When the Senate passed a long-awaited energy bill yesterday, I flashed back to a fascinating off-the-record chat I had back in 2004 with a top executive of a major oil company. He was in Washington to help make sure that the energy bidness got its piece of an especially hideous tax break called the Sec. 199 production deduction.

I asked him if passage of this subsidy would encourage his company to build a single refinery or drill a single well. He laughed at my stupidly naïve question. "Of course not," he replied, "But we're happy to take their money."

By "their money," of course, he meant our money and that of our grandchildren. Nonetheless, he and others apparently did their job well, since by the time the bill became law, energy and nearly everyone else got the tax subsidy, which started as a 3% deduction, grew to a 6% this year, and was scheduled to balloon to 9% in 2010.

I couldn't help but think of my oil company friend yesterday. Earlier this year, the House tried to repeal the deduction, but in the face of stiff opposition from the White House and the Senate, it has now given up. So, the energy bill passed the Senate 86 to 8 on Dec. 14, the House will go along, and it will be signed by President Bush. The production deduction boondoggle will live for another day.

Just as troubling, the bill is loaded with all kinds of new subsidies and mandates, all geared towards driving energy consumption this way and that. For instance, it requires the use of 36 billion gallons a year of corn-based ethanol—a product which backers like to think significantly reduces greenhouse gasses, but which probably does not. And, by the way, all that land being used to produce subsidized corn for ethanol won't be available to grow other things, such as food.

All of this continues Washington's never-ending, wrong-headed effort to use government subsidies and controls to save energy. I can't help but think how much easier and more efficient it would all be if we dumped all of these incentives and just let the price of energy continue to rise. That, more than anything, will help us achieve self-sufficiency and reduce carbon emissions.

By the way, my 2004 visitor was quite right. Since the oil company tax subsidy was passed in 2004, not a single refinery has been built in the U.S. and domestic oil production has actually fallen from 5.4 million barrels per day to 5.1 million.