How Offshore Drilling Can Aid Cleantech

Ah, compromise, that cornerstone of Democracy. A new, bipartisan effort, advanced by the so-called “Gang of Ten” (five Republican and five Democratic senators), aims to break the deadlock that has recently sunk every attempt to find new energy solutions in the Senate by marrying the critical renewal of renewable energy tax incentives with the dubious opening of the outer continental shelf to oil exploration. In other words, could drilling for offshore crude actually help cleantech?

At least politically, it looks like it. The Gang of Ten’s proposal includes the Democrats’ plan of financing the investment and production tax credits by taxing oil companies — but it would also open up huge chunks of ocean on the East Coast and in the Gulf of Mexico to drilling. The plan is already gaining traction, most notably with presidential hopeful Barack Obama who on Friday modified his position saying he would consider offshore drilling as part of a broader energy plan. The McCain camp was quick to revel in its opponent’s softening and endorsement of an “all of the above” energy solution. This is different from a tax on oil’s windfall profits that Obama has been pushing heavily.

The proposal’s long-term goals could be good for cleantech types. Aside from extending the ITC and PTC to 2012, longer than some of the previous renewal attempts, it would set the goal of getting 85 percent of America’s cars off oil in the next two decades. The federal government would incentivize the switch with $15 billion for R&D and offer $7,500 tax credits on the purchase of alternative fuel vehicles.

The $84 billion proposal would be paid for by revenues from leases signed for new offshore drilling, as well as back-royalties the government says oil companies owe on existing leases. The proposal would also repeal the manufacturing tax credit oil companies currently enjoy. This could be the bit of quid pro quo that keeps the solar and wind industries from losing $19 billion and some 116,000 jobs.

When all is said and done, the proposal could represent one of the first real options for the renewable tax credit’s renewal this year. But it won’t hit the Senate floor until September when Congress is back in session, and with the presidential race turning more venomous each week, it’s unclear what the political atmosphere will look like by then. It does seem clear that the energy situation won’t improve and the renewable energy tax credits certainly won’t be renewing themselves.