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March 18, 2013
President seeks to funnel O&G royalties into research

President Obama used a speech at Argonne National Laboratory (ANL) in suburban Chicago to blame a possible delay in new energy research on automatic federal budget cuts (sequestration) and to pitch the Energy Security Trust Fund proposal he discussed in his most recent State of the Union address. 

The idea of the fund was introduced in 2012 by Securing America’s Future Energy (SAFE), a nonpartisan organization that advocates long-term policies to “break oil’s stranglehold on the transportation sector through alternatives like natural gas for heavy-duty trucks and plug-in electric vehicles.” 

Members of SAFE include a retired commandant of the U.S. Marine Corps and the president and CEO of FedEX Corporation.  SAFE had recommended that the trust fund be built with revenues from expanded Outer Continental Shelf and Alaska production.  According to SAFE, the fund should be capped, and the Department of Energy should report to Congress each year on the fund’s progress. 

No increase in deficit

In his Argonne address, the president states that his own proposal builds off the SAFE concept.

“These leaders came together around a simple idea,” the president said.  “Much of our energy is drawn from lands and waters that we the public own together.  So what they proposed is let’s take some of our oil and gas revenues from public lands and put it towards research that will benefit the public so we can support American ingenuity without adding a dime to our deficit.”

Subject to congressional approval, the president’s proposal would set aside $2 billion of O&G leasing revenues over 10 years to support research into a range of “cost-effective technologies–like advanced vehicles that run on electricity, homegrown biofuels, fuel cells, and domestically produced natural gas.”  According to the administration, these revenues are projected to increase over the next several years based on a combination of leasing, production, and price trends, with additional revenue potential generated as a result of reforms being proposed in the FY 2014 budget.  The trust is paid for within the context of the overall budget and will not add new costs.  Current revenue from oil leasing goes straight to the U.S. Treasury, as do all other federal tax payments.

Shift cars off oil

The president noted that the current gasoline price spike is part of a pattern that has emerged over the last several years.  “The only way to really break this cycle of spiking gas prices–the only way to break that cycle for good–is to shift our cars entirely, our cars and trucks off oil,” the president said.

Nondiscriminatory cuts

Regarding sequestration’s impact on federal energy research, the president said the cuts “don’t distinguish between wasteful programs and vital investments.  They don’t trim the fat; they cut into muscle and into bone.”  The president referenced a recent article in which ANL director Eric D. Isaacs and the directors of two other national laboratories wrote that the budget cuts will force them to cancel all new programs and research initiatives probably for at least 2 years. 

“And at a time when every month you’ve got to replace your smartphone because something new has come up, imagine what that means when China and Germany and Japan are all continuing to pump up their basic research, and we’re just sitting there doing nothing,” said the president. 

Lithium batteries

The importance of wisely funded research is exemplified by Argonne scientist Mike Thackeray, said the president.  Two decades ago, Thackeray and other Argonne scientists started work on a rechargeable lithium ion battery.  The team was told that the work was not worth the effort because even if they could invent a battery that could hold a charge, the cost of making it workable in a car would be prohibitively high.  The Argonne team proved the skeptics were wrong and produced batteries that cost less and last longer.

“So what was just an idea two decades ago is now rolling off assembly lines in cutting-edge, fuel-efficient cars that you can plug in at night,” said the president.

Click here for a transcript of President Obama’s address.

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