprising that in years of higher oil prices, subsidies for that industry would pale compared with those for alternatives. Yet the oil industry has gotten its share of handouts over the years, too. Companies reaping the benefits of offshore drilling, for example, are beneficiaries of a federal program that suspended royalty collections on offshore leases from 1996 to 2000, when prices were too low to justify the cost of such expensive drilling projects. Today, companies are still benefiting from that program, which affects about one-quarter of the current production from the Gulf of Mexico. Indeed, the program encouraged more development in the Gulf, which meant more domestic production when prices began to rise. Similar government support dates to the earliest days of the oil business. In 1931, Texas Gov. Ross Sterling sent the famed Texas Rangers into East Texas on horseback to shut down production and prevent oil prices from cratering. Oil companies at the time welcomed price supports from the federal government. In both cases, the government was picking winners, but it resulted in sustaining the availability of cheap and reliable energy for the public. The bigger question with renewables is whether the public is getting its money’s worth from subsidies. That’s more difficult to assess in the short term, but getting reliable data to track is the first step. The issue, after all, isn’t about picking winners, it’s about wasting too much money on losers.

Subsidies Bad – GenericSubsidies are bad – 8 reasonsEdwards and DeHaven 09 (Chris Edwards, Tad DeHaven, February 2009, “Business Subsidies” http://www.downsizinggovernment.org/commerce/subsidies) With massive deficits facing the federal government, policymakers should be looking for areas to cut the budget. Corporate welfare spending at the Department of Commerce and other agencies should be a prime target.

Following are some general reasons why business subsidies should be cut. Unconstitutional. The Constitution gives Congress the power to "regulate Commerce . . . among the several States."

That provides the federal government the power to remove barriers to interstate trade,

not to hand out money to particular commercial interests. Taxpayer Cost. Corporate

welfare at Commerce is only a small portion of business subsidies in the federal budget, but it nonetheless imposes an unfair burden on taxpayers. Uneven Playing Field. By aiding some businesses, corporate subsidies put other businesses that do not gain political support at a disadvantage. U.S. businesses are generally overtaxed and overregulated, thus it rubs salt

in the wound when certain favored firms get special subsidies from the government. Further, when the government gives favors to some businesses, it invites a feeding frenzy of other businesses to hire lobbyists and demand their own hand-outs. Government Is a Poor Decisionmaker. Private entrepreneurs and investors put careful thought into new ventures because they risk their own money. Many private investments don't work out, but at least

they help markets figure out what will ultimately work. By contrast, government

policymakers have little incentive to ensure that spending projects succeed because they are not risking their own money and they are virtually never fired.

Corruption. Corporate welfare generates an unhealthy relationship between businesses and the government. The more tentacles the government has into the economy, the more lobbying activity will be generated. The more subsidies it hands out, the more pressure lawmakers will be under to create new subsidies.

As the ranks of lobbyists grow, more economic decisions will be made based on politics, more resources will be misallocated, and the nation's standard of living will be reduced. Weakening of Private Sector. Corporate welfare draws talented people away from

productive private pursuits and into wasteful political activities. When companies start chasing after hand-outs from Washington, they lose focus on generating returns in the private marketplace. Companies receiving subsidies become weaker and less efficient, and they take on riskier and more wasteful projects. Enron Corporation, for example, sought and received large federal subsidies to invest in risky and dubious foreign

projects that ended up crashing to the ground. Duplicative of Private Activities. Many federal subsidy programs attempt to duplicate activities that are already provided in private markets. The Commerce TIP program, for example, funds risky technology ventures, but that makes no sense

because America has private investment markets that specialize in funding innovative technologies. Picking Winners Doesn't Work. Over the decades, many federal initiatives have aimed to fund new technologies in energy, computers, and other industries. But the complexity of markets has made most of the government's efforts a failure. As noted, the experience of most industrial countries in trying to centrally plan innovation has been dismal. In sum, the United States was

a great economic power long before Commerce started handing out business subsidies. Its greatest economic successes, such as Silicon Valley's technology industry, were based on individual entrepreneurial achievement, not federal subsidies. Federal subsidies should be ended, and America should revive its entrepreneurial tradition by cutting taxes, regulations, and other barriers to growing businesses.

Subsidies Bad – EnergyGovernment subsidized energy empirically failsCHRIS EDWARDS, director of tax policy studies at Cato He is a top expert on federal and state tax and budget issues. Before joining Cato, Edwards was a senior economist on the congressional Joint Economic Committee, a manager with PricewaterhouseCoopers, and an economist with the Tax Foundation.Energy Subsidies vs. Energy Progress, Cato, 11-11-2013, http://www.cato.org/blog/energy-subsidies-vs-energy-progress//BDS

If we did a poll of free market economists about federal programs that are the most wasteful and ridiculous, energy subsidies would be near the top of the list. It’s not just that energy subsidies make no sense in economic theory, but also that there are so many news stories highlighting the folly that it’s hard to see why policymakers persist in wasting our money. From the Washington Post on Friday: The Department of Energy failed to disclose concerns about a green-technology company that won $135 million in federal funding but ended up filing for bankruptcy in September, according to a watchdog report released this week. DOE Inspector General Gregory Friedman noted that the firm, San Francisco-based Ecotality, is still due to receive $26 million from the agency for testing electric vehicles. … The Energy Department awarded the firm $100 million in 2009 Recovery Act funding for that initiative, in addition to a combined $35 million from a separate program to help pay for testing vehicles … Ecotality is among a number of failed firms that received stimulus funding through an Obama administration initiative to support green-technology companies during the recession. Solyndra, a Silicon Valley-based solar-panel maker, stands as perhaps the most high-profile example. The business collapsed after receiving more than a half-billion dollars in Recovery Act money. Other examples include Beacon Power , a Massachusetts-based company that received at least $39 million from the federal government, along with Michigan-based battery manufacturers LG Chem and A123, which landed grants worth $150 million and $249 million, respectively. On Sunday, the Washington Post profiled the economic chaos, central planning, and wasteful lobbying generated by federal mandates for cellulosic ethanol: Congress assumed that it could be phased in gradually, but not this gradually. This year refiners were supposed to mix about one billion gallons of it into motor fuel. So far, there has been hardly a drop. More than a dozen companies have tried and failed to find a profitable formula combining sophisticated enzymes and the mundane but costly and labor-intensive job of collecting biomass. … To reach the ethanol goals set by Congress, the government came up with a byzantine implementation plan. Each gallon of renewable fuel has its own 38-character number, called a “renewable identification number,” to track its use and monitor trading. There are different types of these RINs for different biofuels, including corn-based ethanol, cellulosic ethanol and biodiesel. In February of each year, refiners who fail to provide enough renewable fuel to the blenders who mix ethanol and gasoline must buy extra RIN certificates. When companies have extra credits for renewable fuels, the RINs can be banked and sold in later years. If there are not enough renewable fuels overall, the price of RINs rises — and provides an incentive to produce more. And in a related story on ethanol, the Post found: Five years ago, about a dozen companies were racing to start up distilleries that would produce enough cellulosic ethanol to meet the congressionally mandated target of 16 billion gallons a year by 2022 … The Agriculture Department provided a $250 million loan guarantee for the Coskata plant. Today, most of the dozen contenders have gone out of business or shelved their plans. Federal subsidies and mandates for ethanol and other energy activities are sadly causing the diversion of billions of dollars of capital to uneconomic uses.

That’s the bad news. But there is good news on the energy front, which comes from far outside of Washington. The Wall Street Journal last weekend profiled “the little guys,” the market entrepreneurs, who were behind the shale energy revolution: The experts keep getting it wrong. And the oddballs keep getting it right. Over the past five years of business history, two events have shocked and transformed the nation. In 2007 and 2008, the housing market crumbled and the financial system collapsed, causing trillions of dollars of losses. Around the same time, a few little-known wildcatters began pumping meaningful amounts of oil and gas from U.S. shale formations. A country that once was running out of energy now is on track to become the world’s leading producer. … The resurgence in U.S. energy came from a group of brash wildcatters who discovered techniques to hydraulically fracture—or frack—and horizontally drill shale and other rock. Many of these men operated on the fringes of the oil industry, some without college degrees or much background in drilling, geology or engineering. Thank goodness for the oddballs. And thank goodness for the market system that channels the brashness into creating growth for all of us, not just the favored few getting handouts from Washington.

A2: Other Stuff

A2: Deregulation BadDeregulation didn’t collapse the economy – ’08 analysis is wrongGattuso 08 (James L. Gattuso, October 22, 2008, Senior Research Fellow in Regulatory Policy at Heritage, “Meltdowns and Myths: Did Deregulation Cause the Financial Crisis?” http://www.heritage.org/research/reports/2008/10/meltdowns-and-myths-did-deregulation-cause-the-financial-crisis) "The trouble with the world is not that people know too little, but that they know so many things that aren't true." -- attributed to Mark Twain Easy answers are seldom correct ones. That principle seems to be at work as the nation struggles to discover the causes of the financial crisis now rocking the economy. Looking for a simple and politically convenient villain, many politicians have blamed deregulation by the Bush Administration. House Speaker Nancy Pelosi, for instance, stated last month that "theBush Administration's eight long years of failed deregulation policies have resulted in our nation's largest bailout ever, leaving the American taxpayers on the hook potentially for billions of dollars."[1] Similarly, presidential candidate Barack Obama asserted in the second presidential debate that "the biggest problem in this whole process was the deregulation of the financial system."[2] But there is one problem with this answer: Financial services were not deregulated during the Bush Administration. If there ever was an "era of deregulation" in the financial world, it ended long ago. And the changes made then are for the most part non-controversial today. Basic Regulatory Structures Never in Doubt In a literal sense, financial services were never "deregulated," nor was there ever a serious attempt to do so. Few analysts have ever proposed the elimination of the regulatory structures in place to ensure the soundness and transparency of banks. Simply put, the job of bank examiner was never threatened. More typically, of course, the word deregulation has been used as shorthand to describe the repeal or easing of particular rules. To the extent there was a heyday of such deregulation, it was in the 1970s and 1980s. It was at this time that economists -- and consumer activists -- began to question many longstanding restrictions on financial services. The most important such restrictions were rules banning banks from operating in more than one state. Such rules were largely eliminated by 1994 through state and federal action. Few observers lament their passing today, and because regional and nationwide banks are far better able to balance risk, this "deregulation" has helped mitigate, rather than contribute to, the instability of the system. Gramm-Leach-Bliley and Beyond The next major "deregulation" of financial services was the repeal of the Depression-era prohibition on banks engaging in the securities business. The ban was formally ended by the 1999 Gramm-Leach-Bliley Act, which followed a series of decisions by regulators easing its impact. While not without controversy, the net effect of Gramm-Leach-Bliley has likely been to alleviate rather than further the current financial crisis. In fact, President Bill Clinton -- who signed the reform bill into law -- defended the legislation in a recentinterview, saying, "I don't see that signing that bill had anything to do with the current crisis. Indeed, one of the things that has helped stabilize the current situation as much as it has is the purchase of Merrill Lynch by Bank of America, which was much smoother than it would have been if I hadn't signed that bill." [3] In 2000, Congress also passed legislation that, among other things, clarified that certain kinds of financial instruments were not regulated by the Commodity Futures Trading Commission (CFTC). Among these were "credit default swaps," which have played a role in this year's meltdown. Whether this law constituted "deregulation" is not clear, since the pre-legislation status of these instruments was uncertain. Nor is it a given that CFTC regulation of their trading would have avoided the financial crisis. In fact, many policymakers, including Clinton Treasury Secretary Robert Rubin, argued that their regulation would do more harm than good. In the nine years since that legislation -- including the eight years of the Bush presidency -- Congress has enacted no further legislation easing burdens financial services industry. Regulatory Agency Trends But what of the regulatory agencies? Did they pursue a deregulatory agenda during the Bush Administration? Again, the answer seems to be no. In terms of rulemaking -- the promulgation of specific rules by regulatory agencies -- the Securities and Exchange Commission (SEC) is by far the most active among agencies in the financial realm. Based on data from the Government Accountability Office, the SEC completed 23 proceedings since the beginning of the Bush Administration that resulted in a substantive and major change (defined as an

economic effect of $100 million or more) in regulatory burdens. Of those, only eight -- about a third -- lessened burdens.[4] Perhaps surprisingly, the Bush record in this regard is actually less deregulatory than that of the Clinton Administration, which during its second term lessened burdens in nine out of 20 such rulemaking proceedings. Other financial agencies have been far less active in making formal rule changes. The Federal Reserve reports five major rulemakings in the database since 1996 -- four of which were deregulatory. The only rule change reported by the Federal Deposit Insurance Corporation and the Controller of the Currency is the 1997 adoption of new capital reserve standards, an action with mixed consequences. Of course, much of the work of regulators takes place in day-to-day activities rather than in formal rulemaking activities. For that reason, it is also helpful to look at the budgets of regulators. These also show little sign of reduced regulatory activity during the Bush years. The total budget of federal finance and banking regulators (excluding the SEC) increased from approximately $2 billion in FY 2000 to almost $2.3 billion in FY 2008 in constant 2000 dollars. The SEC's budget during the same time period jumped from $357 million in 2000 to a whopping $629 million in 2008. During the same time period, total staffing at these agencies remained steady, at close to 16,000.[5] A False Narrative In the wake of the financial crisis gripping the nation, it is tempting to blame "deregulation" for triggering the problem. After all, if the meltdown were caused by the ill-advised elimination of necessary rules, the answer would be easy: Restore those rules. But that storyline is simply not true. Not only was there was little deregulation of financial services during the Bush years, but most of the regulatory reforms achieved in earlier years mitigated, rather than contributed to, the crisis. This, of course, does not mean that no regulatory changes should be considered. In the wake of the current crisis, debate over the scope and method of regulation in financial markets is inevitable and, in fact, necessary. But this cannot be a debate over returning to a regulatory Nirvana that never existed. Any new regulatory system would be just that -- complete with all the uncertainty and prospects for unintended consequences that define such a system. Policymakers must not pretend otherwise.

Export-Import = TerribleEx-Im is terrible general card to retag James 12 (Sallie James, October 2012, “Ending the Export-Import Bank” http://www.downsizinggovernment.org/export-import-bank)The Ex-Im Bank promotes the idea that its actions correct market failures by filling gaps supposedly left by private credit markets. However, the bank’s activities are not neutral and thus the bank creates its own distortions in markets. For example, the bank puts emphasis on politically favored industries such as renewable energy, and it favors certain industries that it believes have a “high potential for export growth.”6 The Ex-Im Bank’s goal of boosting exports and improving the U.S. international trade balance smacks of mercantilism. The reality is that the U.S. trade balance has more fundamental causes that aren’t changed by government export subsidies. The Government Accountability Office has pointed out that “export promotion programs cannot produce a substantial change in the U.S. trade balance.”7 The trade balance is driven largely by macroeconomic factors such as the difference between the level of savings and investment. It is true that the Ex-Im Bank has not imposed a net burden on taxpayers in recent years. It has used revenues from fees and premiums to fund its activities. Congress allows the Ex-Im Bank access to interest-free funds from the Treasury for program and administrative expenses, with the expectation that offsetting collections will repay the Treasury in full. Still, taxpayers are on the hook if the agency suffers major losses on its portfolio of outstanding loans. And whether or not the bank currently imposes direct costs on taxpayers, its activities still distort markets.

Ex-Im doesn’t solve jobsJames 12 (Sallie James, October 2012, “Ending the Export-Import Bank” http://www.downsizinggovernment.org/export-import-bank)1. Does the Bank Create Jobs? The Export-Import Bank says that creating jobs through exports is a main goal of the agency. The bank’s mission statement argues that it “helps to create and maintain U.S. jobs primarily by financing the sales of U.S. exports, to emerging markets throughout the world, providing loan guarantees, export-credit insurance, and direct loans.”10 The Ex-Im Bank’s president, Fred Hochberg, claims that the bank “supported $34.4 billion worth of American exports and an estimated 227,000 American jobs” in 2010.11 The following headlines were on the bank’s homepage one day in 2011: “Ex-Im Bank Supports 600 Jobs with Financing for South Africa,” “Infrastructure Growth for the Dominican Republic Means Jobs Growth for the U.S.,” and “Using Wind Energy to Promote U.S. Jobs and Exports.”12 These claims, in a narrow sense, may be true. Lending money to a foreign purchaser of American products may encourage them to make a purchase that they otherwise may not have made. The American producer may get an order that will increase its revenue. Certain favored U.S. firms may expand their operations and hire more workers. However, that is only one side of the equation. The bank does not create the resources to provide financing out of thin air: the money comes from taxes or the repayment fees from previous loans, which would otherwise flow to the U.S. Treasury. In that sense, the bank only redistributes resources by taking them from other areas of the economy. It reallocates capital that would otherwise be available for other uses. When the bank diverts resources to politically selected activities, economic efficiency is lost unless the reallocation corrects a true market failure. But there is no reason to think that the Ex-Im Bank knows how to better deploy resources than consumers, investors, and businesses in private markets. Ex-Im Bank supporters often say that the bank creates jobs without acknowledging any offsetting losses to the rest of the economy. Thus the 227,000 jobs that Hochberg claims to have created are not necessarily “net jobs” that would not exist in a world without the Ex-Im Bank. The relevant question is whether the Ex-Im Bank’s activities create more value—measured in terms of jobs, or exports, or economic growth—than they destroy. At best, the activities of the bank have no discernible net impact on the number of jobs in the U.S. economy. In many cases, Ex-Im–backed sales would have

been completed anyway with private financing. The bank says that it tries to avoid displacing private-sector finance, but it can’t avoid displacement entirely. Because the Ex-Im Bank is ready to step in with financing, no one can know what terms might have been offered by private lenders had the bank not existed. Yet assume that the bank successfully increases U.S. exports in a given year. What happens then? Foreign buyers must have U.S. dollars to complete their purchases. They obtain those dollars by buying them in international currency markets, thus bidding up the price of dollars. The stronger dollar does two things. First, it makes exporting more difficult for producers who do not have subsidized financing, which reduces somewhat the total amount of non-subsidized exports. Because there is a set number of dollars available in foreign exchange markets at any given time, when the Ex-Im Bank steers those dollars to certain clients, there are fewer dollars available for other potential buyers or foreign investors. Second, a stronger dollar makes imports more attractive to U.S. consumers. The net effect is that imports rise with exports, with no net impact on the trade balance. Some jobs are created in the export sector, while some are lost to import competition and some to reduced sales among unsubsidized exporters. The cumulative impact on employment is indeterminate and is not likely to be strong in either direction. An expert from the Government Accountability Office testified to Congress, “ Government export finance assistance programs may largely shift production among sectors within the economy rather than raise the overall level of employment in the economy.”13 The Congressional Research Service summarized the views of economists who oppose export subsidies: …there is doubt that a nation can improve its welfare or level of employment over the long run by subsidizing exports. Economists generally maintain that economic policies within individual countries are the prime factors which determine interest rates, capital flow, and exchange rates, and the overall level of a nation’s exports. As a result, they hold that subsidizing export financing merely shifts production among sectors within the economy, but does not add to the overall level of economy activity, and subsidizes foreign consumption at the expense of the domestic economy. From this point of view, promoting exports through subsidized financing or through government-backed insurance and guarantees will not permanently raise the level of employment in the economy, but alters the composition of employment among the various sectors of the economy and, therefore performs poorly as a jobs creation mechanism.14 The jobs created by Ex-Im Bank transactions are visible. However, the jobs destroyed or never created in the first place are not visible, and thus are not taken into account in the calculations that the bank uses to measure job creation. Market-directed international trade also changes the employment mix in the economy. But the U.S. economy benefits because Americans can specialize in producing the products in which they have a comparative advantage in response to market signals about global demands. On the import side, Americans are able to import things made relatively less expensively abroad. That process raises the productivity of American workers and increases living standards. When exporters are subsidized, however, politics rather than comparative advantage often drives trade flows. By distorting price signals in the export financing market , the Ex-Im Bank draws from financial resources that would have been put to other, more valuable, uses. The result is a less efficient economy and a lower standard of living than would occur in a free market for export finance.

