"We have a choice to make. We can remain one of the world’s leading importers of foreign oil, or we can make the investments that would allow us to become the world’s leading exporter of renewable energy.”
These words, spoken by President Obama in March 2009 two months after taking office, made clear his intent – already enunciated during his campaign – to steer the United States energy industry in green directions. When the $787 billion stimulus bill was signed the previous month, it showered renewable energy with new funds. At the dawn of Obama’s second year, it is worth asking what influence he has had thus far on this sector of the economy.
For traditional energy producers, the budget Obama formally unveiled in February 2010 marked the second consecutive year in which the president has tried to eliminate tax breaks for energy exploration and add new fees on energy producers. The administration’s targets for elimination include deductions for intangible drilling costs such as hauling supplies and preparing sites, domestic manufacturing deductions by oil and natural gas companies, and the percentage depletion claimed for extracted oil and gas. The White House also has proposed a new federal excise tax on oil and gas produced in the Gulf of Mexico.
Predictably, a slew of energy producers – including American Petroleum Institute President Jack Gerard – immediately voiced opposition to the plan. Responding to Obama’s remarks, Gerard called a robust U.S. oil and gas industry “essential to the recovery of the nation’s economy.”
Yet if Obama has caused traditional energy producers to see red during his first year in office, he has many others – namely, those dedicated to the development of alternative energy sources – seeing brighter times ahead. Under Obama’s proposed 2011 budget, the Department of Energy (DOE) would boost spending by 4.6 percent for basic science, and increase spending on energy research – two favorite areas for Energy Secretary Steven Chu. The budget proposes accelerating the transition to a low-carbon economy through support of development and deployment of clean energy technologies such as nuclear, solar, biomass, geothermal, wind and low-carbon emission coal power.
Under the budget, the DOE would get the ability to guarantee an additional $36 billion in loans for construction of new nuclear plants, on top of the $18.5 billion that four construction companies had been previously short-listed to receive. These loan guarantees would sharply reduce the financing cost of capital-intensive nuclear plants, and proponents hope it would help jump-start an additional half-dozen nuclear power plants. Quickly following his pro-nuclear words in the State of the Union address, President Obama announced “as just a start,” that the DOE would provide Southern Company with $8.3 billon in conditional loan guarantees to build two new nuclear reactors in Georgia’s Burke County. These two new nuclear plants will be the first to be constructed in the U.S. in more than three decades.
In consideration for the impact to a fragile U.S. uranium mining industry, the DOE’s fiscal year 2011 energy budget also rescinded a plan to sell excess uranium from DOE stockpiles to fund cleanup of the Portsmouth, Ohio nuclear site. Instead of focusing the financial burden on the U.S. uranium mining sector, the funds for this cleanup will come from taxation of the entire nuclear sector. We believe this to be a first vote to revitalize what was the world’s number one uranium mining country 30 years ago.
Other alternative energy sectors have enjoyed strong support from the Obama camp even as financing – or uncertainty over scaling up new technologies for practical use – impedes swift implementation. For example, the DOE recently granted $44 million for research into commercializing algal biofuels and $97 million for algae pilot and demonstration projects. Yet as The Wall Street Journal reported, this technology has not yet proved that it can produce fuels in sufficient quantities or at a low enough cost to make a dent in U.S. liquid fuel consumption.
Even in the face of such bold plans, the administration must walk a tightrope in an economy still heavily dependent on traditional energy sources. As we have noted in this brief summary, Obama’s vision for a reformed energy policy is having significant – if in some cases gradual – effects on the industry. As his term progresses, we will continue to witness further newsworthy reforms.
Amir Adnani is the president and CEO of Uranium Energy Corp. For more information, contact This e-mail address is being protected from spambots. You need JavaScript enabled to view it or visit www.uraniumenergy.com.
Add this page to your favorite Social Bookmarking websites
