Editor’s Log: Energy Sanity

During the 2008 national elections, there was much rhetoric about leadership. Unfortunately, in regards to the energy industry, that leadership has failed miserably with no indication of sanity any time soon.

The United States has not established a coherent, realistic and practical energy policy for decades. President Carter established the energy administration back in the 70s. That department now has a bloated budget and bulging staff and has had only negligible effect and virtual no results for its original mandate: reduce America’s dependence on foreign energy. About the only policy ever receiving support was “cheap energy at any price.”

Of course, previous administrations, both Republican and Democratic, did not fare much better. President Bush (W) tried to get some domestic “hands-off” areas released for possible exploration but any progress he made was immediately rebuffed by the Obama administration.

Our current energy policy, or lack thereof, is a mess. On the one hand, you’ve got Obama preaching alternative energy sources and reducing our dependence on foreign oil, almost at any cost. That should mean increasing domestic production and pipeline infrastructure, but of course, it doesn’t. Obama is also encouraging our Middle East allies to produce more oil and making nice-nice with Venezuela’s Chavez in order to keep a healthy supply of oil flowing to the U.S.

Congress’ actions have been to virtually attack the domestic energy industry, trying to reduce exploration and growth incentives (even though most other industries receive similar considerations) while increasing tax and regulatory burdens. The “carbon tax” threatens to submarine economic recovery.

Our dependence on foreign oil will not end any time soon–especially as the world’s economy begins to revive and demand subsequently increases. The use of oil is embedded in our society–think plastics, pharmaceuticals, solvents, fertilizers and pesticides. Natural gas is also a carbon fuel but its efficiency and low carbon footprint makes it the perfect “alternative” fuel as we attempt to transition from oil-based fuel; a process that, even with a firm plan, will probably take a minimum of 50 years. However, to date, gas’ potential as an alternative fuel source has only received cursory attention from our Congressional leadership.

As the price of oil and natural gas continues to climb, there will be a corresponding rise in public pressure to address the issue. No doubt it will be extremely difficult to change the world’s appetite for carbon fuels; those efforts will be met with great resistance. The only way toward success is to seek realistic and practical solutions that recognize the short-term need for a healthy domestic energy industry. The only current action by our leaders seems to be centered on reverting back to making energy companies the fall guys for lack of a coherent, sensible direction.

Stimulus, again
After a busy month of traveling and many discussions with cities and contractors from around the country, it appears as if the sewer rehabilitation market is riding out the recession better than most construction-related markets. Though there are certainly parts of the country where rehab work is slim, by-and-large, contractors are reporting slow but steady work. Some even have substantial backlogs.

We’re also, at long last, receiving good news regarding stimulus funds. I’ve run into several cities that have received or should soon receive their funds. Final engineering is wrapping up and projects are being bid. That’s consistent with consensus projections that, at least for sewer/water projects, actual work should kick off late in the fourth quarter and early first quarter of 2010.

The question, for most cities, remains: what happens to their rehab and construction activities after the stimulus packages are gone? Though most agree that the economy is beginning to make a comeback, most likely improvements will come slowly, in bits and pieces, and that 2010, while improving, will still be a slow year. Will municipalities, after two years of recession, be able to generate the revenue they need to transition from a treading water mode to a progressive mode?

On the plus side, I’ve also increasingly been learning of cities finally–and agonizingly–raising their sewer and water rates, some quite aggressively and steadily over a period of several years. While no doubt that is a bitter pill to swallow, it is a necessary tonic if we’re going to even try to maintain these vital systems. It’s also hard to show much sympathy to those city governments who have typically avoided, at peril, raising sewer/water rates when needed and effectively keeping rates artificially depressed, typically for political reasons.

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