Ex-Im doesn’t improve the trade balanceJames 12 (Sallie James, October 2012, “Ending the Export-Import Bank” http://www.downsizinggovernment.org/export-import-bank)2. Does the Bank Improve the Trade Balance? The Obama administration has pursued a National Export Initiative (NEI), which is supposed to help double U.S. exports by 2015. Ex-Im Bank supporters cite this as justification for increased funding of the bank and expanded bank authority.15 The Export Promotion Cabinet—which steers the NEI—released a report in 2010 with recommendations related to the

Ex-Im Bank. It said, “under the NEI, U.S. exports are expected to double. This expected increase in export activity will translate into increased demand for public sector export credit assistance.” 16 But that is a circular argument. The NEI justifies the bank’s expansion, and the bank’s expansion is supposedly necessary to meet the goal of doubling exports. Unfortunately, business lobby groups help spread some of the false economic theories that the Ex-Im Bank depends on. During a past Ex-Im Bank reauthorization debate, for example, the U.S. Chamber of Commerce said that “last year’s record $369.7 billion trade deficit highlights the need for full funding for the U.S. Export-Import Bank in order to advance American products overseas and correct the growing imbalance between imports and exports.”17 In reality, subsidized export credit does not noticeably affect the overall level of exports, nor does it change the net balance of imports and exports. A Government Accountability Office expert testified that “Ex-Im Bank programs cannot produce a substantial change in the U.S. trade balance.”18 Ex-Im subsidies may indeed stimulate foreign demand for particular U.S. products, but the greater demand for dollars needed in order to purchase those products bids up the U.S. dollar’s value. The stronger dollar encourages imports and raises the price of U.S. exports generally. The exchange-rate mechanism, in other words, moderates any price advantage created by Ex-Im loans. The trade deficit is largely driven by macroeconomic factors such as the levels of savings and investment. Again, the real impact of Ex-Im Bank financing is to divert exports from less favored to more favored sectors. Even if subsidized credit could alter the trade balance in theory, in practice it is too small to make any major impact. The $34 billion of U.S. exports supported by the Ex-Im Bank in 2010, for example, represented less than two percent of the $1.8 trillion worth of all U.S. exports that year. The merchandise trade deficit in 2010 was almost 20 times larger than all the exports supported by the bank that year.19 The trade deficit is not indicative of American economic weakness in any case: it fell dramatically during the recent global downturn and is rising again with renewed growth. Trade deficits neither cause unemployment or reduce growth, nor are they a sign of unfair trade practices abroad or declining industrial competitiveness at home. The current high nominal trade deficit reflects the fact that the United States attracts a high level of foreign investment, including investment in government bonds to finance huge federal deficit spending. The trade deficit enables Americans to maintain a level of investment that would be unattainable if they relied solely on domestic savings. In short, the trade balance says very little about the relative competitiveness of U.S. exporters.20

Ex-Im doesn’t correct market failuresJames 12 (Sallie James, October 2012, “Ending the Export-Import Bank” http://www.downsizinggovernment.org/export-import-bank)3. Does the Bank Correct Market Failures? Another rationale for funding the Ex-Im Bank is that the agency provides its services when the private sector is unwilling to do so. In response to those who doubt that private lenders would ignore good opportunities, the bank claims that they have special insights and access to information that private lenders do not. Bank officials have said that “Export-Import Bank personnel can go into a minister of finance or the president of a company and ask for accounting records that are audited under [International Accounting Standards Board] rules, and we can push for reforms and the kind of structures that are needed.”21 However, the Ex-Im Bank does not explain why they could not simply share with the markets any information to which they supposedly have privileged access. Presumably foreign businesses or government officials would not prevent successful transactions by withholding important records and data. The Ex-Im Bank’s attitude reflects a misguided assumption in Washington that a small group of government experts are better able to price risk and manage economic activities than many thousands of private-sector investors and analysts who have their own money at stake. The Ex-Im Bank views itself as being crucial to international commerce. But the vast majority of trade finance

is sourced from the private sector: 65 to 90 percent if the transaction is internal (i.e., extended between firms in a supply chain, or as an intra-company transfer), and 80 percent of trade financed externally.22 About 90 percent of short-term export credit insurance is provided by private firms. 23 It is true that in the midst of the recent financial crisis, global credit markets froze, partly contributing to a drop in international trade in 2009. But research has shown that while trade finance and exports mirror each other, the declines in trade finance did not have a major effect on trade flows. Economists Jesse Mora and William Powers have found that declining international demand was the most important factor in explaining the drop in world trade, with trade finance a secondary factor. Trade finance, they conclude, “had at most a moderate role in reducing global trade,” and while the decline in trade financing did contribute to the fall in global trade, it simply reflected broader macroeconomic and credit market conditions during the crisis.24 Another factor to consider is that the Ex-Im Bank typically has made its loans, guarantees, and insurance to countries such as South Korea, China, Mexico, and Brazil that have had little difficulty in attracting private investment.25 Indeed, the bank’s relatively low default rate (less than two percent in 2010) suggests that it is making loans to creditworthy countries. That raises the question of why we need a government agency to finance safe transactions that could be left to the private sector.26 On the other hand, when loans and other benefits are extended to uncreditworthy countries, they are in effect foreign aid rather than export promotion. If foreign debts become unpayable, they must ultimately be financed by U.S. taxpayers. Another problem is that when the Ex-Im Bank finances public-sector borrowers, it may have the effect of delaying privatization and other reforms that would aid development.27 The Ex-Im Bank mainly subsidizes a small group of large businesses. In 2010, for example, the top 10 beneficiaries of Ex-Im Bank loans and long-term guarantees received move than 92 percent of those bank services.28 Boeing Company alone accounted for 44 percent of total Ex-Im Bank loans and long-term guarantees in 2010. It is difficult to see why large multinational companies such as Boeing shouldn’t finance their own export sales. In sum, while private credit markets are not perfect, the unintended consequences of subsidized public credit are more problematic. Ex-Im Bank operations can harm economic development, displace private-sector credit, and finance foreign firms that compete with U.S. firms. It makes no sense for the bank to finance sensible projects that the private sector is willing to finance. Nor does it make sense for the bank to finance dubious projects that are excessively risky. Former Cato chairman William Niskanen noted: The fact that private credit is sometimes not available on terms that a potential foreign buyer and U.S. exporter would prefer … is not sufficient evidence of a market failure. The terms on which credit is available from a private lender reflect the costs, taxes, and regulations to which that lender is subject; its assessment of the commercial and political risks of a specific loan; and the expected return on alternative loans. In a competitive credit markets among lenders that face the same costs and alternatives, the best terms will be offered by the potential lender that is most optimistic about the commercial and political risks of a specific loan.29 The Ex-Im Bank’s activities introduce distortions to the marketplace. For one thing, the bank picks and chooses which industries to subsidize, and it may be biased toward investments in politically trendy activities such as renewable energy.30 As an example, the Ex-Im Bank provided a $10 million loan guarantee to the failed solar company Solyndra.31 Another problem is that the Ex-Im Bank’s subsidies can encourage investment in very dubious projects. That is the story of Enron’s international investments, which played an important role in the implosion of the firm. By one estimate, Enron received $2.4 billion in federal aid for overseas energy projects through the Export-Import Bank and the Overseas Private Investment Company between 1992 and 2000.32 Another study puts total federal government subsidies to Enron for its foreign schemes at $3.7 billion.33 All these subsidies made possible Enron’s excessively risky foreign investments, which came crashing down at the same time that the firm’s accounting frauds were being revealed.34 Another source of distortion is the complex rules and regulations that Congress imposes on the Ex-Im Bank. For example, there are limits on the amount of foreign content allowed in bank-supported exports. Also, any bank–supported transaction worth more than $20 million must be transported on a U.S.-flagged ship, which is a hidden subsidy to protected shippers. This rule has a substantial negative effect: “Today, an extremely limited number of U.S.-flag ‘break bulk’

carriers remain in operation, yielding transportation costs so high as to nullify the benefits of Ex-Im Bank financing.” 35

Ex-Im doesn’t level the playing fieldJames 12 (Sallie James, October 2012, “Ending the Export-Import Bank” http://www.downsizinggovernment.org/export-import-bank)4. Does the Bank Level the Playing Field? The Ex-Im Bank’s supporters argue that its services are needed to counter the subsidized competition that U.S. firms sometimes face abroad. Ideally, U.S. exporters should not have to compete in a world where their competitors are receiving government support. However, U.S. policy should aim at maintaining a prosperous economy overall, not at promoting the private interests of particular companies. And even if the latter were an appropriate goal, it’s not clear that the Ex-Im Bank has much of an impact. The evidence is mixed regarding whether state-provided export subsidies enhance a country’s export performance. First note that other high-income countries generally don’t subsidize their exporters any more than does the United States. In 2009, out of seven high-income countries, the United States was the third-largest in the use of medium and long-term export credits.36 Furthermore, the use of export subsidies has waned in recent years in numerous countries. The members of the Organization for Economic Cooperation and Development (OECD) are bound by a 1978 agreement (“OECD Arrangement”) that limits subsidies for export finance and obliges countries to inform other OECD members when they violate its terms. The existence of the OECD Arrangement partly accounts for the drop in the use of export credits in recent years. Non-OECD countries, however, are not bound by these rules. China, for example, is a major user of “tied aid,” which is development aid that obliges the recipient to buy products from the donor country. On average, China, Brazil, and India have supported more than three percent of their total exports in recent years, and export credit volumes are growing.37 However, there is no clear relationship between a country’s export performance and the amount of government export subsidies. A cross-country analysis by this author shows no significant relationship between a country’s rank as an exporter or the growth in exports, and its level of export credit subsidies.38 The extent to which the Ex-Im Bank actually counters foreign export credits is unclear. While the bank previously was forthcoming about the share of its activities devoted to countering subsidized foreign competition, recent reports contain little information about this activity. Given the fall in export credit subsidies in the OECD, the need for countervailing activities likely has not increased since the late 1990s, when less than 20 percent of Ex-Im guarantees and insurance were for the purpose of countering officially supported foreign competition.39 The idea that the United States suffers from a prohibitively tilted playing field is dubious. The Ex-Im Bank backs only about two percent of total U.S. exports, and likely only a portion of those exports compete against products that receive government export subsidies. Thus, it is unlikely that the U.S. economy is seriously threatened by a tilted international playing field or that the Ex-Im Bank does much to level it out. Interestingly, the Ex-Im Bank has occasionally stacked the deck against U.S. companies by subsidizing foreign companies. For example, Mexico’s state-owned oil monopoly, Pemex, has been one of the Ex-Im Bank’s top beneficiaries, which is a questionable use of U.S. taxpayer dollars given that U.S. oil companies compete against Pemex. Similarly, the billions of dollars in financing that the Ex-Im Bank authorizes each year to foreign airlines to buy Boeing aircraft helps foreign airlines compete against U.S airlines. In 2012, for example, “Delta Airlines claim[ed] that loan guarantees the Ex-Im Bank offered to Air India to buy 30 planes from U.S. manufacturer Boeing would create more competition for U.S. carriers and could force them to cancel certain routes.”40 The Ex-Im Bank’s financing activities are highly concentrated, with roughly 80 percent in four sectors: air transportation, oil and gas exploration, manufacturing, and power projects. Air transportation alone accounts for almost half of the bank’s total financial exposure, and the largest user of the Ex-Im Bank is Boeing.41 Thus, terminating the Ex-Im Bank may reduce the profits of the relatively few companies and industries that receive the bulk of the agency’s aid. But those losses would be temporary as companies adjusted their finances and learned how to compete without subsidies. The best way for U.S.

policymakers to help U.S. businesses and exporters would be to pursue major regulatory and fiscal reforms. For example, policymakers should reduce tariffs on imported business inputs, such as steel, to lower the U.S. costs of production.42 And they should slash the U.S. corporate income tax rate, which is now the highest in the world.43 The U.S. statutory corporate tax rate of 40 percent is far higher than the 23 percent global average in 2012.44 The U.S. effective corporate tax rate is also one of the highest in the world.45

Renewables are TerribleRenewables are terrible things and this must be retaggedMichaels 08 (Robert J. Michaels, October 20, 2008, professor of economics at California State University, “Renewables aren’t the answer” http://usatoday30.usatoday.com/printedition/news/20081020/oppose20.art.htm)

America needs lots of clean, low-cost, secure electricity. Unfortunately, renewable sources don’t fill the bill, and a national requirement wouldn’t change things. Renewables (excluding hydroelectric dams)

produce less than 3% of U.S. electricity, much of which is hardly clean. About two-thirds comes from

burning scrap vegetation (“biomass”) and garbage, which produce the same pollutants and carbon as coal.

The real job is to produce fewer of them, rather than changing fuels from fossilized to non-fossilized vegetation. Geology limits geothermal opportunities, biomass is environmentally questionable, and solarremains prohibitively expensive. That leaves wind power, but efficient wind turbines pollute in their own way taller than the Statue of Liberty and maddeningly noisy. A national requirement would engender the same environmental resistance as conventional generators and transmission. Opposition to California’s requirement is so strong that today, it gets a smaller percentage of power from renewables

than in 2001. Wind generates only when it is blowing, and it blows least when power is most valuable. At peak demand hours in 2006, wind plants in both California and Texas produced below 3% of their potential. To maintain reliability will require continued investment in full-scale backup generation. Wind generation is itself expensive even at today’s fuel prices, it requires a

massive federal tax credit to survive. A national policy that creates jobs in renewables destroys them elsewhere. Forcing people and businesses to buy expensive power leaves them less to spend on other goods and investments in future productivity. If unemployment is a national problem, attack it with a national policy rather than special-interest legislation for the renewables industry. That industry is already big

enough worldwide that a U.S. requirement is not needed to bring forth better renewable technologies. And renewables don’t matter for national security or energy independence; these are about oil, which produces about 2% of our electricity. If pollution and climate change are problems, attack them directly. Don’t confuse this special-interest legislation with an efficient solution to them.

Renewables are terrible – 5 reasons – this must be retaggedTaylor and Doren 11 (Jerry Taylor, senior fellow at the Cato Institute, critic of federal energy and environment policy, Peter Van Doren, editor at the journal Regulation, April 25, 2011, “The green energy economy reconsidered” http://www.forbes.com/2011/03/28/green-energy-economics-opinions-jerry-taylor-peter-van-doren.html)

“Green” energy such as wind, solar and biomass presently constitute only 3.6% of fuel used to generate electricity in the U.S. But if another “I Have a Dream” speech were given at the base of the Lincoln Memorial, it would undoubtedly urge us on to a promised land where renewable energy completely replaced fossil fuels and nuclear power. How much will this particular dream cost? Energy expert Vaclav Smil calculates that achieving that goal in a decade–former Vice President Al Gore’s proposal–would incur building costs and write-downs on the order of $4 trillion. Taking a bit more time to reach this promised land would help reduce that price tag a bit, but simply building the requisite generators would cost $2.5 trillion alone. Let’s assume, however, that we could afford that. Have we ever seen such a “green economy”? Yes we have; in the 13th century. Renewable energy is quite literally the energy of

yesterday. Few seem to realize that we abandoned “green” energy centuries ago for five very good reasons. First, green energy is diffuse, and it takes a tremendous amount of land and material to harness even a little bit of energy . Jesse Ausubel, director of the Program for the Human Environment and senior research

associate at Rockefeller University, calculates, for instance, that the entire state of Connecticut (that is, if Connecticut were as windy as the southeastern Colorado plains)

would need to be devoted to wind turbines to power the city of New York. Second, it is extremely costly. In 2016 President Obama’s own Energy Information Administration estimates that onshore wind (the least expensive of these green energies)

will be 80% more expensive than combined cycle, gas-fired electricity. And that doesn’t account for the costs associated with the hundreds of billions of dollars worth of new transmission systems that would be necessary to get wind and solar energy–which is generally produced far from where consumers happen to live–to ratepayers. Third, it is unreliable. The wind doesn’t always blow and the sun doesn’t always shine when the energy is needed. We account for that today by having a lot of coal and natural gas generation on “standby” to fire-up when renewables can’t produce. Incidentally, the cost of maintaining this backup generation is likewise never fully accounted for in the cost estimates associated with green energy. But in a world where fossil fuels are a thing of the past, we would be forced–like the peasants of the Dark

Age–to rely upon the vagaries of the weather. Fourth, it is scarce. While wind and sunlight are obviously not scarce, the real estate where those energies are reliably continuous and in economic proximity to ratepayers is scarce .

Finally, once the electricity is produced by the sun or wind, it cannot be stored because battery technology is not currently up to the task. Hence , we must immediately “use it or lose it.” Fossil fuel is everything that green energy is not. It is comparatively cheap. It is reliable; it will burn and produce energy whenever you want it. It is plentiful (we use only a tiny bit of oil in the electricity sector). And you can store fossil fuels until you need them. Proponents of green energy argue that if the government can put a man on the moon, it can certainly make green energy economically attractive. Well, notice that government was not trying to get a man to the moon profitably, which is more akin to the challenge here. Even before the Obama presidency began, about half the production costs of wind and solar energy were underwritten by the taxpayer to no commercial avail. There’s little reason to think that a more sustained, multi-decade commitment to subsidy would play out any differently. After all, the federal government once promised that nuclear energy was on the cusp of being “too cheap to meter.” That was in the 1950s. Sixty-one billion dollars of subsidies and impossible-to-price regulatory preferences later, it’s still the most expensive source of conventional energy on the

grid. The fundamental question that green energy proponents must answer is this: if green energy is so inevitable and such a great investment, why do we need to subsidize it? If and when renewable energy makes economic sense, profit-hungry investors will build all that we need for us without government needing to lift a finger. But if it doesn’t make economic sense, all of the subsidies in the world won’t change that fact.

More renewables are terrible – retagTaylor and Doren 13 (Jerry Taylor, senior fellow at the Cato Institute, critic of federal energy and environment policy, Peter Van Doren, editor at the journal Regulation, January 31, 2013, “Is clean energy an impossible dream?” http://www.huffingtonpost.com/jerry-taylor/is-clean-energy-an-impossible-dream_b_2576612.html)

Don't get us wrong: If low-polluting renewable energy sources could displace fossil fuels without massive taxpayer subsidies that would harm the economy, you'd find us at the front of the parade. But President Obama's undying devotion to clean energy -- memorably invoked in his inaugural address -- should trouble anyone who does not believe in showering public money on industries with no hope of a back-end payoff for the taxpayer or consumer. On the steps of the Capitol, Obama again spoke of clean energy as the energy of the future, intoning: "We cannot cede to other nations the technology that will power new jobs and new industries." He also repeated the argument that clean energy is a necessary prerequisite for saving the world from catastrophic global warming. Let's look at both points. If clean energy is the energy of future, then it's news to the analysts within the Obama administration.

The U.S. Energy Information Administration (EIA) -- the analytic arm of the U.S. Department of Energy -- predicts that renewable energy (excluding liquid biofuels like ethanol which are, at present, as carbon-intensive as crude oil) will rise from 8 percent of total U.S. energy consumption today to a grand total of 11 percent in 2040. Moreover, that modest gain in market share is not expected to come from

improvements in clean energy's ability to compete with fossil fuels. No, the EIA believes that this anemic growth stems "mainly from the implementation of ... state renewable portfolio standard (RPS) programs for electricity generation" (that is, state programs that simply dictate that a certain amount of renewables are produced regardless of cost). If this is the main pillar of the president's plan to create jobs, then we're in big trouble. First of all, there's no evidence to suggest that "clean" energy is more labor intensive than "brown" energy. After all, once the wind farms or solar facilities are built, it doesn't take a lot of employees to fuel them or run them unless they happen to break down. If plant construction is the main source of job creation, then we could accomplish the same end by building museums, highways, oil refineries, or a few dozen Egyptian-style pyramids for that matter. To be fair, forecasting future energy market shares is a problematic and -- if past is prologue -- nearly pointless exercise. Much hinges on technological innovations and breakthroughs that have yet to occur (and may never occur). Even on the eve of a revolution in hydraulic fracturing, few forecasters saw anything but sky-high natural gas prices as far as the eye could see. Still, the EIA's forecasts represent our most educated guesses about where the future will take us -- and alas, even those who draw paychecks from the Obama administration believe that clean energy will remain a bit player in energy markets despite the myriad tax

credits, loan guarantees, and government production mandates to change that reality. It's difficult to believe that this modest gain in market share is going to do much to reduce the impact of climate change . Happily, hydraulic fracturing is doing that environmental job for us. As Mitt Romney and his cohorts on the right were fond of telling us during the recent presidential campaign, 135 coal-fired power plants have already closed during the Obama administration and another 175 are scheduled to close by 2016. But what Romney & co. didn't tell us is that low-cost natural gas -- courtesy of hydraulic fracturing -- was the main reason for those plant closures. Jesse Ausubel, director of the Program for the Human Environment at Rockefeller University, argues persuasively that this will continue as carbon-rich fuels continue to give way -- as they have historically -- to hydrogen-rich fuels. Yesterday, it was coal displacing biomass, then oil displacing coal. Today, it's natural gas displacing oil and coal. Tomorrow, it will likely be hydrogen displacing natural gas. Would a more aggressive set of government policies succeed on the

clean energy front? One never knows, but it's worth noting that the two instances in which the federal government has made Herculean efforts to turn ugly energy ducks into beautiful economic swans -- nuclear energy and corn ethanol -- have failed spectacularly despite decades of concentrated political effort and tens of billions of dollars of taxpayer assistance. Nuclear energy and corn ethanol continue to be so uncompetitive that, absent

continuing government subsidy, those industries would largely disappear . There's no reason to think that throwing the same effort into clean energy will turn out any differently. Environmentalists remain wedded to clean energy subsidies because they fear that, even if we are correct, no better policy avenue exists to address

climate change. This approach is likely to yield next to nothing, although it does provide the illusion that climate risks are being addressed. But they aren't. Far better, we think, for environmental voters to have no such illusions about what the president is delivering.

A2: CP links to PTXPrivate funding avoids politics -- financially feasible Cooper 12 [Donna Cooper is a Senior Fellow with the Economic Policy team at the Center for American Progress, “Meeting the Infrastructure Imperative”, 2/16, http://www.americanprogress.org/issues/2012/02/infrastructure.html]

Private investors have partnered with state or local governments to build roads, expand highway systems, and build or repair bridges. Typically in this case the private investor pays the public entity upfront an estimated market value for the transportation asset, and then is required under an agreement to cover the cost of improving the asset. In addition, these agreements permit the investor to charge tolls or receive dedicated tax payments while also establishing clear maintenance requirements. Investors enter into these agreements where the tolls or dedicated taxes are projected to cover all costs and profits and are most attractive to investors when the level of earnings has the potential to exceed projections. Federal credit subsidies lower the overall project costs, which in turn reduces the pressure on tolls and/or dedicated taxes, which then has the positive results of making a project more politically and financially feasible .

Tax credits are extremely popular -- perceived as economically beneficialOhlemacher 14 [Stephen Ohlemacher, writer for the Associated Press, “HOUSE VOTES TO MAKE RESEARCH TAX CREDIT PERMANENT,” http://bigstory.ap.org/article/house-votes-make-research-tax-credit-permanent]

The House voted Friday to make permanent a tax credit that rewards businesses for investing in research and development, pushing Congress toward an election-year showdown over a series of expired tax breaks that are popular back home but add billions to the budget deficit. The research tax credit expired at the beginning of the year, along with more than 50 other temporary tax breaks that Congress routinely extends. House Republicans said Friday's vote was the beginning of a broader effort to add more certainty to the tax code. In the coming weeks, they hope to vote on bills to make more temporary tax breaks permanent, though they have yet to decide on which ones. "Beyond having the dubious distinction of the highest corporate rate in the world, the United States is also the only country that allows important pieces of its tax code, like the research and development tax credit, to expire on a regular basis," said Rep. Dave Camp, R-Mich., chairman of the tax-writing House Ways and Means Committee. "Businesses cannot grow and invest when the tax code is riddled with instability and uncertainty." Camp noted that the research credit has been around since 1981 and has been renewed many times with broad bipartisan support. Friday's bill passed by a vote of 274 to 131, with 62 Democrats joining nearly every Republican in support. Some House Democrats called Friday's vote a corporate giveaway that would add $156 billion to the budget deficit over the next decade. They goaded Republicans for calling themselves fiscal conservatives while adding so much to the nation's long-term debt. "It's not only fiscally irresponsible, it's also hypocritical," said Rep. Sander Levin of Michigan, the senior Democrat on the Ways and Means Committee. President Barack Obama supports making the research and development tax credit permanent. But the White House threatened to veto the House bill because it isn't offset by other tax increases. The veto message noted that if all the 50-plus temporary tax breaks were made permanent, it would "add $500 billion or more" to the deficit. "The administration wants to work with Congress to make progress on measures that strengthen the

economy and help middle-class families, including pro-growth business tax reform," the White House said in a statement. "However, making traditional tax extenders permanent without offsets represents the wrong approach." Almost every year, Congress allows a package of more than 50 temporary tax breaks for businesses and individuals to expire, only to renew most of them in time for taxpayers to claim them on their returns. The research and development tax credit is among the most popular. A wide variety of industries claim the credit, including manufacturers, aerospace companies, drugmakers and software developers, said Christina Crooks, director of tax policy for the National Association of Manufacturers. Most of the tax credit goes to help pay the salaries of engineers, scientists, software developers and others who work to develop new and improved products, Crooks said. The Senate is moving to extend nearly all the temporary tax breaks through 2015, putting off the debate over which ones to make permanent. The Senate could vote its package as early as next week, setting up a showdown with the House that might not get settled until after congressional elections in November. The Senate Finance Committee passed a bill in April that would extend the tax breaks through 2015, adding about $85 billion to the debt. Sen. Ron Wyden, D-Ore., chairman of the Finance Committee, said the bill would give lawmakers time to work on a comprehensive plan to overhaul the entire tax code. To generate support in Congress, lawmakers routinely pair tax breaks that affect millions with more narrow ones that don't. Among the biggest of the tax breaks allowed to expire at the beginning of the year: an exemption that allows financial companies to shield foreign profits from being taxed by the U.S., and several provisions that allow businesses to write off capital investments more quickly. There is also a generous tax credit for using wind farms and other renewable energy sources to produce electricity. The biggest tax break for individuals allows people who live in states without an income tax to deduct state and local sales taxes on their federal returns. Another protects struggling homeowners who get their mortgages reduced from paying income taxes on the amount of debt that was forgiven. Among the more narrow ones: tax breaks for film producers, motorsport race track owners, the makers of electric motorcycles and teachers who buy classroom supplies with their own money. "What one person thinks is pork and misguided tax policy is someone else's critical economic development program," said Jon Traub, a former Camp aide who is now a managing principal at Deloitte Tax LLP.

