July 28, 2005 | Commentary on Energy and Environment

Can We Afford the Energy Bill ?

It's bad enough that the energy bill now working its way through Congress may cost taxpayers close to $36 billion over the next five years. Worse, it actually contains provisions that would increase the cost of energy in the years ahead.

Take the ethanol mandate. This costly gasoline additive, made from Midwestern corn, already gets special tax breaks worth more than 50 cents per gallon. Now, its producers, including agri-business giant Archer Daniels Midland, have convinced their friends in Congress to require that 7.5 billion gallons of it be added to the nation's fuel supply.

Acording to a study by the Energy Department, this mandate could cost drivers more than 3 cents per gallon -- in an energy bill that was supposed to help lower the price at the pump.
Granted, there are many other energy bill provisions that won't increase energy costs. But most are unlikely to decrease them either. And many, including all sorts of giveaways to the energy industry, will cost taxpayers a fortune.

The electricity generating sector makes out especially well, getting potentially tens of billions in subsidies and tax breaks. Under the bill, taxpayers will be chipping in billions every year for the costs of research and development. There's even federal financial aid for building new power plants that meet certain requirements.
In effect, American consumers will spend twice for electricity. They'll still have to pay their electric bills just as before, but more of their tax dollars would underwrite part of the cost of producing the electricity.

In the hands of Congress, the energy bill has morphed into a farm bill, an environmental bill, and above all else, a massive pork-barrel bill. But what we really need is a true energy bill, one that frees energy markets from unnecessary regulatory constraints and opens up new sources of supply. There are a few such provisions in the bill -- like facilitating approvals for hydroelectric power plants and encouraging investments in electric transmission lines -- but only a few.

The energy bill does only a little to open up the many oil and natural gas-containing areas in the U.S., both onshore and offshore, that are off-limits. It does contain authorization for an inventory of offshore energy reserves, which is a good first step. But the legal battle over opening those reserves is left to another day.

Overall, the energy bill is a net loser for the American people, and will likely cost us both as energy consumers and as taxpayers.

About the Author

Ben Lieberman Senior Policy Analyst, Energy and Environment
Thomas A. Roe Institute for Economic Policy Studies

Ben Lieberman is a senior policy analyst in the Roe Institute for Economic Policy Studies at the Heritage Foundation.  First appeared in The Washington Times.