Drilling for clean energy innovation

Our solution might seem just as contradictory: drill for clean energy innovation. However, we are not talking about some deceiving ‘clean oil’ technology solution or about ignoring climate change. Rather, we suggest Washington policymakers raise at least $1 billion per year in new revenue from increased fees on oil and gas drilling, to be invested in breakthrough clean energy research at the Department of Energy’s Advanced Research Projects Agency-Energy (ARPA-E).

According to the Department of the Interior, oil and gas drilling revenue from federal lands increased 56 percent since 2000, averaging $11 billion per year. In Washington, $11 billion is often shrugged at – it is only two percent of the nation’s discretionary defense budget, for example. Yet $11 billion is also more than double what the United States invested in clean energy research in 2012. This current level of funding is far below what is necessary for making clean energy cost-competitive with fossil fuels, and to have a chance at mitigating climate change.

ARPA-E is one particular victim of Washington’s stingy clean energy efforts. Created at the urging of the National Academy of Sciences, ARPA-E is the premier source of public investments in research to achieve breakthrough clean energy. ARPA-E supports novel R&D projects that are transformative and pivotal to addressing climate change, as were DARPA’s early investments in what became the Internet.

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While ARPA-E often enjoys rare bipartisan support, its budget does not reflect the urgency and importance associated with developing better and cheaper low-carbon energy alternatives. Its FY2012 budget of $275 million falls short of the $1 billion the National Academy originally recommended, and is miniscule compared to DARPA’s $3 billion annual budget. Additionally, ARPA-E has faced appropriations challenges each year since its creation – most recently the House Appropriations Committee proposed to cut its budget by 80 percent for FY2014.

The proposal to fully fund ARPA-E using new oil and gas drilling revenue benefits from both historical precedent and bipartisan appeal. Congress supported breakthrough shale gas drilling research in the 1970s and 1980s through a tax on the interstate transport of natural gas, which the nation is seeing the benefits of today. Alaskan Senator Lisa Murkowski (R) has proposed using revenue from expanded oil and gas drilling to support development of next-generation renewable and fossil fuel technologies. And President Obama recently proposed creating a modest Energy Security Trust Fund supported by small increases in drilling fees to develop new fuels and transportation technologies that reduce oil consumption.

Both the president’s and Murkowski’s proposals offer a good start, but neither provides nearly enough. Limiting new funding to only developing transportation technologies - while obviously important - disregards the more extreme demands of addressing America’s energy and climate challenges. And raising revenue for energy innovation exclusively through expanded drilling will not generate significant revenue for at least a decade.

There is a natural compromise. The right should agree to raise at least $1 billion in new revenue by increasing onshore royalty rates by three percent and establishing an $8 flat fee on leased, unproductive acres on federal lands. The new revenue should be directed into an ‘Energy Innovation Trust Fund,’ which directly supports fully-funding ARPA-E’s budget each year. In exchange, the left should agree to open currently restricted lands to exploration and development, such as those on the Outer Continental Shelf, as long as there is state buy-in and federal regulations ensure environmental safety.

We need to aggressively develop next-generation clean energy using the spoils from last-generation fossil fuels. This proposal has the potential to bridge the political gridlock surrounding energy and climate policy, while providing long-term security to atrophied clean energy research budgets Guaranteeing adequate funding for ARPA-E will not solve all of the country’s innovation struggles, but it does prioritize supporting our most promising opportunities.

Washington needs to address the reality of the country’s energy situation now to have a chance at mitigating climate change. Tying oil and gas drilling to energy innovation would guarantee consistent investment in the nation’s energy future and is a clear-cut way for Congress to proceed beyond the status quo.

Stepp is a senior policy analyst and Nicholson is a policy analyst with the Information Technology and Innovation Foundation.

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