Tax credits are popular -- particularly GOPMalakoff 14 [David Malakoff, editor for AAAS, sciencemag contributor, “U.S. House Passes Permanent R&D Tax Credit,” http://news.sciencemag.org/policy/2014/05/u.s.-house-passes-permanent-rd-tax-credit]

The U.S. House of Representatives has passed a bill that would permanently extend a popular tax break for companies investing in research. Despite strong bipartisan support, however, the proposal appears unlikely to become law—at least not this year. The 274 to 131 vote ended several days of sniping over the bill, which would permanently renew the so-called R&D tax credit, which expired at the end of last year. Although both Democrats and Republicans sponsored the legislation, it had drawn a veto threat from the White House because it didn’t provide a way to offset the $156 billion that the tax break is expected to cost over the next decade. Republican leaders in the House argued that Congress has a long history of extending the R&D tax break—it’s been renewed 15 times since it was first adopted in 1981—without finding a way to pay for it. But Democratic leaders said Republican supporters were guilty of hypocrisy because they typically insist that any new program not add to federal spending deficits. “All of the wringing of hands and gnashing of teeth with reference to the deficit seems to go by the boards when the Republicans talk of tax cuts,” said Representative Steny Hoyer (D-MD), the second-ranking Democrat

in the House, at press conference earlier this week. In a private meeting before this morning’s vote, Hoyer and other Democratic leaders asked members of their party not to vote for the bill, according to media reports. But despite the plea, 62 Democrats joined 212 Republicans to approve the legislation. Just one Republican opposed the measure. One Democrat who supported the bill, Representative Earl Blumenauer (D-OR), told CQ Roll Call that it would have been inconsistent to vote against a measure he has long supported, and that Congress typically extends the R&D tax credit without a dedicated spending offset. “It has been extended unpaid for 10 times,” he said. Blumenauer also suggested that the vote “does not matter as much because the tax credit will not pass in this form in the Senate.” The Senate is working on its own version of the legislation which would extend the credit for just 2 years. But Congress is not expected to agree on any fix, permanent or temporary, until after the elections in November.

Energy tax credits are bipartisanCasteel 10 [Chris Casteel, reporter, Published in 2010, “Sen. Jim Inhofe praises bipartisan opposition to removing energy tax credits and deductions,” http://newsok.com/sen.-jim-inhofe-praises-bipartisan-opposition-to-removing-energy-tax-credits-and-deductions/article/3469106]

WASHINGTON — A strong Senate vote against raising taxes on the oil and gas industry was a bipartisan message that lawmakers don't want to punish all companies for the BP oil spill, Sen. Jim Inhofe said Wednesday. Inhofe, R-Tulsa, made the comment a day after he led the fight against a proposal to eliminate some of the tax credits and deductions available to exploration companies. The proposal was made by Sen. Bernard Sanders, a Vermont independent, as an amendment to a hodgepodge of a bill that would extend some current tax breaks as well as unemployment benefits. Sanders' amendment would have repealed the tax credits that allow exploration companies to write off some of their expenses and depreciation. The proposal, which mirrors one made by President Barack Obama the last two years, would also have excluded energy exploration companies from the deduction available to U.S. manufacturers. Sanders' proposal was defeated by a vote of 61 to 35 on Tuesday, as Democrats from all over the country joined Republicans in opposition. "With the vote on the Sanders amendment, the Senate has clearly spoken with a strong bipartisan message that the entire oil and gas industry as a whole — especially small independent producers like many of those in Oklahoma — should not be penalized for BP's catastrophe in the Gulf,” Inhofe said Wednesday. "The Senate understands the value of our nation's domestic energy producers, the needs they meet, the jobs they create, the fact that they fund many state and local initiatives and the payments they make to landowners.”

Reforming tax law is bipartisanRATE - A lobby in Washington (Reforming America's Taxes Equitably, "Democratic and Republican Platforms Agree: Corporate Tax Rate is Too High, Needs Reform," ratecoalition.com/pressreleases/democratic-and-republican-platforms-agree-corporate-tax-rate-is-too-high-needs-reform/, ADL)

WASHINGTON, D.C. – The recently released Democratic and Republican platforms both include language calling for corporate tax reform with the aim of increasing job

creation, economic growth and competitiveness through a lower corporate tax rate and broader tax base. RATE Co-chairs Elaine Kamarck and James P. Pinkerton released the following statements regarding the common goal of the two parties: “At a time of hyper partisanship and few policy agreements, the agreement in the Democratic and Republican platforms on corporate tax reform shows much promise that something will be done to reform our corporate tax rate, which is far too high,” said James P. Pinkerton, Co-Chair of the RATE Coalition and former White House domestic policy adviser to Presidents Ronald Reagan and George H.W. Bush. “Having the highest corporate tax rate in the world hurts economic growth and increases job losses at a time when both parties are looking boost the economy and job creation. Such agreement bodes well for policymakers aiming to reform our corporate tax code.” “Democratic and Republican lawmakers agree that corporate tax reform that lowers the rate and broadens the base is key to economic growth and drastically lowering the unemployment rate,” said Elaine Kamarck, Co-Chair of the RATE Coalition and former White House adviser to President Bill Clinton and Vice President Al Gore. “In 1986 Democratic and Republican leaders worked together to enact tax reform that led to more than a decade of strong economic growth. Policymakers have another such opportunity today to create jobs and once again make the United States the top nation in which to grow a business.” The corporate tax reform sections of the Democratic and Republican platforms can be found below. Democratic Platform: We are also committed to reforming the corporate tax code to lower tax rates for companies in the United States, with additional relief for those locating manufacturing and research and development on our shores, while closing loopholes and reducing incentives for corporations to shift jobs overseas. … There is more to do. We Democrats support lowering the corporate tax rate while closing unnecessary loopholes, and lowering rates even further for manufacturers who create good jobs at home. Republican Platform: American businesses now face the world’s highest corporate tax rate. It reduces their worldwide competitiveness, encourages corporations to move overseas, lessens investment, cripples job creation, lowers U.S. wages, and fosters the avoidance of tax liability-without actually increasing tax revenues. To level the international playing field, and to spur job creation here at home, we call for a reduction of the corporate rate to keep U.S. corporations competitive internationally, with a permanent research and development tax credit, and a repeal of the corporate alternative minimum tax. We also support the recommendation of the National Commission on Fiscal Responsibility and Reform, as well as the current President’s Export Council, to switch to a territorial system of corporate taxation, so that profits earned and taxed abroad may be repatriated for job-creating investment here at home without additional penalty.

Lobbies shield the link to politicsCTJ 13 - citizens for tax justice (August 21 2013, "Corporate-Backed Tax Lobby Groups Proliferating," ctj.org/ctjreports/2013/08/corporate-backed_tax_lobby_groups_proliferating.php#.U78JBvldU6w, ADL)

In recent years, the corporate tax reform debate in the nation's capital has been invaded by an army of acronyms such as T.I.E., A.C.T. and R.A.T.E., representing different businesses and corporate interest groups. These groups seek to rebrand and build momentum for a corporate tax reform that benefits corporate rather than public interests. In this report we identify the nine lobby groups most actively and publicly advocating for business interests in the corporate tax debate: the Alliance for Competitive Taxation (ACT), Businesses United for Interest and Loan Deductibility (BUILD), Campaign for a Home Court Advantage (a campaign by the Business Roundtable), Coalition for Fair Effective Tax Rates, Fix the Debt, Let's Invest for Tomorrow (LIFT) America, Reforming America's Taxes Equitably (RATE), Tax Innovation Equality, and the WIN America Campaign. We also identify the ten U.S. corporations most aggressively pursuing tax reform through these groups based on each of the company’s participation in four or more such coalitions. Though

the specific goals of these groups vary, there are common threads between them. For example, five of the nine groups explicitly support moving to a territorial tax system, which would exacerbate corporate tax avoidance overseas and promote the offshoring of jobs. Four of the groups explicitly support revenue-neutral tax reform. And, the WIN America Campaign, BUILD, and TIE each support either protecting or implementing very specific tax breaks that would benefit their corporate backers. For a full inventory of the groups' policy positions see Table 1. Based just on the lists of corporate members released by these groups (many remain private), they represent at least 359 different corporations and 186 different trade associations. Further, 87 of the corporations are actually supporters of two or more of these corporate tax lobbying efforts, with 31 supporting as many as 3 or more of these groups. See Table 2 for breakdown of the most active corporations and which groups they belong to.

Privatization is popularRothbard 86 -Murray N, dean of the Austrian School, economist (“Privatization” March 1986, http://mises.org/econsense/ch39.asp)nimil patel cut this card

Privatization is becoming politically popular now as a means of financing the huge federal deficit. It is certainly true that a deficit may be reduced not only by cutting expenditures and raising taxes, but also by selling assets to the private sector. Those economists who have tried to justify deficits by pointing to the growth of government assets backing those deficits can now be requested to put up or shut up: in other words, to start selling those assets as a way of bringing the deficits down.¶ Fine. There is a huge amount of assets that have been hoarded, for decades, by the federal government. Most of the land of the Western states has been locked up by the federal government and held permanently out of use. In effect, the federal government has acted like a giant monopolist: permanently keeping out of use an enormous amount of valuable and productive assets: land, water, minerals, and forests. By locking up assets, the federal government has been reducing the productivity and the standard of living of every one of us. It has also been acting as a giant land and natural resource cartelist--artificially keeping up the prices of those resources by withholding their supply. Productivity would rise, and prices would fall, and the real income of all of us would greatly increase, if government assets were privatized and thereby allowed to enter the productive system.

A2: CP links to Spending/Trade-offPrivate funding avoids the link to spending -- perceived financially feasible Cooper 12 [Donna Cooper is a Senior Fellow with the Economic Policy team at the Center for American Progress, “Meeting the Infrastructure Imperative”, 2/16, http://www.americanprogress.org/issues/2012/02/infrastructure.html]

Private investors have partnered with state or local governments to build roads, expand highway systems, and build or repair bridges. Typically in this case the private investor pays the public entity upfront an estimated market value for the transportation asset, and then is required under an agreement to cover the cost of improving the asset. In addition, these agreements permit the investor to charge tolls or receive dedicated tax payments while also establishing clear maintenance requirements. Investors enter into these agreements where the tolls or dedicated taxes are projected to cover all costs and profits and are most attractive to investors when the level of earnings has the potential to exceed projections. Federal credit subsidies lower the overall project costs, which in turn reduces the pressure on tolls and/or dedicated taxes, which then has the positive results of making a project more politically and financially feasible .

Tax credits are more cost efficient and are independent of agency fundingNSF 12 [National Science Foundation, Published in 2012, “Chapter 4. R&D: National Trends and International Comparisons,” http://www.nsf.gov/statistics/seind12/c4/c4s6.htm]

Federal support for the nation's R&D spans a range of broad objectives, including

defense, health, space, energy, natural resources/environment, general science, and various other categories. To assist the president and Congress in planning and setting the federal budget and its components, the Office of Management and Budget classifies agency budget requests into specific categories called budget functions. These functions include a number of

categories that distinguish the various R&D objectives. Descriptions of the budget authority provided annually to federal agencies in terms of these R&D budget functions afford a useful picture of the present priorities and trends in federal support for U.S. R&D. In FY 2009, budget authority for federal agency spending on R&D totaled an estimated $156.0 billion, including a one-time $15.1 billion increase provided under the American Recovery and Investment Act of 2009 (appendix tables 4-28 and 4-29). As in previous years, defense was the largest of the R&D budget functions, accounting for 55% ($85.2 billion) of the total. Defense R&D is supported primarily by the Department of Defense (DOD), but also includes some R&D by the Department of Energy (DOE) and the Department of Justice (where some R&D by the Federal Bureau of Investigation comes under a defense category). Defense has accounted for the majority of R&D budget authority throughout the last two decades (figure 4-10, appendix table 4-28); the share has fluctuated year to year in the 50%–70% range. In FY 1980, it roughly equaled nondefense R&D, but by FY 1985 it was more than double. From 1986 to 2001, nondefense R&D surged, and the share of defense R&D shrank to 53%. After September 11, 2001, defense R&D became more prominent, accounting for 59% of the federal R&D budget in FY 2008. The drop to 55% in FY 2009 reflects chiefly the effect of the one-time ARRA spending authority that expanded health, energy, and general science research. Nondefense R&D Budget authority for nondefense R&D totaled $70.8 billion in FY 2009, or about 45% of the total that year (appendix table 4-28). Nondefense R&D includes health, space research/technology, energy, general science, natural resources/environment, transportation, agriculture, education, international affairs, veterans' benefits, and a number of other small categories related to economic and governance matters. The most striking change in federal R&D priorities over the past two decades has been the considerable increase in health-related R&D—which now accounts for well over half of all nondefense R&D (figure 4-10). Health R&D has risen from about 12% of total federal R&D budget authority in FY 1980 to 21% in FY 2008 and 26% in FY 2009 because of the ARRA increment. The increase in share accelerated after 1998, when policymakers set the National Institutes of Health (NIH) budget on course to double by FY 2003. The budget allocation for space-related R&D peaked in the 1960s, during the height of the nation's efforts to surpass the Soviet Union in space exploration. It stood at 10%–11% of total R&D authority throughout the 1990s. The loss of the space shuttle Columbia and its entire crew in February 2003 prompted curtailment of manned space missions. In FY 2005, the space R&D share was down to about 6%; by FY 2009, it had declined to around 4%. Federal nondefense R&D classified as general science had about a 4% share of total federal R&D in the mid 1990s, growing to 8%

in FY 2009. However, this change reflected chiefly a reclassification, starting in FY 1998, of several DOE programs from energy to general science. Federal Budget for Basic Research In FY 2009, federal budget authority for all basic research totaled $36.4 billion (appendix table 4-29). This represented some 23% of the $156.0 billion of total federal budget authority for R&D that year. The vast majority of basic research reflects the budgets of agencies with nondefense objectives, such as general science (notably NSF), health (NIH), and space research and technology (NASA). Over the past several years, budget authority levels for basic research have been mostly flat, after adjusting for inflation, excepting the 2009 ARRA boost. In FY 2002, basic research budget authority was $25.8 billion (constant 2005 dollars); in FY 2008, $26.4 billion; and $33.0 billion in FY 2009. Back to top Federal Spending on R&D by Agency Budget authority, discussed above, lays out the themes of the broad federal spending plan. Federal obligations reflect federal dollars as they are spent, that is, the implementation of the plan by federal agencies (see appendix tables 4-30 and 4-31). In FY 2009, federal obligations for R&D and R&D plant together totaled an estimated $137.0 billion: $133.3 billion for R&D and an additional $3.6 billion for R&D plant (table 4-16). Federal obligations for R&D have, in general, increased annually on a current-dollar basis since the mid-1990s (figure 4-11). Earlier figures are $68.2 billion for R&D in FY 1995 and an additional $2.3 billion for R&D plant, $75.9 billion and $4.5 billion in FY 2000, $118.9 billion and $3.8 billion in FY 2005 (appendix table 4-30). When adjusted for inflation, however, the growth has been slower after FY 2005. NSF's latest statistics indicate that the boost to R&D from the ARRA appropriations translated to an additional $10.1 billion of federal R&D obligations in FY 2009—$8.7 billion for R&D, another $1.4 billion for R&D plant, with the main recipients the Department of Health and Human Services (HHS), NSF, and DOE (table 4-16). (The figures for federal funding of U.S. R&D cited in table 4-1 earlier in this chapter are somewhat lower. These earlier figures are based on performers' reports of their R&D expenditures from federal funds. This difference between performer and source of funding reports of the level of R&D expenditures has been present in the U.S. data for more than 15 years and reflects various technical issues. See sidebar, "Tracking R&D: The Gap between Performer- and Source-Reported Expenditures.") Fifteen federal departments and a dozen other agencies engage in and/or fund R&D in the U.S.[21] Seven departments/agencies that reported spending on R&D in excess of $1 billion annually accounted for 97% of the total (table 4-16). Another eight of the departments/agencies reported spending above $100 million annually. Department of Defense In FY 2009, DOD obligated a total of $68.2 billion for R&D and R&D plant (table 4-16)—which represented half (50%) of all federal spending on R&D and R&D plant that year. Nearly the entire DOD total was R&D spending ($68.1 billion) with the remainder spent on R&D plant. Twenty-seven percent ($18.7 billion) of the total was spending by the department's intramural labs, related agency R&D program activities, and FFRDCs (table 4-16). Extramural performers—private businesses, universities/colleges, state/local governments, other nonprofit organizations, and foreign performers—accounted for 73% ($49.5 billion) of the obligations, with the bulk going to business firms ($46.3 billion). Considering just the R&D component, relatively small amounts were spent on basic research ($1.7 billion, 3%) and applied research ($5.1 billion, 7%) in FY 2009 (table 4-17). The vast majority of obligations, $61.3 billion (90%), went to development. Furthermore, the bulk of this DOD development ($54.9 billion) was allocated for "major systems development," which includes the main activities in developing, testing, and evaluating combat systems (figure 4-12). The remaining DOD development ($6.4 billion) was allocated for "advanced technology development," which is more similar to other agencies' development obligations. Department of Health and Human Services HHS is the main federal source of spending for health-related R&D. In FY 2009, the department obligated an estimated $35.7 billion for R&D and R&D plant, or 26% of the total of federal obligations that year. Nearly all of this was for R&D ($35.6 billion). Furthermore, much of the total, $34.6 billion, represented the R&D activities of the NIH. Obligations from the ARRA-appropriated funds totaled $4.9 billion for HHS in FY 2009, the largest by far of all the federal agencies (table 4-16). Again, nearly all of this was NIH R&D. For the department as a whole, R&D and R&D plant obligations for agency intramural activities and FFRDCs accounted for 21% ($7.5 billion) of the total. Extramural performers accounted for 79% ($28.2 billion). Universities and colleges ($20.5 billion) and other nonprofit organizations ($5.3 billion) conducted the most sizable of these extramural activities (appendix table 4-31). Nearly all of HHS R&D funding is allocated to research—almost 53% for basic research and 47% for applied research (table 4-17). Department of Energy DOE obligated an estimated $11.6 billion for R&D and R&D plant in FY 2009, about 8% of the federal obligations total that year. Of this amount, $9.9 billion was for R&D and $1.7 billion for R&D plant. Obligations this year stemming from the ARRA appropriation totaled $2.2 billion, the third largest among the agencies (behind HHS and NSF). The department's intramural laboratories and FFRDCs accounted for 77% of the total obligations. Many of DOE's research activities require specialized equipment and facilities available only at its intramural laboratories and FFRDCs. Accordingly, DOE invests more resources in its intramural laboratories and FFRDCs than other federal agencies. The 23% of obligations to extramural performers were chiefly to businesses and universities/colleges. For the $9.9 billion obligated to R&D, basic research accounted for 41%, applied research 32%, and development 27%. DOE R&D activities are rather evenly distributed among defense (much of it funded by the department's National Nuclear Security Administration), energy, and general science (much of which is funded by the department's Office of Science). National Science Foundation NSF obligated $6.9 billion for R&D and R&D plant in FY 2009, or 5% of the federal total. Extramural performers, chiefly universities and colleges ($6.6 billion), represented 96% of this total. ARRA-related obligations were $2.2 billion (R&D and R&D plant), the second largest among the agencies. Basic research accounted for about 92% of the R&D component. NSF is the federal government's primary source of funding for academic basic science and engineering research and the second-largest federal source (after HHS) of R&D funds for universities and colleges. National Aeronautics and Space Administration NASA obligated an estimated $5.9 billion to R&D in FY 2009, 4% of the federal total. Sixty-seven percent of these obligations were for extramural R&D, given chiefly to industry performers. Agency intramural R&D and that by FFRDCs represented 33% of the NASA obligations total. By character of work, 71% of the NASA R&D obligations funded development activities; 17%, basic research; and 12%, applied research. Department of Agriculture USDA obligated an estimated $2.3 billion for R&D in FY 2009, with the main focus on life sciences. The agency is also one of the largest research funders in the social sciences, particularly agricultural economics. Of USDA's total obligations for FY 2009, about 67% ($1.6 billion) funded R&D by agency intramural performers, chiefly the Agricultural Research Service. Basic research accounts for about 41%; applied research, 51%; and development, 8%. Department of Commerce DOC obligated an estimated $1.5 billion for R&D in FY 2009, most of which represented the R&D and R&D plant spending of the National Oceanic and Atmospheric Administration (NOAA) and the National Institute of Standards and Technology (NIST). Seventy-seven percent of this total was for agency intramural R&D; 23% went to extramural performers, primarily businesses and universities/colleges. For the R&D component, 12% was basic research; 72%, applied research; and 16%, development. Department of Homeland Security DHS obligated an estimated $1.0 billion for R&D and R&D plant in FY 2009, nearly all of which was for activities by the department's Science and Technology Directorate. Sixty-one percent of this obligations total was for agency intramural and FFRDC activities. Just over 39% was conducted by extramural performers—mainly businesses, but also universities/colleges and other nonprofit organizations. Of the obligations for R&D, 15% was basic research; 37%, applied research; and 48%, development. Other Agencies The eight other departments/agencies obligating more than $100 million annually for R&D in FY 2009 were the Departments of Education,

