Thursday, May 6, 2010

Oil Spill in the Gulf and the Prospects for Senate Action on Energy & Climate Legislation

By now we're all aware of the massive oil leak into the waters of the Gulf. In the past few days, pundits have been spending a fair amount of time trying to predict what this crisis will do to the already-strained prospects for legislative energy and climate action this year.

In the days before the explosion even took place, a rivalry had developed involving the possible moving up of immigration reform on the legislative calendar at the expense of the Kerry-Graham-Lieberman bill. That led to Senator Lindsey Graham (R-SC) threatening to bail as the sole Republican attached to the bill he'd been helping to write for months and the indefinite delaying of the bill's scheduled introduction.

After a rocky week, environmentalists saw the horrible events in the Gulf as further evidence of the desperate need for major legislative action. The leak might even have been seen as a potential catalyst, allowing a seamless transition from financial regulatory reform to the energy and climate bill. Despite that, most talking heads have concluded that the leak has done the opposite: making legislative success even less likely. It's easy to see the rationale for this pessimism. In recent days, Democratic Senators Bill Nelson (FL), Bob Menendez (NJ), and Frank Lautenberg (NJ) announced their complete opposition to any further offshore drilling. Nelson even went as far as to suggest he would filibuster any bill expanding the controversial practice, saying, "Any proposal for offshore drilling is dead on arrival."

Given the consensus approach Graham, Kerry (D-MA), and Lieberman (I-CT) had taken and had hoped would pave the way to passage, a bloc of needed Democratic members opposing one of the provisions most likely to attract GOP votes is a major problem. On top of that, many have pointed out the crisis could be used by the president to advocate for the legislation and see President Obama's relative silence on the issue politically as evidence of his reticence to call for bold action. Though that analysis may end up being correct, we can't know that this soon. It is very possible President Obama is trying to take the classy road by not hijacking a national tragedy that saw eleven lives lost and a likely devastation of already-struggling coastal communities for political purposes before there's even time to mourn. It's also arguable that Americans want to see their government addressing the immediate problem first, by trying to collect and disperse the leaked oil, cap and stanch the leak itself, and offset the damage to the affected communities, which is what they've been doing. Such action does not preclude future use of the crisis as a "teachable moment" once the immediate disaster has subsided somewhat.

Matt Ygelsias also
offers a better source onto which enviro-anger can be focused:
"In some ways the larger issue here is the continued loyalty to Big Oil of Gulf Coast politicians like Mary Landrieu who’s trying to leverage this disaster into bolstering support for more drilling. The point of the Obama administration going soft on drilling in the first place was that the iron math of the Senate makes it impossible to do anything without the support of the Landrieus (”Landrieux”?) of the world. And if the politicians’ whose states are going to be devastated by this are responding by hewing even more tightly to the Big Oil line, then the situation is just hopeless."
All that said, as the consummate optimist, I am not yet willing to write the obituary for Kerry-Graham-Lieberman. Giving me cause for continued hope are statements from some key members of the upper chamber. In the same breath as his statement of opposition to offshore drilling, Menendez took the opportunity to say the leak “should be an impetus for the Senate to act on climate and energy, rather than a barrier.” Senate Majority Leader Harry Reid (NV) added, "I think it should spur us on. Alternative energy is what we need to do as rapidly as we can, so I think rather than slow us up, I think it should expedite our doing energy legislation.”

Even more than that, experience tells me two things: that members of Congress are suprisingly fickle and often change their minds rather quickly, and that few things will stand in the way of Barack Obama when he's committed to getting something done. Accordingly to his last statements, President Obama is dedicated to tackling the energy and climate crisis this year. Until he changes that tune, I will remain cautiously optimistic.

As of today, Senator John Kerry has committed to moving forward on the bill and confirmed that it will be rolled out early next week.

"I know what the conventional wisdom is out there," Kerry said, "that with all the election-year jitters, a looming Supreme Court confirmation and a difficult legislative schedule, that Congress is going to avoid tough choices as November nears. But I believe this is the year – perhaps our last, best chance – to pass comprehensive climate and energy legislation."

Let's get to work.

The Dodd/Shelby TBTF Deal

Details from the Washington Post:

"The heart of the agreement was Dodd's willingness to drop a proposed $50 billion fund, which would be filled upfront by the financial industry, that would cover the cost of closing down failing firms. Under the Dodd-Shelby deal, the Federal Deposit Insurance Corp. would liquidate faltering firms by borrowing money from Treasury to cover initial costs. The government would recover the costs by selling off the firm's assets, with creditors and shareholders incurring losses. Other large banks could be assessed to pay for additional costs as a last resort."

"Also, creditors of a failing firm would be forced to pay back the government any money they received above what they would have gotten under a bankruptcy proceeding. Any seizure of a large, failing firm would require court approval to ensure that the government not shut down a company inappropriately. In addition, Congress would have to approve the use of federal debt guarantees, and regulators also would be able to ban management and directors of failed firms from working in the financial sector for a minimum of two years."