February 9, 2007 | Commentary on
End Government Policies That Hamstring Energy Security
This is the second of a four-part series written by Heritage
Foundation Vice President of Government Relations Mike Franc,
discussing an agenda for the new Congress, balancing the need for
bipartisan cooperation against the temptation to veer too far
leftward on domestic and international policy issues.
American demand for energy is expected to increase rapidly over
the next two decades, exceeding domestic supplies. This is
consistent with sharply rising global demand, which is expected to
outpace discovery of new deposits.
The federal Energy Information Administration, for example,
expects world oil demand to grow significantly over the next three
decades, from 80 million barrels per day in 2003 to 98 million
barrels per day in 2015 and then to 118 million barrels per day by
2030. This will place further strains on our quest for energy
independence. At the time of the Arab oil embargo in 1973, we
imported 35% of our oil. By 1995, our dependence on foreign oil had
reached 45%. Today it stands at 61%.
Not only do we depend on foreign oil, but those sources are
usually in bad neighborhoods. Alarmingly, three-quarters of the
world's supply of oil is controlled by unstable or hostile regimes,
most of which are unsympathetic to investor and property rights. Of
proven world oil reserves, 57.5% are in the Middle East, 11% in
Russia and Venezuela, and 6% in Africa. The People's Republic of
China, moreover, just erected its first oil rigs in Cuba's
territorial waters in the Gulf of Mexico, barely 50 miles off
Some are willing to use oil as a tool to threaten U.S. national
security objectives. Proclamations by al Qaeda and other terrorist
groups that U.S. and Western economies and their oil lifelines are
legitimate targets make it clear that the oil and gas
infrastructure is in peril. "Today," FedEx Chairman Frederick Smith
explains, "90% of the world's proven oil reserves are owned by
national oil companies, and many of those ... companies are owned
by countries who wish the United States ill."
At the same time, American energy production and its
infrastructure are hamstrung by federal policies that consciously
limit access to known energy resources. Such restrictions have had
a chilling effect on development, production, exploration and
infrastructure and foster uncertainty among investors.
Even the most severe critics of these anti-energy policies were
aghast to learn the full extent of our self-inflicted wounds. In
December, the federal Bureau of Land Management released its
much-anticipated inventory of oil and natural gas deposits on
federal lands. The report estimates that Uncle Sam's onshore
holdings amount to an astounding 187 trillion cubic feet of natural
gas and 21 billion barrels of oil.
But our energy inventory doesn't stop at the shoreline. A
companion federal study calculates that an additional 83 trillion
cubic feet of natural gas and 19.1 billion barrels of oil lie
beneath federally controlled territorial waters. But experts note
that, because estimates of offshore energy deposits are notoriously
low and tend to increase significantly over time, our real energy
inventory is likely much larger.
Unfortunately, the government goes on to note, regulatory
constraints make it next to impossible to recover the overwhelming
majority of these sorely needed resources. Just 3% of onshore
federal oil and 13% of onshore federal gas are accessible under
standard leasing terms. Debilitating restrictions such as a ban on
surface occupancy tie up 46% of the onshore federal oil and 60% of
the onshore federal gas. The rest -- 51% of the oil and 27% of the
gas -- are completely off-limits to development (see charts
Pro-energy lawmakers struggled valiantly throughout the 109th
Congress to bring more of America's energy portfolio on line. In
fact, Congress considered and rejected proposals to:
- Open the barren wasteland of the Arctic National Wildlife
Refuge and our offshore waters to oil and natural gas
- Alleviate regulatory barriers that have prevented the
construction of a new oil refinery in America for more than 30
- Loosen the so-called "boutique fuels" requirement that, for no
discernable environmental gain, has created severe supply
bottlenecks and causes the annual spring spike in gas prices.
But anti-energy lawmakers resisted and, in the end, all Congress
had to show for its effort was an exceedingly modest bill that
expands offshore drilling while keeping virtually all the existing
restrictions in place.
We can do better.
U.S. energy policy should advance two essential U.S. interests:
First, it should adhere to free-market principles by allowing for
the safe development of domestic energy supplies and infrastructure
without the government's determining winners and losers. This
approach is the only way to guarantee the long-term viability of
Second, we should enhance the security, stability and economic and
democratic development of oil- and gas-producing countries so that
energy resources remain readily available, ample, affordable and
safe. It is simply untenable to live in a world where potential
enemies of the U.S. control so much of the world'' oil.
Specifically, Congress and the President should:
- End the severe limits placed on new oil and natural gas
exploration and drilling in such promising areas as Alaska's Arctic
National Wildlife Refuge as well as the 85% of our territorial
waters that are also off limits.
- Streamline the cumbersome requirements that impede energy
production. For energy infrastructure this would mean
streamlining the regulations that have hampered refinery expansions
and have led to a large variety of costly fuel specifications.
No new refinery has been built in the U.S. since 1976, due in part
to costly Clean Air Act regulations. For electricity generation
this would mean removing existing barriers to a more diversified
generation base, including new nuclear and coal generation.
Specifically, this includes providing a repository for spent
nuclear fuel and streamlining New Source Review and other Clean Air
Act regulations that impede additional use of America's abundant
coal reserves to generate electricity.
- Eliminate special treatment of various fuel sources. U.S.
energy policy should encourage fuel diversity and a vibrant market
instead of having the federal government pick energy winners and
The myriad of taxpayer subsidies -- including tax credits and
mandates for ethanol, wind or solar energy, as well as loan
guarantees and other subsidies for politically favored energy
projects -- should be eliminated. To illustrate: Each gallon of
U.S. ethanol blended with gasoline receives a 51-cent tax credit,
along with other tax code inducements. Even with these tax breaks,
domestic ethanol, made mostly from Midwestern corn, remains more
expensive than gasoline.
- Encourage competition in the market for ethanol. Speaking of
ethanol, Congress should lift the current import tariffs on sugar
and ethanol produced from sugar cane. Exorbitant protectionist
tariffs allow the ethanol industry to avoid competing with foreign
providers. Foreign ethanol is subject to a 54-cents-per-gallon
tariff and a 2.5% duty. This discourages imports such as
potentially cheaper sugar-cane-based ethanol from Brazil and other
countries that could undercut domestic producers.
- Hold the line against additional environmental regulations that
would further raise the cost of energy. Provisions to cap fossil
fuel emissions in the name of combating global warming represent a
grave threat to future economic growth.
- Reexamine existing environmental requirements that impose
unnecessary hardships on private property owners and hamper energy
production on public lands. The Endangered Species Act and the
National Environmental Policy Act have spawned literally thousands
of lawsuits that have delayed or scuttled important energy
production and construction projects. Congress should annoy the
trial lawyers and place strict limits on these frivolous
Franc is vice president of government relations for
The Heritage Foundation (heritage.org).
First appeared in Human Events