Interior, Justice, Transportation, and Veterans Affairs; and the Environmental Protection Agency, Agency for International Development, and Smithsonian Institution (tables 4-16 and 4-17). These agencies varied with respect to the character of the research and the roles of intramural, FFRDC, and extramural performers. Back to top Federal Spending on Research by Field Federal agencies' research covers the whole range of science and engineering fields. These fields vary in their funding levels and have different growth paths (see appendix tables 4-34 and 4-35). Funding for basic and applied research combined accounted for $63.7 billion (about 48%) of the $133.3 billion total of federal obligations for R&D in FY 2009 (table 4-17). Of this amount, $33.3 billion (52% of $63.7 billion) supported research in the life sciences (figure 4-13; appendix table 4-34). The fields with the next-largest amounts were engineering ($10.3 billion, 16%) and the physical sciences ($5.8 billion, 9%), followed by environmental sciences ($3.8 billion, 6%), and mathematics and computer sciences ($3.6 billion, 6%). The balance of federal obligations for research in FY 2009 supported psychology, the social sciences, and all other sciences ($7.0 billion overall, or 11% of the total for research). HHS accounted for the largest share (56%) of federal obligations for research in FY 2009 (appendix table 4-34). Most of this amount funded research in medical and related life sciences, primarily through NIH. The five next-largest federal agencies for research funding that year were DOE (11%), DOD (11%), NSF (10%), USDA (3%), and NASA (3%). DOE's $7.2 billion in research obligations provided funding for research in the physical sciences ($2.6 billion) and engineering ($2.5 billion), along with mathematics and computer sciences ($1.0 billion). DOD's $6.8 billion of research funding emphasized engineering ($3.5 billion), but also included mathematics and computer sciences ($0.9 billion), physical sciences ($0.8 billion) and life sciences ($0.9 billion). NSF—not a mission agency in the traditional sense—is charged with "promoting the health of science." Consequently, it had a relatively diverse $6.1 billion research portfolio that allocated about $1.0 billion to $1.3 billion in each of the following fields: environmental, life, mathematics/computer, and physical sciences; and engineering. Lesser amounts were allocated to psychology and the social and other sciences. USDA's $2.1 billion was directed primarily at the life (agricultural) sciences ($1.7 billion). NASA's $1.7 billion for research emphasized engineering ($0.6 billion), followed by the physical sciences ($0.5 billion) and environmental sciences ($0.4 billion). Growth in federal research obligations has slowed since 2004. Federal obligations for research in all S&E fields expanded on average at 3.6% annually (in current dollars) over the last 5 years (FY 2004–09), a much higher 6.6% over the last 10 years, and 5.8% over the last 20 years (appendix table 4-35). Adjusted for inflation, the 2004–09 average growth turns into an average annual increase of only 0.9%, which contrasts with a 10-year real growth of 4.1% and 3.3% over the last 20 years. Since the late 1990s, growth in federal research obligations in the life sciences and psychology has exceeded the S&E average, leading to growing shares for these fields. Growth for the mathematics and computer sciences was just below the S&E average. The shares of research funding going to physical sciences, behavioral and other social sciences, and

engineering, declined. Environmental sciences grew slower than both total research and inflation. The federal government makes available tax credits for companies that expand their R&D activities, as a way of counteracting potential business underinvestment in R&D. Governments stimulate the conduct of R&D through tax incentives—allowances, exemptions,

deductions, or tax credits—each of which can be designed with differing criteria for eligibility, allowable expenses, and baselines (OECD 2003). In the United States, federal tax incentives for qualified business R&D expenditures include a deduction under Internal Revenue Code (IRC) Section 174 (C.F.R. Title 26) and a research and experimentation (R&E) tax credit under Section 41.[22] The latter was established in 1981 by the Economic Recovery Tax Act (Public Law 97-34). It was last renewed by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, through 31 December 2011.[23] The Obama administration has proposed making this credit permanent (U.S Department of Treasury 2011). Along with the United States, over 20 OECD countries offer fiscal incentives for

business R&D (OECD 2011b). Fiscal incentives for R&D are typically predicated on R&D's role in economic growth along with the recognition that R&D can generate social benefits well beyond those captured by companies investing in such activities (see Hemphill 2009 and references therein). In the United States there were about $8.3 billion in business R&E tax credit claims both in 2007 and in 2008 (see appendix table 4-36).[24] Five industries accounted for 75% of these claims in 2008: computer and electronic products; chemicals, including pharmaceuticals, and medicines; transportation equipment, including motor vehicles and aerospace; information, including software; and professional, scientific, and technical services, including computer and R&D services. Since 1998, R&E credit claims have grown at about the same average annual rate as has company-funded domestic R&D, keeping the ratio of R&E credit claims to company-funded domestic R&D in a narrow range (3.3% in 2008).[25] In 2008, more than 12,700 corporate returns claimed at least one component of the R&E tax credit (appendix table 4-37). Corporations with more than $250 million in business receipts accounted for 14% of returns claiming the credit in 2008 and 82% of the dollar value

of all claims. In 2001, they had accounted for 9% of returns and 73% of dollar claims.[26] The federal R&E tax credit encompasses a regular credit and as many as two forms of alternative credit formulas since 1996.[27] Under the regular credit, companies can take a 20% credit for qualified research above a base

amount for activities undertaken in the United States (IRC section 41(a)(1)). Thus, the regular credit is characterized as a fixed-base incremental credit. An incremental design is intended to encourage firms to spend more on R&D than they otherwise would by lowering after-tax costs (Guenther forthcoming). Expenses paid or incurred for qualified research include company-funded expenses for wages paid, supplies used in the conduct of qualified research, and certain contract expenses. Further, research "must be undertaken for discovering information that is technological in nature, and its application must be intended for use in developing a new or

improved business component."[28] The credit covers U.S.-performed R&D by both domestic and foreign-owned firms and excludes R&D conducted abroad by U.S. companies. Activities generally disallowed for the purposes of the credit include those conducted after the beginning of commercial production and adapting an existing product or process. Research in the social sciences, arts, or humanities and research funded by another entity is also excluded.

Doesn’t link to tradeoff – doesn’t add to the deficit Weisman 14 [Jonathan Weisman, NYT journalist, “In a Shift From Deficit Concerns, the Senate Will Take Up Tax Breaks,” Published May 13th, 2014, http://www.nytimes.com/2014/05/14/us/politics/senate-will-take-up-tax-breaks-for-business.html?_r=0]

The Senate on Tuesday shrugged off the deficit concerns that were once an animating force on Capitol Hill, voting 96-3 to take up a package of business tax breaks without offering any way to pay for them. The procedural vote presaged final passage as early as this week and followed the House’s overwhelming approval last week of legislation that would make permanent the research-and-development tax credit for businesses and raise the deficit by $156 billion over the next 10 years. On that vote, 62 House Democrats joined virtually every Republican in ignoring President Obama’s veto threat because of the deficit implications. “It’s pretty remarkable,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a deficit watchdog group. “It’s a shift from, ‘This is a huge problem’ — and if anyone looks at the long-term problems, it clearly still is — to ‘We’ve made so much progress on the budget deficit’ to doing things that actually hurt the debt. It’s as though members of Congress tried out fiscal discipline, didn’t like how it felt and are falling back to bad habits.” Senator Ron Wyden, right, the Oregon Democrat who heads the Senate Finance Committee, with reporters after the vote. Credit Gabriella Demczuk/The New York Times As the deficit continues to fall, it loosens the policy reins in Washington for the first time since Mr. Obama rammed through his stimulus law in the opening weeks of his presidency. Last week, the nonpartisan Congressional Budget Office reported that tax receipts were up 8 percent over the first seven months of the fiscal year, which began in October. Spending was down around 3 percent, and at $301 billion, the federal budget deficit is $187 billion lower than at this time last year. “We will not pull the plug before our nation’s recovery is complete,” said Senator Harry Reid, Democrat of Nevada, the majority leader. “Let’s work together to give America’s families a fair shot.” The Senate’s Expiring Provisions Improvement Reform and Efficiency Act, or Expire, renews more than 50 tax credits through 2015, including the research and development tax credit, tax credits for investments in depressed areas, tax breaks for energy-efficient home improvements and tax breaks for higher education expenses. Senator Ron Wyden, Democrat of Oregon, the new chairman of the Senate Finance Committee, had pledged to pare back the routinely extended tax breaks as a dry run for a broader overhaul of the tax code. In the end, nothing was pared back, not the “temporary” tax break for rum producers in Puerto Rico and the Virgin Islands, not the ability for moviemakers to write off the first $15 million of film production costs for films made in the United States, not the much maligned but longstanding tax breaks for racehorses and Nascar racetracks. Heritage Action, the political arm of the conservative Heritage Foundation, called it “one of the most egregious examples of Washington using its power to prop up well-connected interests.” Yet only the staunchest deficit hawks, Republican Senators Tom Coburn of Oklahoma, Jeff Flake of Arizona and Mike Lee of Utah, voted against beginning debate on the bill. And Congress’s actions over the last few days are only the beginning. In the coming weeks, the House is likely to make permanent five more corporate tax cuts, costing $301 billion through 2024. That would virtually wipe out all the deficit reduction last year, when Bush-era tax cuts

were allowed to expire on upper-income households. The White House noted that the House’s expanded and permanent tax credit for research and development would cost more than 15 times as much as renewing and extending unemployment benefits, which Republicans insist must be paid for. “The administration wants to work with Congress to make progress on measures that strengthen the economy and help middle-class families, including pro-growth business tax reform. However, making traditional tax extenders permanent without offsets represents the wrong approach,” the White House said in extending a veto threat. A large majority in Congress appears to disagree, potentially setting up the first veto of consequence of the Obama presidency.

AFF

CP Can’t Solve

OCS Resource ExtractionOCS extraction requires federal government approval which takes multiple yearsTierney 13 (Susan F. Tierney, PhD, June 2013, “Planning for Offshore Energy Development: How Marine Spatial Planning Could Improve the Leasing/Permitting Processes for Offshore Wind and Offshore Oil/Natural Gas Development” http://www.analysisgroup.com/uploadedFiles/Publishing/Articles/Planning_for_Ocean_Energy_Development_Complete.pdf)

Federal government approvals are required for private companies’ access to develop the resource: Private firms seeking to develop energy resources in the US OCS must request and receive the right to do so from the federal government, which manages the area extending outward from the states’ ocean territories (typically three miles out from shore) to the edge of the United States’ 200- mile “exclusive economic zone” (EEZ). BOEM administers the leasing, permitting and development processes for both offshore oil/gas and wind. Gaining access occurs through different processes for wind as compared to oil/natural gas. However, both involve multi- year processes that start with high-level decisions about which areas of the OCS will be open for development, then continue through issuance of leases to specific companies, and finally move to review /approval of operators’ exploration/ site assessment plans, to review/ approval of specific project development plans

Perm do the CP-BOEM issues licensesBOEM No date(The Bureau of Ocean Energy Management, “Oil and Gas Leasing on the Outer Continental Shelf,” http://www.boem.gov/uploadedFiles/BOEM/Oil_and_Gas_Energy_Program/Leasing/5BOEMRE_Leasing101.pdf)

The Bureau of Ocean Energy Management (BOEM) is a bureau in the United States Department of the Interior (DOI) that manages the offshore energy resources of the Outer Continental Shelf (OCS). BOEM manages approximately 1.7 billion acres containing about 8,000 active leases of this federally owned offshore area while protecting the human, marine, and coastal environments through advanced science and technology research. The almost 36 million leased OCS acres generally account for about 7 percent of America’s domestic natural gas production and about 24 percent of America’s domestic oil production. The OCS Lands Act authorizes the Secretary of the Interior to grant mineral leases and to prescribe regulations governing oil and natural gas activities on OCS lands. The OCS Lands Act mandates the OCS be made available for expeditious and orderly development, subject to environmental safeguards while maintaining competition for the OCS resources. Federal ownership begins three nautical miles off most coastal states; the exceptions are Texas and the Gulf coast of Florida where the OCS starts at about nine nautical miles. Federal jurisdiction generally ends around 200 nautical miles from the coastline.

Congress is necessary to do the planBOEM No date(The Bureau of Ocean Energy Management, “Oil and Gas Leasing on the Outer Continental Shelf,” http://www.boem.gov/uploadedFiles/BOEM/Oil_and_Gas_Energy_Program/Leasing/5BOEMRE_Leasing101.pdf)

BOEM has start-to-finish oversight responsibility on oil and gas leasing activities within the OCS. Section 18 of the OCS Lands Act, requires the Secretary of the Interior to prepare an oil and gas leasing program that consists of a 5-year schedule of proposed lease sales that shows the size, timing, and location of leasing activity as precisely as possible. This Five Year Program must balance the priorities of meeting national energy needs, environmentally sound and safe operations, and fair market return to the taxpayer. For any specific lease sale to be held, it must be included in an approved Five Year Program. A lease sale cannot be added later to an existing Five Year Program without an act of Congress. Whether a lease sale is held depends on sale-specific analyses.

Feds are keyBOEM No date(The Bureau of Ocean Energy Management, “Oil and Gas Leasing on the Outer Continental Shelf,” http://www.boem.gov/uploadedFiles/BOEM/Oil_and_Gas_Energy_Program/Leasing/5BOEMRE_Leasing101.pdf)

In administering the offshore oil and gas leasing program, BOEM is required by law to see that the Government receives a fair return for the lease rights granted and the minerals conveyed. BOEM uses a two-phased system of bid evaluation to assess the adequacy of bids based on multifaceted criteria. Immediately after the bids are read publicly, BOEM begins the process of determining whether a bid can be accepted and a lease issued. Each high bid is first examined for technical and legal adequacy. Before any bid is accepted, the bidding results of the sale also are reviewed by the Attorney General and the Federal Trade Commission to determine if awarding a lease would create a situation inconsistent with antitrust laws.

Federal approval is keyBOEM No date(The Bureau of Ocean Energy Management, “Oil and Gas Leasing on the Outer Continental Shelf,” http://www.boem.gov/uploadedFiles/BOEM/Oil_and_Gas_Energy_Program/Leasing/5BOEMRE_Leasing101.pdf)

The leasing and operations activities on the OCS are subject to the requirements of some 30 federal laws administered by numerous federal departments and agencies. In addition to the OCS Lands Act, other laws that may apply to OCS exploration, development, and production include, but are not limited to the: • National Environmental Policy Act (NEPA) • Endangered Species Act • Coastal Zone Management Act • Federal Water Pollution Control Act • Ports and Water Safety Act • Marine Mammal Protection Act • Clean Air Act • National Historic Preservation Act • Oil Pollution Act • Federal Oil and Gas Royalty Management Act BOEM takes seriously its responsibilities to develop our nation’s oil and gas

resources in an environmentally sound and safe manner and to obtain fair market value for the American people. Our agency is committed to being responsive to the public’s concerns and interests by maintaining a dialogue with all affected parties.

Green Energy Too ExpensivePrivates can’t invest in green energy – uncertaintyLucas 13 (Fred Lucas, March 18, 2013, “Obama says gov’t must subsidize green energy that’s ‘too risky’ for private sector” http://cnsnews.com/news/article/obama-says-gov-t-must-subsidize-green-energy-s-too-risky-private-sector)

President Barack Obama called for shifting Americanvehicles “entirely” off oil and said thegovernment must finance greenenergy projects because they are “too risky” for the private sector. “We recognize there are some things we do together as a country because individually we can’t do it -- and by the way, the private sector on its own will not invest in this research because it’s too expensive, it’s too risky,” Obama said. “They can’t afford it interms of their bottom lines. So we’ve got to support it, and we’ll all benefit from it and our kids will benefit from it and our grandkids will benefit from it. That’s who we are. That’s been the American story.”

Privatize EEZ -- Can’t Solve Doesn’t solve – no comprehensive view, violates int’l law, and leads to biodiversity declineAndrews 08 (Katherine Andrews, July 2008, “Governing the Exclusive Economic Zone: The Ocean Commons, Cumulative Impacts and Potential Strategies for Improved Governance” http://www.economistinsights.com/sites/default/files/pictures/World%20Ocean%20Summit%20-%20Governance%20within%20EEZs%20working%20group%20-%20suggested%20reading%201.pdf)

Disadvantages Possible decrease in public good. If government relinquishes some of its decision- making power to the marketplace then the general public interest may suffer because no one is looking to protect it. A market-based regime works on the principle that everyone looking out for their own best interest leads to the greatest economic good overall—Adam Smith’s famous “invisible hand”.220 However, greatest economic good does not always equate to the greatest public good. Abrogation of trust responsibility. Granting extensive privatised rights in the marine resources of the EEZ may be an abrogation of the trustee responsibility for the resource the government holds under national and international law. Lack of comprehensive view. Even though the regime would allow for tradeoffs between sectors, each government ministry would continue to regulate the uses for which they were responsible. While the zoning regime would need some upfront strategic planning, the benefits of the market (such as adaptability, flexibility, innovation) are maximised if the market is allowed to work toward the greatest economic efficiency. This necessarily means that a comprehensive vision becomes difficult because it is the collective actions of numerous individuals that control the direction. Does not adequately account for non-use values. Non-use and non-market values fare poorly in a market-based system.221 There might be some incentives for conservation tourist zones, but the incentives would in all likelihood not result in conservation zones large enough to protect biodiversity To ensure that non-use values were protected, conservation, cultural or similar zones would need to be set aside as a first step in developing the zoning regime. High implementation costs. Creation of a new system of private property rights in the EEZ would be costly. A new law would have to be passed, likely against strong opposition.222 If the law passed there would be planning to be done, conservation zones to be created, numerous consultations with stakeholders, and then a processcreated to auction the zone rights. Creating an entire new market where one did not exist before would be a very large undertaking. Difficult to Undo. Once property interests are created and purchased, they can be difficult to rescind or buy back. If the government decided that they no longer wanted a private property regime for the EEZ they might not be able to roll it back. This strategy will make adaptive management more difficult because it is predicated on the zone rights holders making many of the decisions. Does not address some important issues. Zoning does not address non-spatial challenges, such as invasive species. Regulatory frameworks addressing those issues would still need to be maintained.

Private Actors Say No

Drilling LeasingShell just needs economic security on their leases – otherwise no incentive not to drillDlouhy 14 (Jennifer A. Dlouhy, covers energy policy, politics and other issues for The Houston Chronicle and other Hearst Newspapers from Washington, D.C. Previously, she reported on legal affairs for Congressional Quarterly, Shell puts 2014 Arctic drilling plans on ice after legal challenge, Feul Fix, 1-30-2014, http://fuelfix.com/blog/2014/01/30/shell-puts-2014-arctic-drilling-plans-on-ice/)//BDS

WASHINGTON – Shell executives said Thursday the company was dropping its plans to resume Arctic drilling this summer, the latest setback in its costly eight-year quest to find oil under remote waters north of Alaska. Royal Dutch Shell CEO Ben van Beurden cast the move as a temporary setback driven by legal uncertainties after a federal appeals court ruling last week. But the freeze comes as the new chief executive promises to pare underperforming assets and as an onshore American oil boom undermines some of the arguments for oil exploration in the Arctic frontier. After devoting nearly $6 billion into a new generation of Arctic drilling, Shell has just two half-finished wells in the Chukchi and Beaufort seas to show for the effort. The company drilled the two “top holes” in 2012, but was barred from boring into potential oil-bearing zones because a unique oil spill containment system had not arrived nearby. Reaction: Shell’s delay ignites calls for deep freeze on Arctic drilling Van Beurden said he was “frustrated” by the 9th Circuit Court of Appeals’ Jan. 22 ruling that U.S. regulators wrongly relied on an arbitrary estimate about the amount of oil that could be recovered in their environmental analysis of a 2008 auction of Chukchi Sea leases. “The obstacles that were introduced by that decision certainly make it impossible to justify the commitments of cost, equipment and people that are needed to drill safely in Alaska this year,” van Beurden said. “We have to wait for the courts and the U.S administration to resolve this legal issue. Given all of this, we will not drill in Alaska in 2014, and we are reviewing our options.” Arctic battle Litigation over the 2008 lease sale — at which Shell spent some $2 billion buying Chukchi Sea drilling rights — has held up the company’s Arctic ambitions before. The Interior Department was ordered to redo its environmental analysis in 2010 after a federal court found deficiencies with the review. The Interior Department issued a new environmental impact statement a year later, paving the way for Shell’s exploration in 2012. But Shell’s 2012 venture into the Beaufort and Chukchi seas was marred by mishaps, including air pollution problems and embarrassing equipment failures, even before its floating Kulluk conical drilling rig ran aground near an Alaskan island on Dec. 31. Van Beurden acknowledged the challenges of drilling in the remote Arctic waters, which are clogged with ice most of the year and more than 1,000 miles from the nearest Coast Guard station. The legal uncertainties, he said, “adds another level of complexity which . . . makes it impossible to justify going ahead with this very, very complicated, very expensive program in 2014.” Scrutinizing Shell’s portfolio Van Beurden declined to speculate on the future but stressed Shell would “have to really reflect what our options are.” It is unclear whether Shell’s Arctic program would survive the executive’s plan to “rigorously scrutinize” the company’s portfolio and prove its capital discipline to shareholders. Shell is already selling off U.S. shale assets and dropped plans for a major Gulf Coast gas facility. Van Beurden said other “hard choices” are on the horizon. “We haven’t always made the right capital choices,” confessed van Beurden, who took over as Shell’s chief executive a month ago. “We need to be careful not to over invest at too early a stage,” including in “sensitive environments like the Arctic and oil sands.” “Frankly, I think we got a little bit ahead of ourselves in some of these sensitive plays,” he added. Risks and

rewards For oil companies looking to shore up their balance sheet and book new reserves, the Arctic offers huge potential, with an estimated jackpot of 412 billion barrels of oil equivalent lurking at the top of the globe. U.S. Arctic waters are estimated to contain 27 billion barrels of oil and 132 trillion cubic feet of natural gas. So far, Shell has been the leader in U.S. Arctic waters, decades after the last sustained drilling in the region. But ConocoPhillips and Statoil also hold drilling leases in the U.S. Arctic. But with a new oil and gas drilling boom onshore in North America, some energy experts and financial analysts have cast doubt on the merits of risky, expensive drilling into the U.S. Arctic frontier. Environmentalists say Arctic drilling is too risky for marine life and the subsistence culture of Alaska natives who live in the area. Cold, icy conditions also mean it could take far longer than in the much warmer Gulf for any spilled crude oil to naturally break up in the water. Shell’s move also removes some heat from the politically sensitive issue of Arctic drilling during a mid-term election year. If the Obama administration’s Interior Department had denied Shell’s bid to drill this summer, it might have put some vulnerable Democrats in a tough spot.

Leasing delays means the CP can’t solveDlouhy 12 (Jennifer A. Dlouhy, covers energy policy, politics and other issues for The Houston Chronicle and other Hearst Newspapers from Washington, D.C. Previously, she reported on legal affairs for Congressional Quarterly, Drilling down: 5 major differences in Obama, Romney energy plans, Chron, 8-23-2012, http://blog.chron.com/txpotomac/2012/08/drilling-down-5-major-differences-in-obama-romney-energy-plans/#5700101=0)//BDS

Over the next five years, the Obama administration is planning 12 auctions of drilling leases in the Gulf of Mexico as well as three lease sales for territories around Alaska. Federal regulators also are on track to approve Shell Oil Co.’s plans to drill two wells in Arctic waters near Alaska, over fierce objections from environmentalists. At the same time, the administration has promised to carefully pinpoint what Alaskan waters will be open for future drilling and pledged that the government will not sell drilling leases along the Atlantic or Pacific coasts over the next five years. Romney said he would toss out Obama’s five-year drilling plan and replace it with one “that aggressively opens new areas for development, beginning with those off the coast of Virginia and the Carolinas.” Both Romney and Obama have pledged to keep a close watch on the safety of offshore drilling. In the wake of the 2010 Deepwater Horizon disaster, Obama’s Interior Department dramatically reshaped the way the government oversees offshore energy development and created new regulations to bolster drilling safety. In his white paper on energy policy, Romney said he would “guarantee that state-of-the-art processes and safeguards for offshore drilling are implemented in a manner designed to support rather than block exploration and production.”

