Last month, during his State of the Union address, President Obama indicated a desire to use proceeds from increased offshore drilling to fund a trust with the intention of finding an alternative to gasoline.
This afternoon he is expected to suggest a $2 billion fund, set aside over a ten-year period. While this sounds like a proposal that could easily be supported by both the Democratic and Republican parties, it may not be as clear-cut a victory as you would imagine.
By increasing offshore drilling, what Obama is really talking about is raising the limits on existing operations. For sure Republicans want to see this, but is it really enough incentive for them to get behind the $2 billion fund for advanced-vehicle research?
In order to completely convince Republicans, Obama will most likely have to agree to allow new operations, not just increased limits on current ones. Republicans want to see Obama open up new areas of production, such as off the Atlantic Coast.
The idea behind the trust would be to fund research into fuels that could eventually take the place of gasoline.
America has long tried to ease the strain of its gasoline dependence, but there is still a lot of work to be done. Hybrid and electric cars have become more popular, but still represent a very small fraction of the number of cars and trucks on the road.
Yet progress has been made. From 2007 through 2012, the EPA estimates that CO2 emissions have fallen 13% and fuel economy has risen by 16%.
Companies such as Clean Energy Fuels Corp. (CLNE) would likely benefit from the building of such a trust. The company sells natural gas as an alternative for vehicle fleets. As of the end of 2012, the company owned, operated, or supplied 348 natural gas fueling stations.
Westport Innovations (WPRT) is another company that would likely benefit from the fund. WPRT builds engines and fuel systems that use natural gas and alternative fuels.
In order for the President's plan to take effect, it is going to need the approval of both political parties, something that has not been an easy task in recent years. The environmental aspect of the fund is going to cater to Democrats, as is the fact that there will not been any need for opening up new exploration sites.
The Republicans are going to like hearing of increased drilling limits, but will the fact that the plan does not include opening new federal ground or waters where it is currently off limit derail the process?
Some Republicans have hinted that this is a plan they could get behind, but when it comes down to a vote you can be sure to hear complaints about new grounds not being included in the increased production.
You can read the White House's complete fact sheet on the proposal here.
Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.