X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
On April 21, 2005, five years after President George W. Bush first called for a national energy policy, the House of Representatives endured a marathon session and passed an energy bill. Two years earlier, in May 2003, the House had proposed a bill so laden with giveaways that it shamed even many in the industry with its gluttonous appetite for more than $40 billion in federal tax breaks, subsidies, and spending programs. In 2004, the Senate attempted to feed the energy industry tax incentives in the $13 billion to $17 billion range. By comparison, the current House bill is a low-carb diet with an estimated cost of $8 billion to $9 billion. The question is whether the policy is a thoughtful answer to the nation’s energy needs or merely a smaller, easier-to-swallow chunk of pork. Since the House and Senate have yet to reconcile their competing proposals for the nation’s energy future, now might be a useful time to examine what this slimmed-down bill contains. Coincidently , the National Commission on Energy Policy (NCEP) this year released its three-year bipartisan effort called “Ending the Energy Stalemate.” Its 16 commissioners, all heavyweight leaders, represented the diverse perspectives of industry and labor, environmentalists and consumer advocates, academics and policy-makers, and scientists and national security analysts. Their goal was to develop a consensus energy policy for an age of terrorism, global warming, high oil and gas prices, environmental concerns, and limited federal funding. How does the House bill’s effort compare with the measured, three-year NCEP process? This process was amply funded and supported by many scientific and econometric reports assessing the cost-effectiveness and technological premises of its recommended policies. It provides a valuable benchmark for comparison with congressional proposals. KEY DIFFERENCES Overall, there are five key differences between the NCEP policy and the House bill. First, the NCEP recommendations are revenue-neutral: They raise new money to be spent on energy programs so that there is a zero net effect on the federal budget. The House bill, slimmed down as it is, nonetheless adds to what is already a weighty federal deficit. Second, the House bill never mentions global climate change as a challenge facing energy producers, consumers, or policy-makers. By contrast, the NCEP policy raises the money to pay for its recommended initiatives through a modest cap-and-trade program on greenhouse-gas emissions, based on the NCEP’s conclusion that global climate change is to be taken seriously. The House bill is replete with tax credits and research grants for projects that would lower our carbon-intensive fuel mix, but no mechanism is provided to capture new revenues to pay for the programs. Third, the NCEP recommends a significant increase in vehicle fuel-economy standards, linked to investment tax credits to help retool U.S. factories to produce more-efficient cars. The NCEP does not recommend a particular miles-per-gallon standard. But its background studies suggest that improvements in vehicle efficiency from the current 24 mpg to a range of 30 to 37 mpg are cost-effective, meaning they pay for themselves in fuel savings over the life of the vehicle. In contrast, the House bill grants credits for hybrids and fuel-cell cars, but refuses to slim down Detroit’s gas-guzzlers through forcibly imposed fuel-efficiency standards. Fourth, the NCEP pushes for increased mandatory efficiency standards in major appliances and in buildings. The rationale for these standards is well-known to economists. Many empirical studies show that consumers and business managers regularly forgo efficiency investments with payback times as short as six months to three years. The House continues to let people make shortsighted choices, but grants rebates to consumers who purchase “Energy Star” products that meet high efficiency standards. Finally � and notably � the NCEP offers few subsidies to the existing oil and gas industries. Instead, it concentrates its research and development grants and tax incentives on technologies and critical infrastructure that the market system alone is unlikely to bring forth. In contrast, the House bill still caters to the domestic oil industry with incentives for production from deep wells in shallow water, from wells in deep water, and from exploratory wells in the National Petroleum Reserve of Alaska; and with rapid amortization of geophysical expenditures and pipeline construction. Clearly , the NCEP has a more coherent theme: Policy-makers should intervene in the marketplace only when markets do not work well, and markets have both a demand side and a supply side. The House bill still reflects Vice President Dick Cheney’s mind-set that energy conservation is largely a personal virtue. WHIZ-BANG TECHNOLOGIES In other major respects, the two policy documents are quite similar. In both plans, the really big bucks go into a Jules Verne-like cornucopia of whiz-bang new technologies. The House bill’s research dollars go to integrated combined-cycle coal gasification, high-energy electron scrubbing, and integrated coal/renewable energy systems that feed hydrogen to nearby fuel cells and sequester carbon dioxide emissions. Funds flow to advanced reactor hydrogen cogeneration, hydrogen fuel-cell cars for the mass-consumer market by 2015, next-generation white-light-emitting diodes, and micro-cogeneration technology. Then add bioenergy from cellulosic biomass (we are talking rice hulls here); the Nuclear Power 2010 Program; nanoscale engineering; superconductivity; an international burning plasma fusion research project; and, finally, a genomes-to-life program to develop microbes that create hydrogen, detoxify soils, sequester carbon dioxide, and, ultimately, combat terrorism. The NCEP offers a similar array of technologies (such as integrated gasification combined-cycle coal technology, biofuels, and advanced nuclear) on which to spend its recommended doubling of the federal energy R&D budget, although its illustrative examples most favor research on methane hydrates and carbon sequestration. The NCEP’s down-to-earth, on-the-ground