DIO RegulationsAbsent regulatory certainty from the Department of the Interior companies will not drill Geman 13 (Ben Geman, National Journal Energy and Environment Correspondent, and has nearly a decade of experience four years as an energy correspondent for The Hill, launched the paper's energy blog, was a reporter for Environment & Energy Publishing, writing for Greenwire and other E&E newsletters, worked at the newsletter Inside EPA, Senior Republican presses Interior for ‘certainty’ on Arctic drilling, The Hill, 5-7-2013, http://thehill.com/policy/energy-environment/298305-senior-republican-presses-interior-for-certainty-on-arctic-drilling)//BDS

Sen. Lisa Murkowski (R-Alaska) is putting public pressure on the Interior Department to move ahead with planned regulations that will govern drilling in Arctic waters off Alaska’s northern coast. “It is important that we have those regulations that are clearly defined in advance — well in advance, hopefully — of the [drilling] season, so that level of certainty moving forward is there,” Murkowski told top Interior Department officials at an Appropriations Committee hearing Tuesday. Murkowski is the top Republican on the Senate Energy and Natural Resources Committee, as well as the Appropriations subcommittee that oversees Interior’s budget. The Interior Department is crafting “Arctic-specific” rules that will address topics such as spill containment readiness and other areas. Deputy Interior Secretary David Hayes said Tuesday that the department intends to float draft regulations by the end of the year “so that there will be clarity moving forward.” The regulations are part of an effort by policymakers and companies to chart a path forward on how the industry will operate in harsh Arctic seas thought to contain large amounts of oil. Royal Dutch Shell suffered a series of mishaps last year in its efforts to begin looking for oil in federal waters off Alaska’s coast. The oil giant has announced it won’t try again until the 2014 drilling season at the earliest. Hayes told reporters that Shell could proceed in 2014 even if the rules are not yet complete when the drilling window opens in the summer. He noted regulators have already demanded various safety requirements in Shell’s exploration plans, such as subsea spill containment equipment. Interior officials are requiring Shell to take additional steps to improve planning in the wake of last summer’s mishaps, as well. “So we have the ability to continue to operate that way, and then leverage that into regulations that apply to all operators,” Hayes said of the requirements Shell faces. “In either case, we are able to proceed as long as the companies commit to meet the requirements that we lay out, either in the operating plan or under the regulations.” Other companies are on a slower track than Shell when it comes to U.S. Arctic drilling. In April, ConocoPhillips scuttled plans to try and drill exploratory wells off Alaska’s coast in 2014, blaming “the uncertainties of evolving federal regulatory requirements.” Norwegian oil giant Statoil plans to hold off until at least 2015 as well. Sen. Mark Begich (D-Alaska), who like Murkowski supports Arctic drilling, said he does not believe Interior's Arctic-specific regulations need to be complete for Shell to proceed, noting, like Hayes, that they’ve already agreed to various conditions in their exploration plans. But he said the rules will be important in enabling other companies to move ahead. “In the future, with Conoco[Phillips] and Statoil, we need to get these regulations done so there is clear certainty in what they need to plan for. That is what we hear from both those companies: Just tell us what the rules are, and then we will go from there, but if we don’t know what they are, then we can’t plan,” Begich said in the Capitol Tuesday. “So for Shell, which is kind of its own case, it’s one story, for Conoco[Phillips] and

Stat[oil] and any others, we have got to get this done, and end of the year would the latest,” he said of the planned draft regulations. New Interior Secretary Sally Jewell said at Tuesday’s hearing that she has met with Shell and ConocoPhillips. “I don’t believe, in my conversations, that either Shell or ConocoPhillips feel that it is regulations getting in their way. It is ensuring the technology is available to be able to respond in the event of a spill incident up there that is of paramount importance to us, and I am sure to you as well — we certainly don’t want a situation in the Arctic like we experienced in the Gulf,” Jewell told Murkowski at Tuesday’s hearing, a reference to the 2010 BP spill in the Gulf of Mexico. Last year, Shell “didn’t pass the tests,” Jewell noted. The company began operations off Alaska’s coast last year but faced several woes, including damage during testing to a key piece of equipment that is needed to contain a potential subsea blowout. Ultimately, Shell did not win Interior Department permission to drill into oil-bearing zones, but was allowed to begin preliminary, so-called top-hole drilling. The company in February announced it was “pausing” and would not seek to drill in the Arctic seas off Alaska's coast in 2013.

DOI regulations could substantially mitigate the environmental impact of drilling – its just a question of implementationBoman 13 (Karen Boman, Rigzone staff writer referencing a Pew Report, Pew Offers Recommendations for US Arctic Drilling Regulations, Rigzone, 9-26-2013, http://www.rigzone.com/news/oil_gas/a/129259/Pew_Offers_Recommendations_for_US_Arctic_Drilling_Regulations/?all=HG2)//BDS

U.S. regulations should ensure that drilling rigs , oil spill equipment and other infrastructure be in place to withstand Arctic conditions and ensure quick response to an oil spill, according to a recent report by The Pew Charitable Trusts. Pew conducted the study, “Arctic Standards: Recommendations on Oil Spill Prevention, Response, and Safety in the U.S. Arctic Ocean”, to assist the U.S. Department of interior’s (DOI) public process, which began in June, to solicit input on improved Arctic technology and equipment standards. DOI initiated the process the update its regulations following its review of Royal Dutch Shell plc’s 2012 Alaska offshore oil and gas exploration program. In its review, DOI concluded that the federal government needed to recognize and account for the Arctic region’s unique challenges. DOI aims to propose new regulations for Arctic oil and gas exploration and production programs next year; the agency plans to have a draft of new Arctic regulations by the end of 2013. Following the 2010 Deepwater Horizon incident, the United States and other Arctic countries began to examine whether regulatory standards were sufficient to prevent an Arctic oil spill. The Ocean Energy Safety Advisory Committee in August 2012 concluded that U.S. regulations needed to be modernized to include Arctic-specific standards to prevent and contain spills and respond to spills quickly and effectively, Pew noted in the report. Diminishing sea ice in the Arctic Ocean is opening Arctic waters to oil and gas exploration and other industrial activities such as shipping. But working in the Arctic poses a new set of challenges and a larger set of risks. The region’s harsh winters, with eight to nine months of ice cover and nearly complete darkness, and high seas, wind, freezing temperatures, dense fog and floating ice hazards in the summer create some of the harshest operating conditions on the planet. Pew noted that current technology has not been proved to effectively clean up oil when mixed with ice or trapped under ice. An oil spill would have a profoundly adverse impact on the Arctic ecosystems, which includes blowhead, beluga and gray whales; walruses, polar bears, other marine animals and millions of migratory birds. Very little exists in the regulations now regarding operating standards for the Arctic Ocean, Marilyn Heiman, director of Pew’s U.S. Arctic program, told Rigzone. Most of the standards are written for temperature waters and originate from the 1980s and 1990s, although some subsections have been updated since that time. Pew is not opposed to offshore drilling. However, a balance must be achieved between responsible energy development and protection of the environment. “It is

essential that appropriate standards be in place for safety and for oil spill prevention and response in this extreme, remote, and vulnerable ecosystem,” Pew noted in the study. PEW’s recommendations include: Vessels, drilling rigs and facilities should be constructed to withstand maximum ice forces and sea states that may be encountered Oil spill control equipment, such as relief rigs and well-control containment systems, should be designed for and located in Alaska’s Arctic for ready deployment Redundant systems – including blowout preventers, double-walled pipelines, double-walled pipelines, double-bottom tanks, and remotely operated controls – should be installed because equipment and logistical access is unavailable for large parts of the year due to harsh weather or ice cover Arctic offshore drilling operations into hydrocarbon-bearing zones should be limited to times when the rig and its associated spill response system are capable of working and cleaning up a spill in Arctic conditions INVESTMENT IN SAFETY, INFRASTRUCTURE NEEDED FOR ARCTIC E&P “We believe that companies that decide to drill in the extreme, remote and vulnerable Arctic Ocean need to make a substantial investment in safety and prevention,” said Heiman. “This includes have both a containment system and relief rig that are 'Arctic ready' and located in the Arctic to be deployed without delay if any loss of well control should occur.” “We anticipate that the well capping and containment system costs will be only slightly higher than the cost of the Gulf of Mexico system that was built last year, taking into account the additional Arctic upgrade requirements,” said Heiman, noting that Shell has already invested in capping and containment. Lack of infrastructure such as highways, airports or sea ports means oil and gas companies working in the Arctic must operate under remote conditions, Pew noted. The area from the Aleutians to the Canadian border has a tremendous lack of basic infrastructure for vessel traffic reporting and monitoring, search and rescue and spill response. There is no rescue tug for vessels in distress north of the Aleutians, which just got tug capability this week, Heiman said. A local shipyard would ben economic and logistical asset to Alaska, and a benefit to the fishing and transportation industries as well but should be addressed after response capability is made a priority, Heiman said in reference to the Kulluk incident last year, in which the Shell-operated Kulluk drilling rig ran aground while being towed from Alaska for repairs. “Absent a shipyard, we recommended detailed mobilization and demobilization plans be required to ensure safe transit to and from shipyards and other drilling locations.” To meet updated regulations, investment in drilling rigs purpose built for Arctic conditions is needed, especially the number of Arctic rigs that were purpose-built for the Beaufort Sea that have been purchases for long-term service in Russia. According to Pew’s report, Arctic Outer Continental Shelf standards need to be set for drilling rigs. While some purpose-built Arctic drilling rigs have been move to another country or taken out of service, new rigs are available, under construction or could be built if DOI’s minimum Arctic drilling rig performance standards are codified clarifying the minimum requirement. “There will not be an economic incentive to build Arctic drilling rigs if operators are allowed to use less robust rigs as an alternative,” Pew noted in the report. Heiman also sees the need for further investment by the vessel industry into vessels capable of operating in the Arctic. DOI currently does not have Arctic vessel standards for drilling in the Arctic Ocean. “Any vessels transiting through the Bering Sea to the Arctic need to have ice strengthened hulls or an ice breaker if they are going any other time than the short summer months,” Heiman said. Vessels must navigate risks such as waves, fog, icing conditions and ice, even in the summer months. Vessel design and operation must account for sea ice, strong currents and lack of infrastructure, meaning that vessels must be able to handle a broader range of tasks, such as firefighting, oil recovery, towing and supply. DOI regulations currently do not specifically include Arctic seasonal drilling limits; the lack of standard has resulted in seasonal drilling limits have not been consistently applied to Arctic drilling programs. DOI effectively applied seasonal drilling limits to Shell’s 2012 Chukchi Sea OCS drilling project, but did not apply seasonal drilling limits to Shell’s Beaufort Sea project that year, even though ice sets in earlier in the Beaufort Sea and is thicker, stronger and more dangerous multi-year ice. Pew recommended that Arctic OCS drilling should be limited to approximately 46 days during a 106-day open water season because oil spill response techniques are more successful in the summer. Drilling an exploration well in the near shore Beaufort Sea OCS area may be possible in the landfast winter ice period. Pew’s other recommendations include for DOI to use encounter rate computations. DOI uses an effective daily recovery capacity calculation, which is how much an operator estimates it skimmers could remove from the environment. However, Pew believes that ERDC, which was put into place after the Exxon Valdez oil spill in the early 1990s, is not adequate. Additionally, Pew recommends DOI add standards for Arctic expertise, experience, capacity, competencies and qualifications. “Companies wanting to obtain Arctic experience would be required to partner with companies that have Arctic experience or hire trained and qualified Arctic experts that can meet these standards,” Heiman noted. Pew would like to see regulations preventing the discharge of toxic drilling muds in the Arctic Ocean, Heiman noted. Historical discharge has left heavy metals

such as mercury and cadmium in seabed sediments and sediment deposition has caused concern about localized benthic smothering on the seabed floor, among other impacts. Heiman pointed out that numerous scientific assessments of these impacts have been conducted by the U.S. Environmental Protection Agency, the North Slope Borough and the local Alaskan government. EPA’s pollution discharge standards for offshore drilling date from the 1980s, and allow a high level of pollution discharge. “The local government has requested voluntary compliance by operators as good neighbors,” Heiman commented. The number of oil spill removal organizations that exist to serve the Arctic Outer Continental Shelf is not as important as the size and capacity of the organization, the number of people in an organization, its equipment, and the training and experienced of the personnel who work in Arctic conditions. “We recommended substantial improvement in the existing OSRO equipment fleets to upgrade and add Arctic-grade equipment that have been field tested and proven in the Arctic,” Heiman said. Currently, very little transparency on compliance and enforcement exists for the public to access data on Arctic exploration and production activity. The public can submit a Freedom of Information Act to DOI, but the process is very slow and cumbersome, especially for the general public, Heiman noted. “Optimally, DOI could develop a single website where a person could search for a company on a project name, although there may be other options that are equally efficient,” Heiman said. JOINT INDUSTRY PRODUCT MODEL ONE METHOD FOR IMPROVING TECHNOLOGY Heiman believes that more research is needed on source control and response, and that clearly, drilling technology has far outpaced technology to contain and control an oil spill. “However, I think this research should be more transparent and open to the public for review in the future,” Heiman noted. The joint industry product model is one method for improving technology. “We recommend that DOI establish clear regulatory standards, which will fuel private company investment to development equipment and technology to meet the standards, which will fuel private company investment to develop equipment and technology to meet to standards.” Heiman added that Pew has heard from many private companies that they have new, better technologies developed, or could develop them if there was a market for the technology. “Absent a regulatory requirement to purchase this equipment, private companies are not incentivized to invest in developing or manufacturing new technology without a guaranteed market.” In conclusion, Pew believes decisions about whether, when and how exploration and production activity is conducted in the U.S. Arctic Ocean should be based “on sound scientific information, thorough planning, the best available technology, and full involvement of the communities most affected.”

Regulations have yet to be implemented but the BOEM is still planning on giving out more leases despite uncertaintiesWoody 7-16 (Time Woody, Communications Manager for the Wilderness Society Alaska office. He was the editor of Alaska magazine, He spent 15 years as an editor and reporter at metro dailies in Arizona, New Mexico and Alaska; Action needed to protect the Arctic Ocean from oil and gas drilling, The Wilderness Society, 7-16-2014, http://wilderness.org/blog/action-needed-protect-arctic-ocean-oil-and-gas-drilling#sthash.cVlju6ZZ.dpuf)//BDS

The push to drill for offshore oil in the Arctic Ocean never seems to end, despite the potential for a catastrophic oil spill by an industry that has not proved itself capable of operating safely in Alaska’s cold, stormy and remote seas. The federal Bureau of Ocean Energy Management (BOEM) is preparing a five-year plan for offshore oil and gas leasing in American waters. It is vital that we all speak out against including the Arctic Ocean in those plans, and we have until the end of this month to submit comments to BOEM. To proceed with leasing or drilling in the Arctic Ocean would be irresponsible because the agency has not finished developing Arctic-specific regulations for the oil industry, and has not implemented key changes recommended by investigations of BP’s Deepwater Horizon disaster in the Gulf of Mexico in 2010. A major oil spill would endanger not only polar bears, seals and other marine mammals, but also devastate Alaska’s northern coast, which is heavily used by indigenous people, bears, caribou and migratory birds. We are

still in the process of learning which areas of the Chukchi and Beaufort seas are especially sensitive and at higher risk of destruction in the event of a major oil spill. And as Royal Dutch Shell proved with a series of blunders in 2012, the industry is incapable of safely transporting equipment to and drilling in such a remote, unforgiving environment. It is critical that you take action now to prevent potentially catastrophic offshore drilling in the Arctic in the future. Please take a moment to tell BOEM that you oppose the terrible risks of offshore drilling in the Arctic Ocean. The Arctic can’t be protected without your help. Please let BOEM know that the Arctic Ocean is too important to be sacrificed to unsafe drilling.

Fed Key

Tax IncentivesFeds are key even with tax incentivesCha 13 - J. Mijin (Dissent, 6/27/13, “Unnatural Gas: How Government Made Fracking Profitable (and Left Renewables Behind),” http://www.dissentmagazine.org/online_articles/unnatural-gas-how-government-made-fracking-profitable-and-left-renewables-behind)patel

Natural gas did not become a popular fuel until the 1950s because home use of natural gas required a large pipeline network for delivery, which was prohibitively expensive. Improvements in metal, welding techniques, and pipe making developed during the Second World War made pipeline construction more economically feasible, and throughout the 1950s and ’60s an extensive pipeline network was built. After the network was built, natural gas became more popular and inexpensive. Hydraulic fracturing is different from regular natural gas recovery production. It requires far more water, sand, and lubricants, as well as much higher pressures than traditional oil and gas recovery methods, in order to literally fracture geological formations to release pockets of gas. While examples of hydraulic fracturing date back to the 1940s, modern-day fracking was not developed until federal research and demonstration efforts in the 1960s and ’70s helped private industry develop technologies that moved drilling past shale to tap limestone gas deposits. Earlier federal efforts to fracture shale formations and release gas did not immediately result in commercially viable technologies, but these efforts showed that diffused gas from shale formations could be recovered—something the private sector had not been able to establish. Continued federal demonstrations set technology development on a path that, with continued federal support, private interests were able to perfect. The case of fracking shows why direct federal support and research is important: private interests do not invest in time-consuming, uncertain research because the benefits are too far out and the risks and costs are too high. Federal research agendas, on the other hand, do not have the same restrictions and need for immediate results. Without the imperfect technology development, there can be no perfected process. Federal research provided the platform and time needed to make the mistakes in developing fracking processes that the private sector could learn from and further refine. In addition to direct federal support and incentives, regulatory provisions have rarely hampered oil and gas production, particularly fracking. While the modern oil industry was born in the beginning of the 1900s, the industry did not face meaningful regulations or oversight until the Santa Barbara oil spill in 1969. After the spill, Congress tightened regulations on leases and made offshore operators liable for spill cleanup, but for nearly seventy years the industry was able to operate and expand with little to no regulatory oversight. Private interests do not invest in time-consuming, uncertain research because the benefits are too far out and the risks and costs are too high. Federal research agendas, on the other hand, do not have the same restrictions and need for immediate results. In the case of fracking, regulatory exemption allowed the industry to grow as rapidly as it has. In 2003, President Bush and Vice-President Cheney backed a sweeping national energy bill that exempted hydraulic fracking from EPA drinking water regulations,

despite the large volume of water used in fracking and the proximity of fracking operations to drinking water supplies. In 2005, fracking was exempted from the Clean Water Act, and in that same year states started seeing oil and gas booms. These exemptions do not mean that fracking is safe—in fact, the opposite is likely true. They do show how the regulatory system can contribute to industry development, despite serious health and environmental consequences.

EfficiencyPrivate sector cannot do it alone-federal regulation is necessary for efficiencyDonahue12 – Hal ( Huffington Post, 10/19/12, “How the Private Sector Failed America,” http://www.huffingtonpost.com/hal-donahue/private-sector-failed-america_b_1979619.html) patel

U.S. corporations transformed our world. The cost of products collapsed. Productivity soared. Lean and mean supply chains, combined with employee cost management, benefited the entire globe. The challenge confronting the world now is that neither the gains nor the pain were shared by all. A Robert Casey for Senate advertisement demonstrates part of the problem. The young Green Beret and other military were electrocuted in the safety of their war zone showers. Faulty contractor electrical work was responsible. Without the interference and persistence of a U.S. Senator, the deaths and the grieving families would have been ignored. Corporate America underperforming and covering up is nothing new. Things were once different. In my youth at the very beginnings of the space race, the Soviet Union launched the first Earth artificial satellite, Sputnik 1. The space race was on. After several failures ending in spectacular explosions, the U.S. launched its own satellite and we entered space and the modern era. Neither corporate nor government cover-ups soiled the picture. Results were what mattered. Why relate this ancient history? Within months, the federal government cooperated with the private sector to equal, and then surpass, the Soviet Union in space. The race ended with the moon landing. An incredible feat but it is only one of many in our long history. Government and business turned this nation into the world's factory during WWII. Cooperation between public and private sectors did such incredible things as building an ocean-going ship a day. At its peak, U.S. industry produced 9,000 aircraft in a single month. These achievements are being lost in an era glorifying the private sector and demonizing government. Reality is much different. Now business executives, confronted with the vast treasure rolling into their companies, displayed the flaws inherent in the capitalist economy. Emphasis is placed on profit over ethics. Lacking effective corporate board, union and government oversight, the executives pillaged company gains for personal profit. Absolute power corrupts absolutely. Before corporate pooh-bahs begin shrieking that only a few 'bad apples' violated the tenets of moral propriety, I point out the pillage was encouraged, aided and abetted by all, from stockholders to consumers to government. Employee protests were demonized as coming from union thugs. Once Reagan crushed the Air Traffic Controllers' union, unions began losing ground. Now, far from being demonized, unions should be boosted up. The alternative is more government regulation. Weak government oversight, combined with weaker unions, allowed the private sector to transfer labor costs to the public sector. Sounds absurd but this is exactly what occurred. When workers are paid too little to feed, clothe and house themselves and their families, the struggling employees must turn to the government for survival. Food stamps, housing and medical subsidies, all funded by the taxpayer, are required. The vulture capitalist response claims employees are free to seek other employment. Reality is far

different. Employers tend to collude. Just as supermarkets and gas stations watch their competitors, so do employers watch what their competitors pay employees. Further, without resources or savings, many workers simply are unable to relocate to where better jobs exist. Long ago, a rural school board member told me candidly that his job was to teach the students enough to work but not enough to move away. Often, corporations embrace versions of this myopic strategy. Unless society, in the form of government or public groups like unions and churches, steps forward, vested interests will act to their sole benefit. So it is with the private sector today. Unfettered by any competing interest group, executives moved into the vacuum created by the weakness of unions and supplemented by the denigration of federal government. Corporations garnered power beyond anything since the robber baron days of the late 19th century culminating in the Citizens United case. The results are many but one is the electrocution death of our soldiers and a cover-up. When a sense of community exists, the social contract insures a balance is maintained between the competing factions of society. When this contract breaks down, society itself is damaged and decay begins to set in. The United States is seeing decay setting in. Is this the society we want to live in? My answer is a resounding no.

