Bush To GM, Ford: Let Them Eat Cake.

Bush not keen to bail out US carmakers

US President George W Bush thinks hard pressed American auto giants, General Motors Corp and Ford Motor Co, should develop better cars instead of looking to Washington for help.

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Bush suggested that one way automakers could make more appealing products was to promote cars using alternative fuels, a topic he plans to mention in his state of the union address next week.

Bush said in the interview that US automakers could find new market share in the competition to sell vehicles that run on alternative fuels.

"As these automobile manufacturers compete for market share and use technology to try to get consumers to buy their product, they also will be helping America become less dependent on foreign sources of oil," Bush told the newspaper.

Now, on the face of it, that makes sense: you know, oil prices being so high, perhaps even artificially high, with no near-term fall in sight.

So it might interest you to learn that the Energy Bill of 2005, that Bush both lobbied for and signed, has these interesting little nuggets in it:

The bill exempts oil and gas industries from some clean-water laws, streamlines permits for oil wells and power lines on public lands, and helps the hydropower industry appeal environmental restrictions. One obscure provision would repeal a Depression-era law that has prevented consolidation of public utilities, potentially transforming the nation's electricity markets.

It also includes an estimated $85 billion worth of subsidies and tax breaks for most forms of energy -- including oil and gas, "clean coal," ethanol, electricity, and solar and wind power. The nuclear industry got subsidies for research, waste reprocessing, construction, operation and even decommission. The petroleum industry got new incentives to drill in the Gulf of Mexico -- as if $60-a-barrel oil wasn't enough of an incentive. The already-subsidized ethanol industry got a federal mandate that will nearly double its output by 2012 -- as well as new subsidies to develop ethanol from other sources.

The final bill dropped most of the controversial amendments that blocked passage of earlier versions, including authorizing oil drilling in the Arctic National Wildlife Refuge, relieving the petroleum industry of liability for the gasoline additive known as MBTE and exempting some communities from clean-air standards. Eco-friendly measures to tighten fuel-efficiency standards for automobiles and take a stand against global warming were deleted as well. What's left, said Rep. Edward J. Markey (D-Mass.), is "a smorgasbord."

For example, it exempts oil and gas companies from Safe Drinking Water Act requirements when they inject fluids -- including some carcinogens -- into the earth at high pressure, a process known as hydraulic fracturing. Betty Anthony, director for exploration and production at the American Petroleum Institute, said states already regulate the process, but residents of Alabama, Virginia, West Virginia and other states have complained that it has polluted groundwater in their communities.

Meanwhile, the measure will streamline Bureau of Land Management drilling permits -- even though the Bush administration already has granted a record number of permits on BLM land. Lawmakers also authorized seismic blasting in sensitive marine areas to gauge offshore oil reserves -- despite a moratorium on drilling in many of those areas. And the bill will exempt petroleum well pads from storm-water regulations under the Clean Water Act. Anthony said the provision makes sense because the wells are already exempt, but critics question why the oil and gas industry, which has seen record profits in recent months, should be exempt from any aspect of environmental law.

"This bill will allow America's most profitable companies to pollute our water supplies," said David Alberswerth of the Wilderness Society. "They're the kings of Capitol Hill."

House Majority Leader Tom DeLay (R-Tex.) also managed to insert at least $500 million in subsidies over a 10-year period -- with the option to double the amount -- for research into deep-water oil and gas drilling, a grant that many lawmakers expect to go to the Texas Energy Center in DeLay's home town of Sugar Land. The bill also includes royalty relief for deep-water drilling projects, a strategy that helped jump-start production in the Gulf during the 1990s.

"If you don't provide the relief, nothing will happen," said John Felmy, the American Petroleum Institute's chief economist. "The start-up costs are just too massive."

So if there's no incentive for oil and gas companies to spend their own money to work harder to find new sources of crude, if the administration is basically handing them the keys to the bar and saying "Lock up when you're ready to go to your AA meeting," then how on earth are Ford and GM supposed to react? They're assuming the President is comfortable with oil-fueled transportation.

Wouldn't you?

So this massive "alternative energy" push that Bush has touted as his shining energy plan, turns out to be "No Lobbyist Left Behind", particularly in the oil and gas industries, as John McCain put it so neatly.

Yes, Ford and GM should have foreseen this. That's what they're corporate planning people are paid a lot of money to do: peek into the future and nail down projections. But Toyota had the Prius, a hybrid car, on the market for four years before they saw a significant profit from American sales, and Ford and GM were already deep into their shareholders toilets. Did Bush expect them to lose more money these past few years? The bailout would have come a LOT earlier and Bush would have chided them for spending money on foolish alternative energy research!

For the record, I own a modest stock holding (a few thousand shares) in a company in Canada that is partnered with Ford in working on fuel cell technology.

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