How the US can reach a grand bargain on energy policy

Earlier this month, President Biden imposed new sanctions banning Russian imports of oil, liquified natural gas and coal to the United States. It was noteworthy that, unlike previous sanctions, Europe did not follow suit. They didn’t because they couldn’t. While the U.S. only imports a relatively small amount of Russian energy, the EU imported 45 percent of its total gas from Russia last year.  

What recent weeks have reminded us clearly is that access to energy is a strategic asset — and that America should achieve independence from foreign energy as soon as possible.   

Two days later, the House of Representatives voted — almost unanimously — to ban the import of Russian energy. The vote was largely symbolic, as Biden had just issued his executive order. For weeks, traders had reported that Russian crude was trading at steep discounts and that upwards of 70 percent of Russian oil and gas shipments over the past month have gone unsold.  

Nevertheless, the House vote was very significant for a different reason. It demonstrated a bipartisan recognition of the imperative to use more of our own energy and rely less on hostile foreign sources.   

Democrats and Republicans could not be further apart on how to accomplish this, however. The president, taking the lead from extreme elements of his party, has used his administration to demonize the oil and gas industry and implement policies that have served as a disincentive for energy companies to produce. Many Republicans, on the other hand, are skeptical about human contributions to climate change and reject the massive near-term costs that climate activists propose to avoid potential distant future problems.  

The fact is, petroleum and natural gas will remain the most consumed sources of energy for decades. In the meantime, the United States must become energy independent and provide as much oil and gas as possible to our friends and allies.  Therein lies the possibility for a grand bargain that gets Democrats and Republicans each what they believe to be best for the nation.   

In April, President Biden announced a new target for the U.S. to achieve a 50-52 percent reduction from 2005 levels in greenhouse gas pollution by 2030. He then proposed approximately $550 billion of new spending in his Build Back Better bill to accomplish this goal. The bill provided for more than $300 billion of clean energy tax credits, a new $29 billion fund to make grants to pollution reduction projects, $12.5 billion for subsidies to buyers of union-manufactured electric cars, and a dozen other green initiatives.  

Republicans want to implement policies that address the urgent need to incentivize the oil companies to maximize the amount of oil and gas that they produce and distribute. America’s energy resurgence over the past decade also positions us well to alleviate the growing energy crisis in Europe. The U.S. is now the world’s leading producer of oil and natural gas and exporter of liquefied natural gas. For a period earlier this year, the U.S., in fact, supplied more liquefied natural gas to Europe than Russia.     

The industry has been clear about what it needs to achieve U.S. energy preeminence. It has asked the administration to speak clearly and without equivocation that the U.S. will be a reliable producer and supplier of oil and natural gas to our allies around the world, both now and into the foreseeable future. They would ask Congress to reverse several of the energy-unfriendly initiatives that the administration has implemented in the past 14 months (shutting down the Keystone XL Pipeline, federal land and waters production moratorium, reversal of the 2020 environmental review process improvements and recently proposed new FERC rules). In addition, they would require faster resolution of liquid natural gas production applications and regularly scheduled offshore and on-shore oil and gas leasing.    

There is a deal to be done — a grand bargain. Invest heavily in alternative energy adoption, but, during the decades of transition, implement a patriotic and essential policy to produce more fossil energy. Under the grand bargain, Congress would enact many of the climate provisions of the Build Back Better Act and also reverse the past year’s energy unfriendly policies and implement other measures to make the U.S. the energy superpower it should be.  

To address the pain that Americans (especially lower and middle-income Americans) are experiencing today, Congress should suspend the federal gasoline tax for two years, and appropriate an amount sufficient to reimburse states to suspend theirs. The estimated average savings to taxpayers would be 52 cents per gallon, but as much as 85 cents in some big states. According to my calculations, the two-year cost of this temporary tax cut would be approximately $200 billion.

Conservatives (like me) will hate the climate spending — especially the payouts to labor unions and subsidies paid to wealthy buyers of electric cars; they will also hate any tinkering with the Trump Tax Cut and Jobs Act to pay for these proposals. Liberals will hate the profits (but love the taxes) that the energy companies will enjoy by incentivizing exploration and drilling. They may also hate the gasoline tax cuts because they believe they will encourage more driving and emissions; that said, they should like that the bulk of this tax cut will go to lower and middle-income families and be paid for by wealthier individuals.  

Winston Churchill (later, Rahm Emanuel) reportedly said, “never let a good crisis go to waste.” Today, we have a crisis — a national security crisis and a standard of living crisis. America’s leaders must seize the moment by adopting a bold energy policy that enhances our national security, accelerates the transition to alternative energy and reduces the current economic strain on the American people.  

David F. Eisner is a New York-based businessman and investor. He was the Treasury Department’s assistant secretary for Management from 2018-2021.