DrillingThe USFG needs to own drilling project to fund the requisite R&D to make renewables viableMatthew Stepp, master's degree in Science, Technology, and Public Policy, his research have been published in the Journal of Energy Policy a Christine Mirzayan Fellow at the National Academies of Science, Megan Nicholson, energy policy writer, Drilling for Innovation, the Breakthrough, 9-4-2013, http://thebreakthrough.org/index.php/programs/energy-and-climate/drilling-for-innovation//BDS

POLICY OPTIONS FOR SUPPORTING ENERGY INNOVATION WITH DRILLING REVENUES The above primer illustrates that the U.S. federal government collects drilling revenue through bonus bids, rents, and royalty rates, and Congress distributes the majority of these revenues to the Treasury’s General Fund. The best platform for supporting energy innovation through oil and gas drilling is by establishing an Energy Innovation Trust Fund, similar to the Land and Water Conservation Fund or the Reclamation Fund. Ideally, Congress would establish a set share of drilling revenue that would be appropriated to the new Trust Fund, which would directly support the budget of an innovation program or agency explicitly working on clean energy technologies. The following sections summarize a number of policy options Congress could adopt to generate revenue for such an Energy Innovation Trust Fund. Redirect Existing Revenues to Energy Innovation The most direct way the federal government could commit to funding energy innovation with oil and gas drilling revenues is to redirect existing revenues to the new Trust Fund. Congress could direct the Office of Natural Resource Revenue within the Department of the Interior to reallocate a share of the revenue currently going into the Treasury General Fund to the Energy Innovation Trust Fund. In the past 10 years, the Treasury Department has collected more than $69 billion in revenue for the General Fund from onshore and offshore oil and gas drilling. The General Fund received on average $7 billion a year over the past 10 years (there was a significant spike in oil and gas revenues in 2008), and $4.7 billion per year over the last 30 years.39 In other words, Congress could consistently appropriate billions of dollars per year to an Energy Innovation Trust Fund if it redirected all or some oil and gas drilling revenue from the General Fund. This proposal would be politically problematic, however, since the share of revenues for the General Fund is appropriated annually for other existing purposes. Expand Drilling on Federal Lands It is likely more politically feasible to support an Energy Innovation Trust Fund by raising new revenues, rather than redirecting existing revenues. One way to raise oil and gas revenues suggested by the oil and gas industry and other advocates is to open additional federal lands to drilling. The administration makes five-year planning decisions for leasing new land for the development of oil and gas exploration and drilling, and has the power to open lands not restricted by congressional mandate. Aside from the potentially significant environmental and ecosystem impacts of opening drilling on currently restricted federal lands, there is substantial debate concerning the revenue impacts of drilling expansion. According to a 2012 Congressional Budget Office (CBO) study, about 70 percent of undiscovered oil and gas resources are stored in already-leased acres. In the study, the CBO assessed a proposal to open “most federal lands” to oil and gas drilling, including lands in the Atlantic and Pacific regions of the Outer Continental Shelf, which is restricted by administration mandate and not Congressional action. The analysis found that opening these lands to drilling would raise about $2 billion between 2013 and 2022, assuming existing drilling fees and royalty rates. The new revenue would mostly come from bonus bids, since production on these lands would probably not begin until after 2022. More revenue is expected when these leases move toward production. The study also estimated that opening the Arctic National Wildlife Refuge (ANWR), which is statutorily prohibited to drilling by Congress, would likely yield about $5 billion in new revenue between 2013 and 2022. Much of this new revenue would derive from bonus bids on new leases. The study suggested that when ANWR leases

become productive, potentially between 2023 and 2035, they would likely bring in between $25-50 billion in new royalty revenues (between $2-4 billion per year). This new revenue would inevitably be shared between the federal government and the state of Alaska; under current law the state would receive 90 percent of federal receipts, and the remaining 10 percent would be retained by the Treasury. The study concluded that “legislation to require immediate leasing of [protected] areas would accelerate development but probably would not affect the total amount of development in [protected] areas over the next decade.” BOEM estimates that ANWR holds a particularly large amount of oil, and considering the advances in drilling technology achieved in the past decade, these estimates are likely low. The CBO’s baseline findings suggest conservative estimates for collecting drilling revenues from currently inaccessible lands, and conclude that while there is significant potential for generating new revenue with expanded drilling, it would be several years before these new revenues are seen by the federal government. Lands that have been restricted for extended periods of time—such as ANWR—must be re-explored and reassessed for value, and developers need time to build the necessary infrastructure to support large-scale production. New royalty revenue would not be significant for at least another decade, which is a problem as the United States cannot wait another 10 years for significant breakthroughs in clean energy—the federal government needs to support energy innovation as quickly as possible. Raising Drilling Fees on Federal Lands Despite the drawbacks of expanding drilling, opening restricted territories, such as the administration-blocked Outer Continental Shelf (OCS), to drilling and exploration could be a powerful bargaining chip in negotiating higher federal fees on oil and gas, which could raise new revenue immediately for an Energy Innovation Trust Fund. This section explores several options for changing the current oil and gas revenue system to generate new federal revenue for an Energy Innovation Trust Fund. Establish a Bonus Bid Minimum While bonus bids do not account for the largest piece of annual drilling revenue, when oil and gas prices are high or when new federal lands are made available in productive areas, bonus bids often spike. The Department of the Interior (DOI) uses competitive auctions to lease the rights to drilling on federal lands, although policies surrounding regulation of these auctions have evolved with the growth of offshore drilling, especially within the last 30 years. After the Deepwater Horizon oil spill in 2011, the advocacy organization Taxpayers for Common Sense (TCS) drafted a letter to the BOEM arguing that the oil and gas industry had a responsibility to the taxpayer to pay what it “rightfully owed” during a boom in oil prices. One of the policies suggested by TCS was raising the minimum bonus bid on deep-water tracts from the standard $37.50 to $100 an acre, reasoning, “…the current minimum bid was established more than a decade ago when the price of oil was about $20 a barrel. Since its 1999 adoption, oil prices have increased by more than five times and so too should minimum bids.” A bonus bid minimum insures that even if commodity prices fall, bonus bids do not dramatically fall as well. BOEM adopted this policy in 2011 and completed a study suggesting that increasing minimum bonus bids on offshore leases would likely decrease rental payments and slow the development of offshore drilling, however all effects of this change have been small in magnitude. Even so, increasing bonus bid minimums further would have a modest impact on generating new revenue, creating, by order of magnitude, between $50 million and $100 million per year. Charge a Flat Rental Fee for Leased Unproductive Acres As mentioned previously, oil and gas leaseholders must pay the federal government rent after the acquisition of the lease until production of oil or gas begins. This period is usually designated for exploration and development of necessary drilling infrastructure, however in some cases the rental period lasts for much longer than necessary, causing a lag in the development of production. The Congressional Research Service reported that when gasoline prices spiked between 2006 and 2008, several members of Congress urged the administration to open additional federal lands to drilling. Members of Congress opposing this brought attention to the significant number of unproductive acres—around 70 percent of total leased acreage—that the federal government had already leased to developers. To encourage development of already leased land, members suggested a flat fee of $4 per acre annually on unproductive acres onshore. The Department of the Interior predicted that this fee, only applied to onshore acres, would produce $760 million in new revenue over 10 years. Rent for onshore and offshore leases is determined by a number of variables concerning location, drilling depth, and assessed property value, which complicates changing the rental structure to increase revenues. One way around changing the formula would be charging a flat fee on unproductive acreage based on regional average rents. Table 3 offers hypothetical assessments of possible new revenue that would be generated in the case of applying a flat fee on unproductive acres regionally, based on previous years’ reports of unproductive acres and average regional rents from the Bureau of Land Management (BLM) and BOEM. Levying a flat fee on currently unproductive acres leased onshore and offshore could raise hundreds of millions of dollars in new annual revenue. According to estimates from BLM and BOEM, less than half of all onshore leases were productive in 2012, and only about one-third of all onshore acres under lease were productive in 2012. Based on these numbers, a flat rate between $4 and $12 applied to all unproductive onshore acres would generate between $100 million and $300 million in new revenue. The government could achieve similar results by levying a flat rate on unproductive acres in the Gulf, where less than 20 percent of all leases and less than 17 percent of total leased acres were productive in 2012. This new rental fee structure would likely encourage leaseholders to accelerate the exploration and development of leased acres, which would move more acres into production and subsequently boost royalty revenue in the long term. Increase Royalty Rates Raising royalty rates on both onshore and offshore oil and gas drilling offers an opportunity to

generate substantially more revenue than changing bonus bid and rental policy. Table 4 depicts potential new revenue from increasing the royalty rate based on the reported average revenues from royalty payments from 2003-2012. The expected increase in revenues is calculated by estimating average revenue from royalties between 2003 and 2012 for onshore leases, offshore leases in the Pacific, and offshore leases in the Gulf of Mexico, since leases in these regions are subject to different royalty rates. The average annual royalty revenue for each region is divided by the region’s expected royalty rate (12.5 percent for onshore leases, 16.67 percent for leases in the offshore Pacific region, and 18.75 percent for leases in the offshore Gulf) to estimate the average annual drilling revenue for each region, and then multiplied by the new royalty rate. The table reflects the new revenue from the policy change, using average annual revenue by region as the baseline. The Energy Information Administration estimates that revenue from onshore drilling will grow slowly in the future, since much of onshore drilling exploration and development has shifted from public to private lands, which might affect future revenue from onshore drilling. Offshore drilling, on the other hand, is expected to continue growing at a steady pace, since new technology is making deep-water areas previously thought to be inaccessible to drilling development viable for production. Our projections, which offer only a rough prediction of the future potential for raising revenue, estimate that marginal to significant increases in current royalty rates could generate between $0.4 billion and $4 billion in new revenue per year. TURNING OIL AND GAS REVENUE INTO ENERGY INNOVATION With bipartisan support, the debate over generating new federal revenue has moved away from discussing the merit of leveraging oil and gas drilling, to discussing how to implement it and what the new funds can support. This report assesses the potential drilling policies that can be used to raise revenue, and how much new revenue each can create. Based on this assessment, it is clear that oil and gas drilling cannot fully support increasing the federal energy innovation budget to recommended levels of $15-$30 billion per year. Rather, oil and gas drilling can raise enough revenue for targeted investments in particular energy innovation programs. Already this year, Republicans and Democrats proposed similar ideas. Senator Lisa Murkowski’s Advanced Energy Security Trust, which advocates opening restricted federal lands to drilling, would direct a portion of new revenues to finance the development of renewable power, energy efficiency, and advanced vehicles. President Obama’s Energy Security Trust Fund opposes expansion of drilling, but advocates for increasing drilling fees in a number of ways and directs new revenues more purposefully to supporting research and development of clean energy transportation. On both sides of the aisle, it is clear that more can be done to ensure that leveraging oil and gas drilling towards energy innovation has maximum impact. As a result, we propose a natural compromise: expand safe and environmentally manageable drilling on federal lands such as in the OCS, which is prohibited by an administrative moratorium, while also implementing new fees on all unproductive acres and raising royalty rates for onshore leases to at least the level of the lowest royalty rates for offshore leases. On the one hand, increasing fees and boosting onshore royalty rates will immediately generate enough new revenue to fully fund high-risk, high-reward energy research at the ARPA-E at the recommended level of $1 billion per year. On the other hand, expanding oil and gas drilling on some federal lands, while not offering enough immediate revenue for energy innovation, provides a political compromise that could directly impact the development of the technology alternatives that will dramatically reduce the need to drill in the first place. The central tenant of such a compromise is fully funding ARPA-E, the Department of Energy’s breakthrough energy technology program, which invests in risky, next-generation clean energy technologies that could fundamentally change the energy market. Modeled after the Department of Defense’s DARPA program that invested in the underlying technologies that make up the Internet among other breakthroughs, ARPA-E is largely considered the most important clean energy research program in the federal government and receives significant support from industry, academia, and Congress. Its mission—to invest in transformative technologies that allow scientists to re-envision entire energy systems—makes the program a complementary piece of the U.S. energy innovation ecosystem that enhances and supports the work of all other programs at the Department of Energy. Unfortunately, ARPA-E is significantly under-funded. Its FY2013 budget is set at $265 million, not even 30 percent of the $1 billion proposed by the National Academies of Science and the President’s Council of Advisors on Science and Technology. Furthermore, ARPA-E’s budget has been plagued by uncertainty. It was initially funded at $400 million through the Stimulus in 2009, only to be cut through budget appropriations to $200 million in 2010. Its funding dipped further to $181 million in 2011, and was increased as part of the FY2012 budget Omnibus appropriations to $275 million. Fully funding ARPA-E with $1 billion from new oil and gas revenue would not only be significant for providing the critical funding the program needs to succeed, but it would also ensure a level of annual budget certainty that directly impacts its ability to invest in breakthrough technologies as well as attract top program manager talent from the energy industry. It would also do more to develop cost-competitive clean energy technologies than the more limited Energy Security Trust proposed by the administration. To commit to funding ARPA-E at $1 billion annually, Congress could raise royalty rates on onshore leases to 16 percent—still below rates for offshore leases—or it could raise onshore royalty rates to 14 percent and also establish an $8-12 flat fee on unproductive acres both onshore and offshore. In exchange for greater investment in next-generation clean energy technologies, the administration could remove its moratorium on drilling in the OCS. CONCLUSION Generating new revenue for public investments in energy innovation from oil and

gas drilling is fertile ground for high-impact, bipartisan policymaking. Proposals on the left raise drilling fees to invest in limited clean energy technology efforts; proposals on the right demand expanded drilling but keep rates and fees relatively low. A compromise between these proposals is not difficult to imagine: expand drilling in specific offshore territories while moderately increasing fees and royalty rates, and direct the new revenue toward R&D efforts that will eventually eliminate the country’s fossil fuel dependence. Congress would do well to link investment in next-generation clean energy with the production of today’s generation of fossil fuel energy. This proposal recognizes that fossil fuels will remain the dominant energy source in the United States until there are cheap and viable low-carbon alternatives, which requires significantly more investment in innovation. And it ties the development of next-generation technologies to the production of existing fossil fuels, similar to how the United States successfully supported shale natural gas technologies and how many state governments are supporting their clean energy programs. In other words, funding clean energy innovation programs, such as ARPA-E, with oil and gas revenue is an energy and climate policy approach that just makes sense.

EnergyPicking winners isn’t the problem—the government has an important role in catalyzing energy projects Steffy 13 (Loren Steff, Forbes contributor writer for 30 Point Strategies, writer-at-large for Texas Monthly, award-winning business columnist for the Houston Chronicle, “In Energy, `Picking Winners' Isn't the Problem,” http://www.forbes.com/sites/lorensteffy/2013/06/13/in-energy-picking-winners-isnt-the-problem/)The government shouldn’t pick winners. It’s a common refrain from the oil and gas side of the energy business, used to argue against subsidies and tax breaks for renewable fuels. There’s a bit of selective memory, if not collective delusion, in the argument.

Energy isn’t a free market, and governments , including the U.S. government, have always played an active role in the development and control of energy markets. U.S. support for domestic energy programs dates to the land grants given timber companies in the 1800s, the Economist pointed out

recently. That support continues today through things like production tax credits for renewable fuels. The concern isn’t so much picking winners as it is funding losers. In recent years, alternative fuels have gotten a bigger piece of the pie. In 2011, for example, two-thirds of the $24 billion in energy-related subsidies went to renewable energy and energy efficiency, the Economist noted. About $6 billion went to ethanol

alone, while only $2.5 billion went toward fossil fuels. High-profile failures like Solyndra and the high cost of subsidies for programs such as wind energy raise the question of whether the government is getting its money’s worth. Parsing energy subsidies has never been easy. Even the definition of what constitutes a subsidy sparks debate. This week, the Institute for Energy Research unveiled this handy Federal Energy Spending Tracker, that allows anyone to crunch the data on who gets how much in the form of government grants, loan guarantees and tax subsidies. In announcing the new resource, IER President Thomas Pyle noted: In recent years, the wind, solar and biofuels industries have been feeding generously at the federal trough, to the extent that green energy spending is 7 times

greater under the current administration than the previous one. More and more, layers of duplicative programs provide opportunities for waste, fraud, and abuse. Today, we are left with a mishmash of subsidies, mandates, and set-asides for pet energy technologies that are more expensive and unreliable than the energy sources they are supposed to replace. IER opposes energy subsidies in general, but the database is a good start for following how the government supports energy development. The institute carefully outlines what it does and doesn’t track. For example, the database includes only energy-specific tax subsidies, not broad tax incentives such as the manufacturing tax credits that are available to many

industries besides energy. Unfortunately, it doesn’t paint the whole picture. The data only goes back to 2009. A more comprehensive study, for example, found that on an inflation-adjusted basis, the subsidies for renewables in their first 15 years of development was a paltry $400 million, compared with $1.8 billion for oil and gas and $3.3 billion for nuclear. It’s not surprising that in years of higher oil prices, subsidies for that industry would pale compared with those for alternatives. Yet the oil

industry has gotten its share of handouts over the years, too. Companies reaping the benefits of offshore drilling, for example, are beneficiaries of a federal program that suspended royalty collections on offshore leases from 1996 to 2000, when prices were too low to justify the cost of such expensive drilling projects. Today, companies are still benefiting from that program, which affects about one-quarter of the current production from the Gulf of Mexico. Indeed, the program encouraged more development in the Gulf, which meant more domestic production when prices began to rise. Similar government support dates to the earliest days of the oil business. In 1931, Texas Gov. Ross Sterling sent the famed Texas Rangers into East Texas on horseback to shut down production and prevent oil prices from cratering. Oil companies at the time welcomed price supports from

the federal government. In both cases, the government was picking winners, but it resulted in sustaining the availability of cheap and reliable energy for the public. The bigger question with renewables is whether the public is getting its money’s worth from subsidies. That’s more difficult to assess

in the short term, but getting reliable data to track is the first step. The issue, after all, isn’t about picking winners, it’s about wasting too much money on losers.

ExplorationFederal investment is key to initiate a coordinated national strategy for ocean exploration USCOP 04 (U.S. Commission on Ocean Policy, “Creating a National Strategy for Increasing Scientific Knowledge,” pp. 304-309, 20 August 2004, http://govinfo.library.unt.edu/oceancommission/documents/prelimreport/chapter25.pdf)

The United States does not have a national strategy for ocean and coastal research, exploration, and marine operations that can integrate ongoing efforts, promote synergies among federal, state, and local

governments, academia, and the private sector, translate scientific and technological advances into operational applications, and establish national goals and objectives for addressing high-priority issues. Instead, for the most part, each federal ocean agency independently addresses its own specific information needs. A national strategy can help meet the ocean resource management challenges of the 21st century and ensure that useful products result from federal investments in ocean research. Moving toward ecosystem-based management approaches will require a new generation of scientific understanding. Specifically, more needs to be known about how marine ecosystems function on varying spatial scales, how human activities affect marine ecosystems and how, in turn, these changes affect human health. Ecosystem-based management will also require a deeper understanding of biological, physical, chemical, and socioeconomic processes and interactions. For example, as coastal population growth feeds a demand for new construction, managers will need to know which activities may cause rapid erosion of the beach, increased turbidity that harms a coral reef, or economic disruption. In another example, fishery conservation can be promoted by protecting spawning grounds and other essential habitat; to make this possible, scientists and managers must understand the fundamental biology of the fish species. Maintaining overall ecosystem health also requires an improved understanding of biological diversity on different levels, including genetic diversity (the variety of genetic traits within a single species), species diversity (the number of species within an ecosystem), and ecosystem diversity (the number of different ecosystems on Earth). The largest threats to maintaining diversity on all three scales are human activities, such as overfishing, pollution, habitat alteration, and introductions of non-native species. The extent of marine biological diversity, like so much about the ocean, remains unknown. But based on the rate at which new species are currently being discovered, continued exploration of the ocean is almost certain to result in the documentation of many additional species that can provide fresh insights into the origin of life and

human biology. A national strategy should promote the scientific and technological advances required to observe, monitor, assess, and predict environmental events and long-term trends. Foremost in this category is climate change. The role of the ocean in climate, although critical, remains poorly understood. The ocean has 1000 times the heat capacity of the freshwater lakes and rivers, ocean circulation drives the global heat balance, and ocean biochemistry plays a primary role in controlling the global carbon cycle. The process of climate change should be examined both on geologic time scales, such as the transitions between ice ages, and over shorter periods of time. The buildup of greenhouse gases in the atmosphere will increase the melting of polar ice, introducing large quantities of fresh water into the North Atlantic. Many researchers now believe that could drastically change ocean circulation and weather patterns in the span of a couple of years.1 In particular, the Gulf Stream could slow or stop, causing colder temperatures along the eastern seaboard of the United States and ramifications around the globe. It is in man’s interests to learn more about the processes that lead to abrupt climate changes, as well as their potential ecological, economic, and social impacts. Even as we try to comprehend the role of the ocean in climate change, we need also to understand the effects of climate change on ocean ecosystems. If temperatures around the globe continue to warm, sea level will continue to rise, putting many coastal residents at greater risk from storm surges and erosion. For individual ecosystems, even small changes in ocean temperature can put the health and lives of sea creatures and humans at risk. Ocean monitoring, through programs like the IOOS, will be essential for detecting and predicting changes more accurately, thereby improving prospects for minimizing harmful effects. Some large initiatives, such as the U.S. Climate Change Science Program and the Census of Marine Life, have been launched in the last couple of years to study large-scale research topics. However, many of the issues most relevant to the needs of coastal managers do not occur on such global scales. Due to the regional nature of many ocean and coastal ecosystem processes, regional-scale research programs are also needed. Currently, insufficient emphasis is placed on this kind of research. The regional ocean information programs discussed in Chapter 5 are designed to close

this gap and increase our understanding of ocean and coastal ecosystems by prioritizing, coordinating, and funding research that meets regional and local management needs. At the state level, the National Oceanic and Atmospheric Administration’s (NOAA’s) National Sea Grant College Program can make essential contributions to achieving research goals. The state Sea Grant programs have the organization and infrastructure necessary to fund research and conduct educational activities that will expand understanding of ocean ecosystems up and down our coasts. Sea Grant’s current strategic plan focuses on

promoting ecosystem-based management and on involving constituencies from government, universities, the public and the private sector, all of whom are needed to strengthen the U.S. research enterprise.2 It is time for the United States to establish a national strategy for ocean research investments, and oversee implementation and funding of programs throughout the ocean science community. This plan should address issues at the global, regional, state, and local levels. It should emphasize ecosystem-based science to help resolve the current mismatch between the size and complexity of marine ecosystems and the fragmented nature

of science and the federal structure. Better coordination and integration will help provide the information needed to sustain resources, protect human lives and property, identify and nurture new beneficial uses, and resolve issues that result from competing activities. A unified national approach to ocean research, exploration, and marine operations, structured around national investment priorities, will also result in wiser and more efficient use of resources. ADVANCING OCEAN AND COASTAL RESEARCH Better coordination of ocean and coastal research is needed at all levels and across all sectors. Increases in funding, changes in grant practices, and the establishment of new partnerships are all essential to maximize the national research enterprise. Advances in social science and economic research are

particularly important to generate information needed for the wise management of ocean resources. Reviving the Federal Investment The United States has a wealth of

ocean research expertise spread across a network of government and industry laboratories and world-class universities, colleges, and marine centers. With strong federal support, these institutions made the United States the world leader in oceanography during the 20th century. However, a leader cannot stand still. Ocean and coastal management issues continue to grow in number and complexity, new fields of study have emerged, new interdisciplinary approaches are being tried, and there is a growing need to understand the ocean on a global and regional scale. All this has created a corresponding demand for high-quality scientific information. Federal investments during the cold war years of the 1960s and 1970s enabled scientists to help promote our national economy and security through research into the fundamental physical, chemical, biological, and geological properties of the oceans. During that period, ocean research funding constituted 7 percent of the federal research budget. However, the federal investment in ocean research began to stagnate

in the early 1980s, while investments in other fields of science continued to grow (Figure 25.2).3 As a result, ocean research investments comprise a meager 3.5 percent of today’s federal portfolio. The current annual federal investment of approximately $650 million in marine science is well below the level necessary to address adequately the nation’s needs for coastal and ocean information. Unless funding increases sharply, the gap between requirements and resources will continue to grow and the United States will lose its position as the world’s leader in ocean research. Coordination and Prioritization To ensure that increased investments are used wisely

and that important research activities continue, federal agencies will need to create long-term strategic plans and remedy structural problems in their grant mechanisms. In creating long-term plans, a balance must be reached between funding basic, curiosity-driven research conducted mostly at universities and marine research centers and more applied research conducted largely at government laboratories to support operations, management, and monitoring activities. Over time, changes in national priorities may shift the balance slightly between basic and applied research but the enduring value, and often unexpected outcomes, of basic research should never be underestimated. Basic oceanographic research in the 1940s, 1950s, and 1960s increased our understanding of ocean currents, marine acoustics, seafloor geology, and robotics, and basic research supported by the U.S. Navy has led to many widely-used and versatile new technologies, such as the Global Positioning System. Improved cooperation between federal labs and academic institutions can combine the strengths of both, ensure that quality research is conducted, and achieve a balance between basic and applied science. Problems in the current system for awarding federal research grants make it difficult to conduct the kind of interdisciplinary, ecosystem-based research required to understand the ocean environment. Short-term research grants of two- to five-years duration are now typical. This type of funding is useful for research on discrete topics of limited scope, and has the advantage of giving agencies the flexibility to adjust quickly to changing priorities. However, it is not adequate to acquire the continuous data sets that will be essential for examining environmental changes over time. In addition, a variety of mechanisms are used by federal agencies to review proposed ocean research grants. Some of these mechanisms work better than others. Grant review systems that are not open to all applicants or that do not use an objective review process for ranking proposals are unlikely to produce the highest quality research. Systems that favor established researchers to the detriment of young scientists, whether intentionally or not, are also flawed, stifling diversity and limiting the infusion of new ideas. When all research proposals, including those from scientists working at federal labs, are subject to the same rigorous review process, tax dollars are more likely to support the best science. Streamlined grant application and review processes will also help get more good science done in a timely way. The ocean science community includes many scientists outside academic and federal labs. Although coordination among sectors has steadily improved, the process remains mainly ad hoc, without the backing of a national strategy and leadership. A clearer understanding of the respective strengths and roles of the different sectors could lead to productive new research partnerships, foster intellectual risk-taking, leverage funding, and encourage participation in large multi-sector research efforts valuable to the nation. There is also a need to gain feedback from managers at state and federal levels and from the private sector that can guide new research directions and technology development. The regional ocean information programs recommended in Chapter 5 will provide an excellent mechanism for gaining input on user needs and regional research priorities. A mechanism is required to coordinate federally funded ocean research (both basic and applied), support long-term projects, and create partnerships throughout all agencies and sectors. Transparent and comprehensive research plans would achieve these goals and ensure that research results can be translated into operational products in a timely manner.

