Car Donation Talk

While neither candidate has a truly sound energy plan, John McCain’s plan sounds like a recipe from several of my favorite movies. It has a tablespoon of the bitter reality in Saving Private Ryan, dash of Mr. Smith goes to Washington sweet idealism, and several cups full of good old fashion Willie Stark pork politics from All of the King’s Men.

The main tenet of the McCain plan is to produce enough energy to lower our dependency on foreign oil and achieve energy independence by 2025.  His plan states that reality is that our economy is being sucked dry paying for foreign oil. This is a bitter truth but one both sides of the aisle agree.

McCain has titled his energy plan the Lexington Project:

“named for the town where Americans asserted their independence once before.

The goal of energy independence by 2025 is admirable.  Voters love goals like this.  JFK’s promised in ten years America will set foot on the moon.   Voters loved it.  And we did.  John McCain promised strategic energy independence by 2025.  The jury is out on whether the American public supports Senator McCain’s energy policy.

The problem with John McCain’s plan is the way that he intends to achieve its admirable end.  The plan recommends that we do more of the same.  We do more drilling.  We use more coal and more natural gas.   Many experts including oil man T. Boone Pickens agree that we cannot drill our way out of this mess.  World oil production peaked in 2005 but demand has increased dramatically with the development of both China and India.  Since the oil companies are large contributors to John McCain’s campaign, it is tough to avoid commenting about the tax credits he has promised an industry who earned record earnings during this oil crisis. As for natural gas and coal we have both in abundance but they have not been able to solve our energy problems so far.

Promising the US oil companies expansion of US drilling will not increase our oil supply. The problem is that the number of refinies in the US has dropped dramtically since 1970 asa  result of the mergers in the oil industry. As of January 2008,there were 158 refineries in the US, Puerto Rico, and the US. Virgin Islands with 4 not currently active. In1981, there were 346 refineries . No new refineries have been built since 1976. With each oil merger, more and more oil refineries were closed. The result was increased demand and drastically decreased supply. All of the current refineries are at or nearly at 100% production.   While oil companies cannot increase refining oil production significantly, it can be decreased dramatically – when refineries close for storms, repairs, etc… It is unlikely that the US oil companies would start investing in new oil refineries after letting their numbers dwindle for so long.  However, even if new refineries were to come on line, the oil from new drilling areas would not make it to market until after the first term term has concluded.  

Three statements describe our current nuclear situation.  All of our current nuclear power plants are approaching their end of life, they are subject to increased failures due to age, and the power companies are protected from liability in case of failure.  Nuclear power plants are a problem ignored.  We still struggle over how to dispose of their waste – which John McCain said was something that he needed to study.  The White House has issued an estimate of 96 billion to complete the nuclear waste storage facility at Yucca Mountain.  Why is there a big rush to get new nuclear plants built now?  Mothballing large numbers of nuclear plants will require large amounts of public funding and a significant federal effort.  The British have estimated the cost to mothball a nuclear plant at up to one billion pounds per plant or almost 2 billion in US dollars.  Once we start mothballing large numbers of plants, the industry would have to deal with a huge public relations nightmare.  Even without the oversight problems with nuclear plants, the government subsidies, and the huge costs, any new nuclear plants will not be ready to produce electricity for between three to five years.  The nuclear solution is highly expensive which will not help us for several years down the line.

The final aspect of Senator McCain’s plan is the alternate energy component.  This aspect includes a $5,000 dollar tax incentive for every person owning a zero emissions vehicle, a 30 million dollar prize for any company which increases the storage of the current set of batteries used for alternate energy vehicles, and tax credits for R&D equal to 10% of wages for corporations.  While there are other aspects to the plan, these three aspects best indicate the viability of his plan. 

The zero emissions car tax credit sounds similar to a previously overturned tax credit.  A similar $5000 tax credit (for hybrids) was opposed by the Department of Transportation as the funding was taken out of the highway budget.  It was eventually overturned as it took money away from the maintenance of our roads and bridges.  If this is the case again, vital funding to maintain our interstate highway system will be given out as tax credits.  If the McCain plan can find an alternative funding source, the tax credits will be feasible.  However, would it be wiser to repeal the tax credits for SUV’s, than to offer new tax credits?  Both tax credits encourage exactly opposite activities (to read about the SUV tax credits click on the following link:  http://www.smsmallbiz.com/Tax-Deductible_Business_Vehicles.html).  Having opposing tax credits is a waste of money.  

The 30 million dollar prize to increase the storage capacity of our current set of batteries would be a great incentive.  However, throwing money at a process that is already proceeding without any help is a waste of money.  Several car companies (Tesla motors, Tango, Green Vehicles, Zenn, Zebra, and others) are already producing or will produce battery electric cars in the US by 2009 which can travel 120 miles between charges.  Several years down the road when McCain would be able to implement this plan – Toyota, Subaru, Honda, and several other major car companies would be mass producing battery electric cars with a similar range by 2010.

The final aspect of the McCain plan is the tax credit to corporations totaling 10% of salaries if the Companies are performing energy R&D.  While Congress could pass this law, the Regulatory Information Service Center would never be able to turn that into a law.  It is not supportable.  If any company involved in energy R&D received the tax credit for 10% of salaries – every company in the US would declare itself as a company performing R&D. 

John McCain’s plan is not practical.  Whether it is tax credits to oil companies who have donated money to his campaign or opposing tax credits – one for zero emissions vehicles and the other for high emissions vehicles, John McCain’s energy plan has a lot of sound and fury signifying nothing.  It will not achieve energy independence by 2025.