recommendations for early deployment of new energy technologies do not dazzle the way the House bill’s offerings do, but both plans share the American faith that inventive technology can let us have our cake and eat it too. STREAMLINING PROJECTS Both the House and the NCEP agree that the issuance of permits for energy projects should be streamlined and that construction must be encouraged for critical energy infrastructure needs, such as sites for liquefied natural gas (LNG) terminals and electric transmission wires. The NCEP recommends an increase in funding for federal land management agencies, particularly in the Rocky Mountains area, to issue permits and monitor the natural gas drilling boom now occurring in their back yards. The funding would allow the agencies to fulfill their dual goals of energy development and environmental conservation. The House bill creates a new Office of Federal Energy Project Coordination and requires a “best management practices” review of issuing permits, accompanied by the streamlining of pilot projects in key Western gas-producing areas. But the House bill does more than streamline. It exempts hydraulic fracturing of oil and gas wells from the Safe Water Drinking Act and exempts oil and gas well sites from regulation as construction sites under the Clean Water Act. It also reimburses oil companies for the costs of preparing environmental impact statements under the National Environmental Policy Act and sets short deadlines for permit approvals and appeals of certain energy activities. As for critical energy infrastructure, the NCEP report particularly favors federal loan guarantees to build the Alaskan natural gas pipeline, an item that Congress had just passed on the eve of the NCEP report’s release. The House bill creates a permit system for “national interest electric transmission corridors,” which allows the Federal Energy Regulatory Commission to override recalcitrant states that fail to timely authorize sites for new interstate transmission facilities and grants the power of eminent domain for rights of way to such corridor permit-holders. The House bill does not clearly grant FERC the sole jurisdiction over LNG plants that this agency is now asserting in litigation with California’s utility commission, something that President Bush has noted with dismay. Yet given the already serious talk in the energy industry here in Houston that the Gulf Coast will be awash in natural gas in a few years from the many LNG terminals either approved or likely to be approved by the welcoming states of Texas and Louisiana, LNG terminal siting may no longer be a key problem. After all, Easterners and Californians can simply continue a long tradition of buying their natural gas from us Texans, shipped at considerable expense through long interstate pipelines from our terminals. As for renewable energy, both policy documents support tax incentives for wind, solar, and other forms, though the NCEP clearly is more enthusiastic than is the House about renewable energy’s potential. Both also support programs to develop clean vehicle fuels, including biofuels from renewable sources. And both encourage electric rate policies that allow more demand-side response to peak power prices. For readers who are electricity deregulation geeks, both policies contain provisions aimed at better monitoring to prevent Enron-type scandals, and both contain mandatory electric reliability standards to protect against blackouts. The House bill puts another nail in the coffin containing FERC’s “Standard Market Design.” In short, in geek jargon: SMD is dead, RTOs are voluntary, EROs join ISOs and RTOs, and PUHCA is repealed. So what two items are missing in action from both reports? Neither disturbs the existing moratoriums on offshore oil and gas drilling that have kept the entire East and West coasts and a juicy piece of the Gulf of Mexico (near Florida) off the table. And neither proposes opening up the Arctic National Wildlife Reserve to drilling. At most, the NCEP recommends an inventory of all fossil fuel resources, both on-shore and offshore, so that policy-makers can make better-informed choices. The House bill will not even countenance a peek at potential offshore resources. A DIGESTIBLE POLICY So is the House bill a digestible policy? Already buzzing around the House table are other initiatives. Congress has approved a 2006 budget resolution that provides $11 billion in energy production tax incentives and program funding. Tucked inside this congressional budget resolution is language opening up the ANWR to drilling. President Bush, in a surprise move, has called for new items to be put on the menu, including regulatory risk insurance for new nuclear plants, incentives to buy clean-diesel cars, aid to new refinery construction, and stronger language granting FERC authority over LNG terminal siting. Sen. Lamar Alexander (R-Tenn.) is quietly seeking legislation to allow states to loosen the bans on offshore drilling off their coasts. And Sen. John McCain (R-Ariz.) is expected to add climate-change provisions to the bill, perhaps encouraged by a recent Department of Energy study concluding that the NCEP’s cap-and-trade program for greenhouse gases will have no material effect on U.S. economic growth. Yes, the House bill, or some close variant, seems digestible in the sense of being enactable. Is it the best energy menu for the United States in an age of obese gas-guzzlers, global climate change, and unstable foreign oil supplies? No, clearly the NCEP offers a more balanced policy. But the House bill does promote the kind of fundamental scientific research that has made the United States a pre-eminent force in innovation and technology, and the pork is on the side of the plate, not the main course. Besides, today’s high gasoline prices are having a very real effect. Even Texans are trading in SUVs for more-fuel-efficient cars. High energy prices are a masterful energy policy: They work their own virtue. Jacqueline Lang Weaver is the A.A. White Professor of Law at the University of Houston Law Center. She specializes in energy law and policy and can be reached at [email protected].

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.