Fed Good

RenewablesPrivate sector fails – fed key to effectiveness and economic efficiencyAlves 11 (Jared Alves, November 30, 2011, “Evaluating Federal Solar and other Renewable Energies Policy” http://jaredalves.com/2011/11/30/evaluating-federal-solar-and-other-renewable-energies-policy-following-solyndra/)

The contracting of private sector investment in renewable energy is not likely due to any inherent infeasibility of the technologies. Indeed, Menz notes that the “costs of generating electricity from renewable resources have declined consistently for the last three decades” – a finding supported by Healey and Pfund in solar industry (Figure 3); which suggests that other factors such as the current economic stagnation and tightening of credit and capital is to blame (Menz, 2005). There is certainly still room for growth, with the basket of renewable energy technologies only accounting for 11 percent of domestic energy use, and the nonpartisan Union of Concerned Scientists in 2005 estimating that the “major renewable resources excluding hydropower… could potentially provide 5.6 times the total amount of electricity used in the country in 2001” (Menz, 2005). Moreover, a 2001 study indicated the effectiveness of government “renewable energy technology initiatives,” as they were estimated to have saved $30 billion in “avoided energy costs” from an initial government investment of only $712 million over the previous decade (Herzog, Lipman, Edwards, & Kammen, December 2001). Accordingly criticisms of renewable energy subsidies neglect the longstanding government involvement in the sector to spur development of energy resources to fuel economic expansion, and ignore the vast untapped potential of fully implementing those resources.

Picking Winners Good – EnergyPicking winners is necessary – only effective way to assist the clean energy sectorWinnie 12 (Trevor Winnie, Clean Edge’s senior research analyst, April 26, 2012, “Message to Congress: Not Picking Energy Winners Should Not Mean Disadvantaging Clean Tech” http://www.renewableenergyworld.com/rea/news/article/2012/04/message-to-congress-not-picking-energy-winners-should-not-mean-disadvantaging-clean-tech)Last week I had the privilege to participate in Environmental Entrepreneurs' (E2) annual advocacy trip to Washington, D.C., joining a small delegation of E2 members to voice the economic benefits of clean energy directly to our nation's leadership, from Senators and Representatives in Congress to key Administration offices and Department officials. After nearly 20 meetings in less than 48 hours — and many more meetings for the delegation as a whole — I left the Capitol inspired as ever that clean tech can

and will be a true engine for the U.S. economy; but I also left even more convinced that our system in Washington is broken, and that today's stalemate created by partisan politics increasingly risks cannibalizing U.S. economic competitiveness in the 21st century. While our discussions aimed to support job-building industry incentives, EPA regulations, and military clean-energy initiatives, one topic continued to

take center stage: the production tax credit (PTC) for wind energy. Set to expire at the end of this year, the PTC (which

provides a 2.2 cents/kWh incentive for wind power producers) has come to epitomize the lack of federal clean-energy commitment. The inability to provide long-term certainty to investors over the years has resulted in a jarring boom-bust cycle for the U.S. wind industry. A market contraction this time, however, would have far more negative impact, as the recent supply chain build out in the U.S. means we have many more American wind jobs to lose (domestic content of wind turbines installed in the U.S. today is nearly 70 percent, compared to just 25 percent in 2006). As many as 37,000 wind supported U.S. jobs will be lost if the PTC is not extended, according to analysis from Navigant. What was surprising in our discussion of the wind PTC with members of Congress was the general lack of disagreement on the merits of supporting clean energy, especially after the intensity of the right’s recent Solyndra-fueled attacks on government involvement in clean tech. One reason for this may be that wind energy has become a critical source of local employment, investment, and tax revenue in many rural – and red-blooded conservative — communities across the nation. But supportive words, no matter how welcome, are not action and do not change the truth: that federal support for clean energy is being held hostage by broader ideological battles and political posturing

that carry blame on both sides of the aisle. Oddly enough, clean energy's best chances in the U.S. might lie in the success stories of the fossil fuel industry. Even those unfamiliar with energy have likely heard about the U.S. shale gas boom, which has led to a surplus of cheap electricity fuel that is leading a transition away from dirtier coal (for now, for the sake of making a point, let's ignore the serious environmental concerns related to gas fracking).

What is often overlooked is that the technology enabling today's cost-effective extraction of shale gas is a direct result of decades of U.S. government incentives and technical support which enabled private industry and investors to drive innovation in the area of unconventional gas extraction (a great overview here by The Breakthrough Institute). Clean-energy technologies deserve this same government support. In fact, they deserve it for the same reasons — that, when made cost-effective, clean energy offers significant economic and energy security advantages to our

nation. One argument against government support for clean energy is a desire to not "pick winners." But by not extending the same opportunities to emerging energy technologies like wind and solar that were (and still are) available to oil and gas, you are doing exactly that — with winners in this instance being those technologies to have already benefitted from decades of government subsidies.

Picking winners is reciprocal to current pushes for coalLacey 12 (Stephen Lacey, August 29, 2012, reporter with Climate Progress “Free-market hypocrisy: Why do we hold renewables to different standards?” http://thinkprogress.org/climate/2012/08/29/766341/free-market-hypocrisy-why-do-we-hold-renewables-to-different-standards-than-fossil-fuels-and-nuclear/)

Now that renewables are receiving some of the same incentives that fossil fuelshave enjoyed for nearly 100 years, we’re suddenly being inundated with calls for a purely “free-market” approach to energy development from politicians on the right and companies concerned about the growth of clean energy. Their arguments make for good sound bites. But if we take a look at the history of

energy development in the U.S., it’s very clear that we’ve never had a truly “free” market. In fact, all of the technologies that dominate our energy system today were given special incentives by the government in order to get them to commercial scale. According to a

recent report from the venture capital firm DBL Investors, the U.S. coal, oil, gas, and nuclear industries have cumulatively taken in more than $630 billion in tax credits, land grants, research and development (R&D) programs, and direct investments from the government. That far surpasses the roughly $50 billion in government renewable energy investments (wind, solar PV, solar

thermal, geothermal, biofuels) through these same mechanisms over the decades, according to the report. But when renewable energy is given similar incentives — helping double the penetration of non-hydro renewable

electricity since 2008 — the energy free-marketeers come out of hiding and lament how we’re supposedly “picking winners and losers.” The Republican Party’s platform released this week is a perfect example: Unlike the current Administration, we will not pick winners and losers in the energy market-place. Instead, we will let the free market and the public’s preferences determine the industry out-comes. In assessing the various sources of potential energy, Republicans advocate an all-of-the-above diversified approach, taking advantage of all our American God-given

resources. That is the best way to advance North American energy independence. Sounds pretty straightforward. However, the RNC’s platform is very bullish on maintaining use of coal, a resource that is declining in the U.S. because of … current market forces. According to the Energy Information Administration (EIA), we’ve seen a 20 percent drop in coal generation over the last year. That decline has been “primarily driven

by the increasing relative cost advantages of natural gas over coal for power generation in some regions,” wrote EIA. But when market forces move in the wrong direction for coal supporters, that is apparently when it’s okay for government to intervene. According to the RNC’s platform, the party wants to use the strength of government to “encourage the increased safe development in all regions of the nation’s coal resources.” So there you

have it. When the government encourages renewable energy, that’s called picking winners and losers. But when the government encourages coal — an increasingly expensive resource that has become an environmental nightmare — that’s “the best way to advance North American energy independence.”

Picking winners good – key to cheapest and most reliable energy sourceSteffy 13 (Loren Steffy, Forbes contributor, 6/13/13, “In energy, ‘picking winners’ isn’t the problem” http://www.forbes.com/sites/lorensteffy/2013/06/13/in-energy-picking-winners-isnt-the-problem/) The government shouldn’t pick winners. It’s a common refrain from the oil and gas side of the energy business, used to argue against subsidies and tax breaks for renewable fuels. There’s a bit of selective memory, if not collective delusion, in the argument. Energy isn’t a free market , and governments, including the U.S. government, have always played an active role in the development and control of energy markets.

U.S. support for domestic energy programs dates to the land grants given timber companies in the 1800s, the Economist pointed out recently. That support continues today through things like

production tax credits for renewable fuels. The concern isn’t so much picking winners as it is funding losers. In recent years, alternative fuels have gotten a bigger piece of the pie. In 2011, for example, two-thirds of the $24 billion in energy-related subsidies went to renewable energy and energy efficiency, the Economist noted. About $6 billion went to ethanol alone, while only $2.5 billion went toward fossil fuels. High-profile failures like Solyndra and the high cost of subsidies for programs such as wind energy raise the question of whether the government is getting its money’s worth. Parsing energy subsidies has never been easy. Even the definition of what constitutes a subsidy sparks debate. This week, the Institute for Energy Research unveiled this handy Federal Energy Spending Tracker, that allows anyone to crunch the data on who gets how

much in the form of government grants, loan guarantees and tax subsidies. In announcing the new resource, IER President Thomas Pyle noted: In recent years, the wind, solar and biofuels industries have been feeding generously at the federal trough, to the extent that green energy spending is 7 times greater under the current administration than the previous one. More and more, layers of duplicative programs provide opportunities for waste, fraud, and abuse. Today, we are left with a mishmash of subsidies, mandates, and set-asides for pet energy technologies that are more expensive and unreliable than the energy sources they are supposed to replace. IER opposes energy subsidies in general, but the database is a good start for following how the government supports energy development. The institute carefully outlines what it does and doesn’t track. For example, the database includes only energy-specific tax subsidies, not broad tax incentives such as the manufacturing tax credits that are available to many

industries besides energy. Unfortunately, it doesn’t paint the whole picture. The data only goes back to 2009. A more comprehensive study, for example, found that on an inflation-adjusted basis, the subsidies for renewables in their first 15 years of development was a paltry $400 million, compared with $1.8 billion for oil and gas and $3.3 billion for nuclear. It’s not surprising that in years of higher oil prices, subsidies for that industry would pale compared with those for alternatives. Yet the oil industry has gotten its share of handouts over the years, too. Companies reaping the benefits of offshore drilling, for example, are beneficiaries of a federal program that suspended royalty collections on offshore leases from 1996 to 2000, when prices were too low to justify the cost of such expensive drilling projects. Today, companies are still benefiting from that program, which affects about one-quarter of the current production from the Gulf of Mexico. Indeed, the program encouraged more development in the Gulf, which meant more domestic production when prices began to rise. Similar government support dates to the earliest days of the oil business. In 1931, Texas Gov. Ross Sterling sent the famed Texas Rangers into East Texas on horseback to shut down production and prevent oil prices from cratering. Oil

companies at the time welcomed price supports from the federal government. In both cases, the government was picking winners, but it resulted in sustaining the availability of cheap and reliable energy for the public. The bigger question with renewables is whether the public is getting its money’s worth from

subsidies. That’s more difficult to assess in the short term, but getting reliable data to track is the first step. The issue, after

all, isn’t about picking winners, it’s about wasting too much money on losers.

Free Market Bad

Fossil Fuels > Renewables BadThe free market will prioritize fossil fuels over renewables – prevents avoiding the tipping pointLacey 12 (Stephen Lacey, August 29, 2012, reporter with Climate Progress “Free-market hypocrisy: Why do we hold renewables to different standards?” http://thinkprogress.org/climate/2012/08/29/766341/free-market-hypocrisy-why-do-we-hold-renewables-to-different-standards-than-fossil-fuels-and-nuclear/)

In order to smooth out this complicated picture, there are some analysts and political leaders who say we should get rid of all subsidies to all technologies and let the free market hash it out. That’s an appealing argument to many. But it completely ignores the embedded impact of a century of support to fossil fuels and 50 years of support to nuclear. It also ignores a more fundamental problem: Our climate is reaching a tipping point and we don’t have time to waste in transitioning away from carbon-based fuels. Period. Most supporters of

clean energy agree there will be a time to phase out incentives that are currently helping boost the industry. There are a lot of disagreements about exactly how and when it should be done, but that conversation is well underway as the cost of renewables continues to fall . As we drudge through this political season and listen to the calls from selective free-marketeers on “picking winners and losers,” let’s remember how we got to where we are in the first place. And more importantly, let’s remember where we’re trying to go.

Tax Incentives Bad

TaxpayersTax incentives are not necessary and hurt taxpayersNYT 10 (New York Times, “As Oil Industry Fights a Tax, It Reaps Subsidies,” http://www.nytimes.com/2010/07/04/business/04bptax.html?pagewanted=all)patel

When the Deepwater Horizon drilling platform set off the worst oil spill at sea in American history, it was flying the flag of the Marshall Islands. Registering there allowed the rig’s owner to significantly reduce its American taxes. At the same time, BP was reaping sizable tax benefits from leasing the rig. According to a letter sent in June to the Senate Finance Committee, the company used a tax break for the oil industry to write off 70 percent of the rent for Deepwater Horizon — a deduction of more than $225,000 a day since the lease began. With federal officials now considering a new tax on petroleum production to pay for the cleanup, the industry is fighting the measure, warning that it will lead to job losses and higher gasoline prices, as well as an increased dependence on foreign oil. But an examination of the American tax code indicates that oil production is among the most heavily subsidized businesses, with tax breaks available at virtually every stage of the exploration and extraction process. According to the most recent study by the Congressional Budget Office, released in 2005, capital investments like oil field leases and drilling equipment are taxed at an effective rate of 9 percent, significantly lower than the overall rate of 25 percent for businesses in general and lower than virtually any other industry. And for many small and midsize oil companies, the tax on capital investments is so low that it is more than eliminated by var-ious credits. These companies’ returns on those investments are often higher after taxes than before. “The flow of revenues to oil companies is like the gusher at the bottom of the Gulf of Mexico: heavy and constant,” said Senator Robert Menendez, Democrat of New Jersey, who has worked alongside the Obama administration on a bill that would cut $20 billion in oil industry tax breaks over the next decade. “There is no reason for these corporations to shortchange the American taxpayer.” Oil industry officials say that the tax breaks, which average about $4 billion a year according to various government reports, are a bargain for taxpayers. By helping producers weather market fluctuations and invest in technology, tax incentives are supporting an industry that the officials say provides 9.2 million jobs. The American Petroleum Institute, an industry advocacy group, argues that even with subsidies, oil producers paid or incurred $280 billion in American income taxes from 2006 to 2008, and pay a higher percentage of their earnings in taxes than most other American corporations. As oil continues to spread across the Gulf of Mexico, however, the industry is being forced to defend tax breaks that some say are being abused or are outdated. The Senate Finance Committee on Wednesday announced that it was investigating whether Transocean had exploited tax laws by moving overseas to avoid paying taxes in the United States. Efforts to curtail the tax breaks are likely to face fierce opposition in Congress; the oil and natural gas industry has spent $340 million on lobbyists since 2008, according to the nonpartisan Center for Responsive Politics, which monitors political spending. Jack N. Gerard, president of the American Petroleum Institute, warns that any cut in subsidies will cost jobs. “These companies evaluate

costs, risks and opportunities across the globe,” he said. “So if the U.S. makes changes in the tax code that discourage drilling in gulf waters, they will go elsewhere and take their jobs with them.” But some government watchdog groups say that only the industry’s political muscle is preserving the tax breaks. An economist for the Treasury Department said in 2009 that a study had found that oil prices and potential profits were so high that eliminating the subsidies would decrease American output by less than half of one percent. “We’re giving tax breaks to highly profitable companies to do what they would be doing anyway,” said Sima J. Gandhi, a policy analyst at the Center for American Progress, a liberal research organization. “That’s not an incentive; that’s a giveaway.” Some of the tax breaks date back nearly a century, when they were intended to encourage exploration in an era of rudimentary technology, when costly investments frequently produced only dry holes. Because of one lingering provision from the Tariff Act of 1913, many small and midsize oil companies based in the United States can claim deductions for the lost value of tapped oil fields far beyond the amount the companies actually paid for the oil rights. Other tax breaks were born of international politics. In an attempt to deter Soviet influence in the Middle East in the 1950s, the State Department backed a Saudi Arabian accounting maneuver that reclassified the royalties charged by foreign governments to American oil drillers. Saudi Arabia and others began to treat some of the royalties as taxes, which entitled the companies to subtract those payments from their American tax bills. Despite repeated attempts to forbid this accounting practice, companies continue to deduct the payments. The Treasury Department estimates that it will cost $8.2 billion over the next decade. Over the last 10 years, oil companies have also been aggressive in using foreign tax havens. Many rigs, like Deepwater Horizon, are registered in Panama or in the Marshall Islands, where they are subject to lower taxes and less stringent safety and staff regulations. American producers have also aggressively exploited the tax code by opening small offices in low-tax countries. A recent study by Martin A. Sullivan, an economist for the trade publication Tax Analysts, found that the five oil drilling companies that had undergone these “corporate inversions” had saved themselves a total of $4 billion in taxes since 1999. Transocean — which has approximately 18,000 employees worldwide, including 1,300 in Houston and about a dozen in Zug, Switzerland — has saved $1.8 billion in taxes since moving overseas in 1999, the study found. Transocean said it had paid more than $300 million in taxes so far for 2009, and that its move reflected its global scope, with only 15 of its 139 rigs located in the United States. “Transocean is truly a global company,” it said in a statement. Despite the public anger at the gulf spill, it is far from certain that Congress will eliminate the tax breaks. As recently as 2005, when windfall profits for energy companies prompted even President George W. Bush — a former Texas oilman himself — to publicly call for an end to incentives, the energy bill he and Congress enacted still included $2.6 billion in oil subsidies. In 2007, after Democrats took control of Congress, a move to end the tax breaks failed. Mr. Menendez said he believed the Gulf spill was devastating enough to spur Congress into action. But one notable omission in his bill shows the vast economic reach of the industry. While the legislation would cut many incentives over the next decade, it would not touch the tax breaks for oil refineries, many of which have operations and

employees in his home state, New Jersey. Mr. Menendez’s aides said the senator thought it was legitimate to allow refineries to continue claiming a manufacturing tax credit that he wants to eliminate for drillers because refining is a manufacturing business and because refineries do not benefit from high oil prices. Mr. Menendez did not consult with New Jersey refineries when writing the bill, his aides said.

Private Actors Bad

P3s BADPPP’s don’t yield resultsCarbajal 12 - Salvador López, University of Kent (8/6/12, “Public-Private Partnerships for Private Sector Development: Shifting the Perspective of State Involvement ,” Date Accessed 7/18/14) patel

Despite this trend of retreat of the state in recent decades, there are some scholars that refute this idea and place it as a western, even Anglo-Saxon phenomenon, using to support their arguments the Asian experience of the state. As Strange (2007) describes it, the Asian state has in fact been the means to achieve economic growth, industrialization, a modernized infrastructure and rising living standards for people. In recent years, this situation has influenced economic policies around the world emphasizing the role of the state in creating incentives to invest in new technical and entrepreneurial skills, facilitating collective action, developing and ensuring all kinds of quality standards, motivating investors to surmount technological lags, or avoiding too strong trade shocks that might have wiped out entire industries (DFID, 2008). Nevertheless, the main focus has remained in the government capabilities to achieve this, as opposed to concerted public-private efforts. In this sense, as a new trend, governments across the world have established active and targeted private sector support; however it has often not yielded satisfactory results (UNIDO & GTZ, 2008). A major obstacle for its success has been that the entrepreneurial culture in government officials often discourages business success, and any effort to increase the quality of public support systems where bureaucracies lack customer orientation and efficiency, requires time. It is in this framework that the more active inclusion of the private sector in policies that aim to foster markets becomes of the utmost importance, due to the fact that private interests and culture are different than those of the public sector.

Shell DrillingIn context of the leases shell’s rapacious drilling destroys the environmentGreenpeace 14 (Greenpeace, Greenpeace is an independent global campaigning organisation that acts to change attitudes and behaviour, to protect and conserve the environment and to promote peace, Court Denies Offshore Oil Drilling Lease Sale in Arctic, Eco Watch, 1-23-2014, http://ecowatch.com/2014/01/23/court-denies-offshore-oil-drilling-sale-in-arctic/)//BDS

Yesterday the Ninth Circuit Court of Appeals decided that the Department of the Interior violated the law when it opened almost 30 million acres of the outer continental shelf in the Chukchi Sea off the coast of Alaska to oil and gas drilling. The court concluded the Department’s estimate of one billion barrels of recoverable oil under the frozen Arctic ocean was “chosen arbitrarily” and that the Interior Department “based its decision on inadequate information about the amount of oil to be produced pursuant to the lease sale.” It went on to say that the agency had analyzed “only the best case scenario for environmental harm, assuming oil development,” and that this analysis “skews the data toward fewer environmental impacts, and thus impedes a full and fair discussion of the potential effects of the project.” A coalition of more than fifteen Alaska Native and environmental groups including Earthjustice, Center for Biological Diversity and Alaska Wilderness League, took the case following the George W. Bush Administration’s 2008 sale, only to have it struck down in federal court. In 2011, the Obama Administration moved it forward again, but the coalition swiftly challenged it through the courts. “Drilling for oil in the Chukchi Sea poses an enormous risk to the region’s people and wildlife,” said Greenpeace Arctic Campaign Leader Gustavo Ampugnani. “It locks us into a dangerous and dirty fossil fuel future, and it pushes us far closer to global climate catastrophe and the imminent hazards of extreme weather.” The verdict will hamper Shell’s plans in the Arctic, and comes just a week after the company issued a profit warning variously described as “disastrous” and “dreadful” in the financial press. “Shell—one of the world’s largest companies—has so far spent $5 billion dollars on this perilous Arctic folly,” said Ampugnani. “As the whole world watched, their bold Arctic expedition in 2012 became a global laughing stock, as giant rigs broke free from their moorings and beached on Alaskan shores, dire storm warnings were ignored, and multiple health, safety and environmental regulations were breached.” “This decision should give President Obama pause to reconsider the dangerous path he’s heading down by opening up the precious Arctic to rapacious oil giants ,” Ampugnani continued. “If he wants to live up to his inspiring words on tackling climate change and protecting America’s stunning natural environment for future generations, he should put an end to this dangerous oil rush to the ends of the earth.”

