Can you hear that? It's the distant chant of "drill, baby, drill" emanating from Capitol Hill.
Today House Speaker John Boehner (R-Ohio) formally kicks off his party's attempt to "drill for a highway bill" when he announces the GOP's push to expand oil and gas drilling to fund transportation infrastructure projects. As reported by Politico, "Rumor has it that Boehner will hype a five-year highway bill at current levels or slightly higher but will not get into the exact pay-fors -- making it tough to tease out exact transportation funding figures. At the very least he should lay out a timeline for committee and floor action. It's a chance for House Republicans to hit back against the two-year Senate bill and sell their energy-for-infrastructure approach as the other chamber struggles to find $12 billion to pay for its version."
As I blogged earlier this week, there are at least three House bills sponsored by Republicans that seek to use royalties from expanding drilling to bolster transportation funding. A House Natural Resources subcommittee will convene tomorrow on this scheme. For reasons I've already outlined, Congress should not drill and drive.
I like how my colleague Jesse Prentice-Dunn at Sierra Club characterized the GOP ploy to further pander to Big Oil:
The Speaker is right that we desperately need to invest in our crumbling transportation infrastructure, but wrong in suggesting that we must sacrifice our environment to do so.
Our addiction to oil is threatening our climate, our coasts, and our wallets. Transportation, driven primarily by our passenger cars and trucks, consumes roughly two-thirds of oil used nationwide and is responsible for roughly one-third of our nation's carbon pollution. At the same time, nearly half of Americans lack access to public transit, forcing them to pay any price at the pump to get around.
Instead of offering a plan to upgrade our infrastructure into the 21st century, Speaker Boehner laid out a one-two punch that will leave us addicted to oil for decades to come.
And it's not just us enviros who oppose this bit of "bait and switch" by Boehner et al. The corporate polluter-funded, ultra-conservative Competitive Enterprise Institute has rejected the GOP plan to fund roads through drilling as "shortsighted." Behold this withering excerpt from CEI's Marc Scribner's blog today:
The transportation system is already over-politicized. The myopic Republican plan to partially fund transportation improvements through oil and gas lease revenues — breaking with the long-established “user-pays” principle — will almost certainly increase political manipulation of transportation investments in the future, thereby increasing waste, fraud, and abuse. The U.S. cannot afford to go down this road. While I’m all for “drill, baby, drill!” and reducing the deficit with oil and gas royalty revenues, these monies should be deposited elsewhere. Elsewhere as in, “anywhere but the Highway Trust Fund.”
(Hat tip to Marc for including the image of AC/DC's album cover "Highway to Hell" in his blog.)
Fortunately, for the most part Democrats oppose the Republican bill to drill for highway dollars. And not all Republicans are in lock-step with Boehner and his boys in the Hosue. In fact, earlier this week Sen. Jim Inhofe (R-Oklahoma), ranking member of the Environment & Public Works Committee who is co-sponsoring a bi-partisan transportation bill, has dismissed the House’s drilling-for-infrastructure stance. “There is no money in expanded energy production,” he told Politico. Inhofe said it would also take two or three years for the money to roll in — not nearly quick enough to fund the bill.
It's worth also noting that I attended a conference yesterday devoted exclusively to the topic of the challenge America faces in finding the funding to solve our infrastructure crisis. To sum up the problem: Our country's aging transportation network is deteriorating and the cost of repairing -- let alone upgrading -- our crumbling bridges, roads, railways, runways and ports is staggering. To wit:
- The American Society of Civil Engineers has estimated that an investment of $1.7 trillion is needed between now and 2020 to rebuild roads, bridges, water lines, sewage systems and dams that are reaching the ends of their life cycles.
- The Urban Institute puts the price tag at $2 trillion.
- Last year, a report by 80 experts led by former federal transportation secretaries called for a $262 billion annual investment.
- Failure to invest now will only increase the bill later -- already, infrastructure deficiencies add $97 billion a year to the cost of operating vehicles and result in travel delays that cost $32 billion, according to the civil engineers.