Drilling in the artic risks oil spills Rehmke 13 – Greg (6/17/13, “Offshore Alaska Drilling,” http://www.masterresource.org/2013/07/drilling-oil-alaska/)patel

No one desires a “devastating” oil spill for ecological or other reasons. But there are reasons for optimism and against drilling obstruction in this major new energy frontier. Royal Dutch Shell is a very large company with extensive expertise in

drilling for oil in difficult places. Deep ocean drilling technology has advanced a lot. The average depth of the Beaufort sea is 1,000 meters. Deep water oil drilling offshore in Brazil is 2,000 meters down (Economist story). Shell’s drilling in the Arctic is about 20 miles offshore and in water about 120 feet deep according to this Interior Department review (pdf). It is very doable, in other words. But the negativism is wide. A September 14, 2012, Popular Mechanic article, “Everything You Need to Know About Shell Oil and Arctic Offshore Drilling in Alaska,” could as easily be titled: “Everything You Need to Know About Why Shell Oil Arctic Offshore Drilling in Alaska is Really Risky.” The website introduction to the article provides background: “After years of arguments over drilling in the Arctic National Wildlife Refuge (ANWR), the debate about Arctic oil exploration has moved offshore, into the waters of the Chukchi and Beaufort seas.” Clean Air Act Issues Clean Air Act regulations limit NOx and VOC emissions to reduce ozone that is harmful to people (and presumably polar bears). So maybe EPA is concerned Arctic volatile organic compounds (VOCs) will mix with the NOx released by the Shell drilling ships to create harmful Arctic ozone. Such is far fetched. You can see from the EPA image the VOCs emission sources, and there are few trees, motor vehicles, consumer solvents, or industrial commercial processes in the Arctic. Maybe there is some other harm caused by NOx emissions from a factory-like drilling ship twenty miles offshore in the Arctic. But whether people or polar bears can be harmed by these emissions seems less the issue than Clean Air regulations as a tool for regulators to slow or stop projects deemed dangerous or environmentally immoral. This online editorial from the Fairbanks Daily News-Miner suggests the permitting process is a bureaucratic mess: Environmental and North Slope community groups appealed the permits to an internal EPA review board. … The first stumbling block was an argument about how to define the precise moment when a drilling rig becomes “stationary.” Air quality rules are different for mobile and stationary sources, so it’s obviously an important definition. The appeals board, made up entirely of former EPA attorneyse, said agency personnel didn’t explain their decision well enough. After decades of such work in other U.S. offshore waters, how could such an essential question still be in play? The editorial also noted that the agency failed to analyze the potential health effects of the hour-to-hour variations in nitrogen oxide levels that exploratory drilling equipment would cause in the air breathed by North Slope residents. The agency analyzed the annual effects and found them insignificant. But a new requirement for hourly analysis came down the regulatory pipeline about the same time. So, the board said, the agency should have reviewed the emissions’ effects in an hourly time frame. It’s a good bet the conclusion would be the same, but no matter — it’s back to the drawing board. The objections that stopped the permits were neither new nor substantive. That didn’t prevent them from provoking bureaucratic fussing of the highest order.Treasure Awaits There is lots more oil in Alaska. But is it safe to drill there? Should Shell should be allowed access to a reasonable Federal permitting process? Should Arctic oil reserves should be left untapped due to harsh winters and difficult logistics, human ingenuity aside. To say “no” is to shortcircuit the entrepreneurial process–resourceship in this case–that is responsible for human betterment. There are risks of oil spills, but it cannot be said that unsafe practices, neglect, and actual accidents are profit-maximizing. The Valdez accident (1989) in

Prince William Sound, Alaska, involving as much as 750,000 barrels, rocked the mighty Exxon Mobil. And the Deepwater Horizon blowout (2010), releasing 4.9 million barrels in the Gulf of Mexico, has cost BP tens of billions of dollars. Company and industry-wide reforms in the wake of these accidents, however, have lead to new investments and safety protocols, all part of the oil-finding challenge. Can the self-interest of private parties to assess the risks and be ready to pay a pretty price if things go wrong? Can government under real world political pressures be assumed to know what is best and act accordingly? Thousands of students are now debating these key public policy questions.

Permutation

ExplorationPerm solves- public-private partnerships have been able to undertake ocean explorationSchectman 13 (Joel Schectman, Reporter, The Wall Street Journal, “Government and Tech Companies Plan Exploration of Oceans,” 19 July 2013, http://blogs.wsj.com/cio/2013/07/19/government-and-tech-companies-plan-exploration-of-oceans/

Government officials, scientists and technology companies are meeting today to tackle one

of the biggest of Big Data challenges: mapping the oceans. The U.S. National Oceanic and Atmospheric Administration is meeting today with scientists and technology companies like Google Inc.GOOG -0.02%, in Long Beach, Calif. to create a national plan to explore and map the 3.3 million miles of ocean that fall under America’s sovereignty — a size nearly equal to the continental U.S. That understanding could help the U.S. discover new fuel sources, better regulate the nation’s fishing resources and preserve endangered species. The complexity and remoteness of ocean floors have stalled these efforts for decades, says Stephen Hammond, a senior scientist at NOAA. “Ocean scientists would be hard pressed to tell you what the sea floor looks like and what are the animals that live there. That’s very surprising to most people,”

Mr. Hammond said. But new data systems, says Mr. Hammond, that allow for more collaboration and access by the world’s scientists are beginning to “blow the doors open” on the world’s ocean systems. The complexity of ocean systems, with their interplay of tidal forces, animal species, and underwater geography, has frustrated previous efforts at understanding the ecology below 75% of the world’s surface. The sciences involved in ocean exploration have been “stove-piped,” with researchers specializing in the migration of whales or ocean currents and not working together towards “an interconnected understanding of the system,” said Larry Mayer, a University of New Hampshire oceanographer, who is participating in the planning session. For example, scientists were unable to fully understand the effect of the 2010 Deepwater Horizon spill on the Gulf’s sea creatures, Mr. Mayer said. “We’re not yet at the point where we have this overall view of the complete ecosystem model for a system as complex as Gulf of Mexico,” said Mr. Mayer, who sat on a National Academy of Sciences committee that advised government on the issue. “What we have are little models of subcomponents. But we don’t have comprehensive models of how the ecosystems interact — particularly in the deep sea.” Advances in data tools, which allow scientists to layer maps with thousands of separate information sources, now make that three-dimensional understanding possible, Mr. Mayer said. “We are just now at the

point where where we can use these tools to look at the system in its entirety,” Mr. Mayer said. NOAA says the exploration will involve dozens of public and private partnerships, with technology companies like Esri Inc., the mapping software firm, and Google, which are both participating in the planning forum. For example, Esri Chief Scientist Dawn Wright, says sensors placed on whales, and data sent from vessels, will help policy makers and companies use Esri software to get real time information on whether a shipping lane is effecting an animal population. Ms. Wright says Twitter feeds on water conditions, sent by recreational boaters, could also augment a greater understanding of oceans, while making sure that data is accurate. “The oceans have always been about Big Data,” Ms. Wright said. “And we’re still grappling with these issues.” But managing the data is just part of the challenge, said Michael Jones, chief technology advocate for Google. Oceanographers have just a handful of vessels in the country dedicated exclusively to deep sea exploration. One of those vessels is run by Google executive chairman Eric Schmidt’s Schmidt Ocean Institute. Mr. Jones says the ocean exploration project needs 10,000 unmanned torpedo-like vessels to collect more ocean data, an effort, he says, that will require a combination of public and private funding. “Understand the ocean is 2.5 times bigger than the land,” said Mr. Jones. “Eric and [his wife] Wendy are just one couple and one couple can’t solve this. Even a rich couple.”

SolarPublic-private partnerships provide the best funding mechanism and is normal meansAcker et al. 09 (Christine Acker, May 5, 2009, Cornell Energy, “Transition to Sustainable Energy in the US” http://www.cee.cornell.edu/academics/graduate/upload/WINDcee5910_finalReport2009.pdf)

Investment in solar PV manufacturing plants and equipment was $10 billion in 2007, an increase of 25% over the previous year. Significant financial resources are used to support the R&D activities in the renewable energy sector, estimated to be $16 billion from public and private resources in 2006. Taking into account capacity, manufacturing capabilities, and R&D, the renewable energy sector was funded with more than $100 billion. This money came from the private sector (banks and venture capital firms, about $3 billion mostly for solar PV and biofuels)

and from established government programs that aim to support and promote renewable energy technology development and deployment. Projects in developing countries are funded by multiple public resources, with the largest among them being KfW Entwicklungsbank (Germany, committed $300 million to renewable energy projects in the developing world), World Bank ($220 million) and Global Environment Facility. Recipient countries also participate in financing

CP Links to PTXThe counterplan links to politics and elections -- massively unpopular. Lord 10 financial journalist, commentator and analyst (Nick, “Privatization: The road to wiping out the US deficit,” April 2012, http://go.galegroup.com.proxy.lib.umich.edu/ps/i.do?action=interpret&id=GALE%7CA225551392&v=2.1&u=lom_umichanna&it=r&p=ITOF&sw=w&authCount=1)

Overcoming impediments There are five main reasons why the US infrastructure market has not yet taken off: politics, public perception, the unions, the municipal bond market and the gap between buyers and sellers. Each of these problems is either being addressed or has simply stopped being an issue. And it is this removal of impediments that is causing so many to get excited about the prospects. Perhaps the most intractable problem facing the market has been political opposition to both selling assets and setting up long-term regulatory regimes. Politics is the lifeblood of the US, where every office holder from the president down to the local dog-catcher has to seek election at least every four years. It is extremely difficult to match this electoral timescale with the life cycle of infrastructure assets, which often have a 20-, 30- or 40-year lifespan. Selling assets has been a way to lose elections. "The politics surrounding deals is the hardest thing to manage," says Heap at UBS. "Privatizing assets is simply a way to lose votes." However he thinks that there is a simple equation to understand why the political landscape has now shifted. "The moment the political pain from cutting services is more than the votes lost in selling assets, this market will take off." There is now abundant evidence that at a grass-roots level that political pain threshold has been reached. In big states such as California, Texas and Florida, P3s are now regularly used whenever new services are needed. Even governor Arnold Schwarzenegger in California has said that state assets from prisons to roads and windfarms are on the block as the state lurches through another budget crisis. Politicians across the country are looking at states such as Indiana and cities such as Chicago that have been early adopters of privatization of infrastructure. Because Indiana sold the Indiana Toll Road in 2006 to Cintra and Macquarie for $3.8 billion, it is one of only two states in the union that does not have a budget deficit. In Chicago, mayor Richard Daley has embraced asset sales with a fervour not matched anywhere else. He sold a 99-year lease to run the Skyway in 2005 for $1.83 billion to a consortium also comprising Macquarie and Cintra. He subsequently tried to sell Chicago's Midway Airport for $2.5 billion in 2008 and in 2009 successfully sold the city's parking system in a deal that raised $1.1 billion. The success of that deal has led mayors across the country to look at similar parking deals, with transactions now reportedly under way in Hartford, Harrisburg, Indianapolis, Pittsburg, Las Vegas and Los Angeles. Politicians realize that the political cost in not doing this is greater than in doing it. The tipping point has been reached. But there is still political pain to be negotiated. The Chicago parking deal was a huge success in every way but one: the transition from public to private ownership caused massive disruption and a public outcry from residents. Managing such transitions better will be the key duty for politicians looking to engage the private sector in infrastructure.

OTHERThe private sector and the Obama industry are not in syncKotkin 10 –Joel, distinguished Presidential Fellow in Urban Futures at Chapman University and an adjunct fellow at the Legatum Institute in London (The Daily Beast, 7/15/10, “Why Business Hates Obama,” http://www.thedailybeast.com/articles/2010/07/15/how-obama-lost-small-business.html )patel

The stock market, with some fits and starts, has surged since he’s taken office. Wall Street grandees and the big banks have enjoyed record profits. He’s pushed through a namby-pamby reform bill—which even it’s authors acknowledge is “not perfect”—that is more a threat to Main Street than the mega-banks. And yet why is Barack Obama losing the business community, even among those who bankrolled his campaign? Obama’s big problems with business did not start, and are not deepest, among the corporate elite. Instead, the driver here has been what you might call a bottom-up opposition. The business move against Obama started not in the corporate suites, but among smaller businesses. In the media, this opposition has been linked to Tea Parties, led by people who in any case would have opposed any Democratic administration. But the phenomenon is much broader than that. The one group that has fared badly in the last two years has been the private-sector middle class, particularly the roughly 25 million small firms spread across the country. Their discontent—not that of the loud-mouthed professional right or the spoiled sports on Wall Street—is what should be keeping Obama and the Democrats awake at night. Small business should be leading us out of the recession. In the last two deep recessions during the early 1980s and the early 1990s, small firms, particularly the mom and pop shops, helped drive the recovery, adding jobs and starting companies. In contrast, this time the formation rate for new firms has been dropping for months—one reason why unemployment remains so high and new hiring remains insipid at best. Here’s one heat-check. A poll of small businesses by Citibank, released in May, found that over three quarters of respondents described current business conditions as “fair or poor.” More than two in five said their own business conditions had deteriorated over the past year. Only 17 percent said they expect to be hiring over the next year. It’s not hard to see the reasons for pessimism. Entrepreneurs see bailed-out Wall Street firms and big banks recovering, while getting credit remains very difficult for the little guy. In addition, many small businesses are terrified of new mandates, in energy or health, which makes them reluctant to hire new people. Small banks—not considered “too big to fail”—fear that they will prove far less capable of meeting new regulatory guidelines than their leviathan competitors. The small business owners I’ve spoken to—like most of the public—generally don’t seem convinced about the effectiveness of the stimulus, even if the administration claims it helped us avert an economic “catastrophe.” Barely one fourth of voters, according to a recent Rasmussen poll, think it helped the economy. Obama’s troubles with the bigger firms are more recent. Initially, President Obama wowed the big rich,

leading The New York Times to dub him “the hedge fund candidate.” By the time he won the election, he enjoyed wide support from the Business Roundtable, the Silicon Valley venture community and other titans. • Lloyd Grove: Bankers Think Obama’s in an Alternative Reality • Tunku Varadarajan: Can You Hear Goldman Laughing? Initially, big business was happy with Obama’s stimulus plan, and more or less was ready to acquiesce to both his health-care reforms and cap and trade. After all, most large companies generally provide some health coverage to their employees. For Wall Street, cap and trade represents just one more wonderful way to arbitrage their way to more profits. Of course, some corporate titans will remain loyal to the White House. Take the lucky folks from Spanish- based Abengoa Solar, who are now getting $1.45 billion in federal loan guarantees for an Arizona solar plant that will create under 100 permanent jobs while providing expensive, subsidized energy to perhaps 70,00 homes. If this is stimulus, it’s less jarring than a decaf from Starbucks. Also let’s dismiss those on Wall Street who whine about the administration’s occasionally tough anti-business rhetoric. Wolves should have thicker skins. The Obama administration and Congress have delivered softball financial reform dressed up as major progressive change. They should be grateful, not petulant. But there’s clearly something more serious than hurt feelings at play here. The pain felt by small businesses is hitting the big boys, too. After three straight bad years, small businesses buy a lot less stock, business services, and equipment. Big companies can hoard their money and sport big profits, but ultimately they have to sell to consumers and small firms. Maybe that’s something that the media moguls—who after all have to sell to the hoi polloi—have been picking up on, too. This has led some Obama allies, like GE’s Jeffrey Immelt, to grouse that Obama does not like business, and vice versa. “Government and entrepreneurs are not in sync,” he explained to reporters in Europe. So, too, has Ivan Seidenberg, the head of the once Obama-friendly Business Roundtable, who denounced the administration recently for creating “an increasingly hostile environment for investment and job creation here in this country.” Among businesses of all sizes, there is now a pervasive sense that the administration does not understand basic economics. This is not to say they believe Obama’s a closet socialist, as some more unhinged conservatives claim. That would be an insult to socialism. Obama’s real problem is that he’s a product, basically, of the fantastical faculty lounge. For the most part, university professors do not much value economic growth, since they consider themselves, like government workers, a protected class. Many, particularly in planning and environmental study departments, also embrace the views of the president’s academic science adviser, John Holdren, who suggests Western countries undergo “de-development,” which is the opposite of economic growth. Of course, such ideas, if taken seriously, have economic consequences. You want to see the future? Come to California, where the regulatory stranglehold is killing our economy. Subsidizing favored interests also is not a winning strategy. There’s simply not enough money to maintain a federal version of Chicago-style baksheesh. The parlous state of Obama’s home state of Illinois—which manages to make even California or New York appear models of prudent management—demonstrates the futility of the subsidize-the-base game. The worst part is that none of this was necessary. A stimulus plan that helped workers and communities by recreating a WPA for the unemployed youths might

have gained wide support on Main Street. Credits for hiring, reductions in payroll taxes or a regulatory holiday for small firms also might have bolstered business confidence. Business people, particularly at the grassroots level, would also like to see a return for the detested TARP in a freer flow of credit for their firms. They are not so much hostile to Obama as puzzled by his inability to address their needs. But for now, the stimulus is widely seen as a wasted opportunity and proof of Washington’s enduring incompetence. As a result, roughly 80 percent of Americans, according to Pew, say they don’t trust the federal government to do the right thing, which does not bode well for a second round of pump-priming. This leaves business turning back to the Republicans. Not because most see them as competent or even intelligent; GOP rankings are also at a low ebb. Business owners across the spectrum are forced to embrace the “party of no” because Obama and the Democrats have given them so little to say “yes” to.

Tax incentives should be targeted towards renewables not oil and gasCha 13 - J. Mijin (Dissent, 6/27/13, “Unnatural Gas: How Government Made Fracking Profitable (and Left Renewables Behind),” http://www.dissentmagazine.org/online_articles/unnatural-gas-how-government-made-fracking-profitable-and-left-renewables-behind)patel

Despite what critics claim, tax credits and mandates for production, like renewable portfolio standards, are not unnecessary government interventions in market dynamics. On the contrary, federal resources can be leveraged to provide a stable investment outlook to attract private investment. In an emerging industry, like renewables, predictable market demand through production mandates allows a steady outlook for investment. California, for example, increased its share of renewable energy from 13 to 20 percent in just three years, in large part because its renewable energy production target is 33 percent by 2020. On the other hand, tax credits and mandates for already established industries, like oil and gas, provide no innovation capital for future growth and only act as a profit subsidy. Oil and gas companies continually post record profits and any government assistance is not only unnecessary, it diverts resources from struggling industries that need steady support to expand. Further, fossil fuels are a finite resource; any research and development support should go toward new energy sources that can permanently replace fossil fuels, and not to draining every last bit of oil and gas from the ground. The divergent histories of renewable energy development and fracking show that it is not the strength of the technology that predicts success. Rather, it was a deliberate government strategy to develop fracking and advance oil and gas interests over the development and expansion of renewable energy. If the same level of financial and research support was targeted toward renewable energy development, we would be free from dependence on oil, foreign and domestic, and make meaningful carbon reductions to stave off the worst effects of climate change. We can still make the transition to an economy powered by clean energy, but that window will close soon. It won’t be too many years until energy supply sources will be the least of our concerns.

Tax credits need to be renewed every yearCha 13 - J. Mijin (Dissent, 6/27/13, “Unnatural Gas: How Government Made Fracking Profitable (and Left Renewables Behind),” http://www.dissentmagazine.org/online_articles/unnatural-gas-how-government-made-fracking-profitable-and-left-renewables-behind)patel

In the past few years, renewable energy support has become particularly politicized. The Solyndra bankruptcy provided fodder for continuous conservative attacks against government funding of renewable energy development, and since that time any research funding has been under heavy scrutiny and opposition. Even basic, long-standing support programs, like production tax credits, have faced strong opposition and been at risk of not being renewed. Current opposition to renewable energy support seems to be particularly vehement, but historically there has rarely been strong support for this research. Indeed, renewable energy exploration and development was contemporaneous with oil and gas discovery. The first commercial oil well was drilled in Pennsylvania in 1859. The first solar-power steam generation system for industrial machinery was developed in 1860. Ethanol was one of the best-selling chemicals until President Lincoln imposed an extremely high tax on spirits, including ethanol, to finance the war effort in 1862. After the tax, industrial and fuel ethanol disappeared for forty-five years. In the 1970s, solar-cell technology had advanced to a point where the cost was reduced from $100 a watt to $20 per watt. At that price point, solar modules were a competitive energy source for situations where electricity was needed far from power lines, such as off-shore oil rigs that only required warning lights and horns but had no power other than toxic, short-lived batteries. Ironically, it was the major purchases of solar modules by the oil and gas industry that gave the struggling solar cell industry the capital needed to survive. Support for renewable energy continued to grow in the 1970s, with President Carter leading a movement toward energy independence through conservation and increased domestic energy production with a strong emphasis on renewables. Solar funding, for example, increased from $77,000 in 1970 to $261 million in 1977. Famously, Carter even put solar panels on the White House. The 1970s also saw major developments in oil and gas production. In 1970 crude oil production reached its highest level in the lower forty-eight states. A few years later, in 1973, OPEC announced an oil embargo against the United States and other targeted nations and cuts in oil production. As a result, the cost of oil skyrocketed, leading to gas shortages and rationing. In response to this crisis, the Energy Reorganization Act of 1974 split the responsibilities of the Atomic Energy Commission into the Nuclear Regulatory Commission, which would take over the regulatory aspects of nuclear energy, and the Energy Research and Development Administration (ERDA), which would eventually become the Department of Energy. The ERDA was charged with bringing together all energy research and development efforts, including solar and energy efficiency measures. Not surprisingly, the momentum behind renewable development came to a rapid halt as soon as Ronald Reagan was elected president. Not only did he remove the solar panels atop the White House, he also gutted funding for solar development and poured billions into developing a dirty synthetic fuel that was never brought to market. This start-and-stop support hindered the

renewable energy industry’s growth. It is a problem that continues today. Uncertain industry outlook scares away private investment, which in turn limits the development and expansion of renewable energy deployment. The momentum behind renewable development came to a rapid halt as soon as Ronald Reagan was elected president. Not only did he remove the solar panels atop the White House, he also gutted funding for solar development and poured billions into developing a dirty synthetic fuel that was never brought to market. The bias against renewable funding and support is clear. Recent analysis found that over the first fifteen years an industry receives a subsidy, nuclear energy received an average of $3.3 billion, oil and gas averaged $1.8 billion,Fto and renewables averaged less than $0.4 billion. Renewables received less than one-quarter of the support of oil and gas and less than one-eighth of the support that nuclear received during the early years of development, when strong investment can make a big difference. Yet even with this disparity, more of our energy supply now comes from renewables than from nuclear, which indicates the strength of renewables as a potential energy source. In fact, global solar capacity grew by 74 percent between the end of 2006 and 2011. In the United States, 39 percent of new electric capacity additions in 2011 were from renewable sources, and in that same year renewables accounted for nearly 12 percent of U.S. primary energy production. Nine states now generate more than 10 percent of their electricity from non-hydro renewable energy and California continues to hit record peaks of solar energy generation. Wind and solar energy continually outperform expert predictions. Wind power generation has quadrupled between 2006 and 2010. Renewable energy development also shows how smart, consistent government support can help an industry grow. Wind was the fastest growing source of non-hydroelectric renewable generation, partly due to a federal production tax credit. In the first few years after the production tax credit was adopted, the industry grew slowly, but after attracting more investment production rapidly expanded. Unlike tax credits for the oil and gas industry that are written into the tax code, the production tax credit must be renewed every year, leaving it vulnerable to partisan politics. When it became clear that renewing the production tax credit would be a fight, the uncertainty resulted in a nationwide slowdown in the wind industry, with investors wary of investing in a market where future federal support was not predictable.

Oil and gas companies are extremely profitable and have been for several decades. Yet much of their current success was the result of not just favorable tax incentives and subsidies but also direct federal research. Federal energy subsidies began in 1916 and focused almost exclusively on increasing the production of domestic oil and gas until the 1970s. Over the following three decades, the Department of Energy invested roughly $137 million in direct gas research, in addition to federal tax credits for drillers that totaled $10 billion between 1980 and 2002.