The purpose of the conference was to bring together experts from all sectors to discuss ideas for raising the massive amount of money we need to take care of our present transportation needs and to cover future costs. While opinions differed on just the right policy solutions to the problem, everyone agreed that trading more drilling for more dollars to fund infrastructure made absolutely no sense. Setting aside the ludicrous logic behind expanding destructive drilling and deepending our dangerous dependence on oil, any possible new royalties would generate too little revenues (possibly a few billion dollars per year) much too late (a decade or more from now).
Several alternative solutions make a lot more sense. For example, there was consensus at the conference that the federal gas tax should be raised. The present rate of 18.4 cents per gallon was set back in 1993. Unfortunately, everyone recognizes that Congress and the Obama administration lack the political courage to take that commonsense action.
Even if the gas tax were raised by 10 cents or more, that still would not generate enough cash for transportation because of the escalating price tag of our nation's infrastructure needs, as well as the fact that the shift to a higher fuel-efficient vehicle fleet will mean that drivers won't need to fill up so much -- lessening the amount the government could collect at the pump. Therefore, relying almost exclusively on the gas tax to fund federal transportation will soon lead to insolvency for the program. The revenue will have to come from somewhere else.
One simple and straigtforward way to boost transportation funding might be to divert some of the roughly $6 billion raised annually from import fees collected at our nation's ports. All of that revenue currently goes to the U.S. Treasury, so there is a tradeoff in that siphoning those fees for infrastructure would mean less money going to the General Fund.
The most logical solution offered came from the Carnegie Endowment Fund, which advocates a so-called Oil Security Fee. (It just so happens that NRDC, as part of the Mobility Choice coalition, coined that term in our own plan unveiled last year which calls for an "oil security fee" on gasoline and diesel to reflect the true cost of securing oil supplies as well as policies to promote more efficient mass transportation, telecommuting and mixed use residential development.)
In any case, all oil produced or imported in the United States already has a federal surcharge of 8 cents per barrel -- this is a "pollution" fee. Carnegie proposes a countercyclical oil and gas pricing structure where a 5% ad valorem oil security fee is applied to all oil and refined oil products produced or imported in the U.S. -- and the federal gas tax rises or falls in an inverse relationship to the rise and fall of world prices. In other words, when oil prices are high, gas prices are low and an oil security fee is applied. When oil prices are low, gas tax levels are readjusted.
With the current straight gas tax, when oil prices rise the burden is on consumers who pay more at the pump, hurting the economy. The beauty of the oil security fee is that it moves the revenue generation burden toward oil producers when their profits are high. It also ensures that gas taxes are applied only when oil prices are declining at a rate where the total price of gasoline, including the gas tax, is also declining. Likewise, when oil prices are declining, ad valorem revenues decline, and increasing gas taxes can make up for this lost revenue.
This makes a lot of sense because when oil prices are rising, oil companies are making higher profits and can afford to pay the higher ad valorem tax while consumers, who are already suffering from higher gasoline prices, get some relief at the pump. When oil prices are declining, the consumer is receiving the benefit of lower prices at the pump and the gas tax is less of a burden. As an added benefit, this proposal brings some stability to volatile gasoline markets, creating a more equitable and stable situation for consumers and businesses -- and reining in market speculation. Let's hope Congress will seriously consider Carnegie's approach.
No matter what, it seems that our funding crunch will spur our transportation system in the direction of "user fees," such as more tolls on our roads and higher fees for transit. Already, states are adopting this strategy as a way to address funding shortfalls. The state of Maryland, for example, just raised toll rates on several heavily-traveled bridges and tunnels and the governor has proposed a 15 cent hike in the gas tax. (As Gov. O'Malley is about to find out, among the various taxes out there, you'd be sore pressed to find one that's more unpopular than a tax on gasoline.) Eventually, the federal government may have to adopt a nationwide user fee approach (like tolling all interstates) in order to funding the nation's critical -- and growing -- infrastructure needs.
For as Winston Churchill said, "Our difficulties and our dangers will not be removed by closing our eyes to them."