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Executive Summary #1590 on Energy and Environment

September 19, 2002

September 19, 2002 | Executive Summary on Energy and Environment

BG1590es:  The Senate-Passed Energy Bill Will Hurt Consumersand Taxpayers Without Solving the Energy Problem

The Department of Energy's Energy Information Administration predicts that if energy production continues to grow at a rate comparable to that of the last decade, the growth in energy demand will increasingly outpace U.S. production within the next two decades. This imbalance would threaten America's economy, national security, and standard of living.

With the United States at a crossroads in energy policy, Members of Congress who are meeting in conference on House and Senate energy bills have the responsibility to make a crucial decision. They have an opportunity to correct the imbalance of supply and demand, and ensure that consumers and businesses have reliable and affordable supplies of energy in the future, by adopting balanced, fuel-neutral, and market-based policies, similar to those in the House-passed version of a comprehensive energy bill (H.R. 4). On the other hand, they could yield to special-interest demands and endorse policies that suppress energy supplies, worsening the imbalance between supply and demand, as the Senate-passed version of H.R. 4 does.

The House and Senate conferees should strike the misguided energy-suppressing provisions in the Senate-passed version of H.R. 4 and craft a bill that enhances the nation's energy security. Many measures in the Senate-passed version--including the mandatory renewable portfolio standard (RPS), Kyoto-like climate change titles, measures regarding the regulation of electricity, and a new "tax" that would be levied on consumers through a federal ethanol mandate--are inconsistent with this goal.

The Senate bill's provision regarding renewable energy resources, for example, ignores evidence that this option is unrealistic and counterproductive. Despite two decades of billion-dollar taxpayer subsidies, renewable energy sources have failed to capture a significant market because they are unreliable and economically inefficient. In the year 2000, non-hydroelectric renewable sources accounted for only 2 percent of total U.S. electricity generation. Production from these particular renewable energy sources is projected to increase only to 3 percent by 2020. Imposing a renewable energy initiative may be perceived as "politically correct," but this is an irresponsible option since these sources will raise the cost of energy for consumers while failing to meet the nation's growing demand for the energy that is essential for economic growth and national security. This energy-suppressing provision has no place in a balanced and comprehensive national energy plan.

The climate titles included in the current Senate version of the legislation likewise undermine a responsible energy plan for the nation. The Senate version of H.R. 4 calls for bureaucratic measures that would drastically reduce carbon emissions, harm the already weak economy, and raise the cost of energy for consumers. It imposes these counterproductive restrictions despite myriad uncertainties surrounding theories of climate change, and it dismisses the expert opinions of more than 17,000 climatologists , meteorologists, and other specialists who signed an Oregon Institute of Science and Medicine petition, stating that "There is no convincing scientific evidence that human release of carbon dioxide, methane, or other greenhouse gasses is causing or will, in the foreseeable future, cause catastrophic heating of the Earth's atmosphere and disruption of the Earth's climate." National energy policy should be based on sound scientific evidence and not alarmist rhetoric. Titles X, XI, and XIII, should be stripped from this legislation.

In addition, although Title II of the Senate-passed version of H.R. 4 purports to promote competitive electric markets, in fact, it would re-regulate the energy sector. It expands the Federal Energy Regulatory Commission's powers; authorizes new regulatory programs in the Department of Energy, the Federal Trade Commission, and other agencies; increases regulatory uncertainty; and fails to provide the incentive structure needed to maintain and expand the nation's electricity infrastructure. The conferees should replace this title's regulatory provisions and marketplace manipulation with measures that authentically promote competition and provide consumers with more reliable and less costly energy.

Title VIII of the Senate-passed version of H.R. 4 seeks to nearly triple the use of fuel-ethanol by the year 2012. The ethanol mandate that the Senate leadership endorses essentially provides a subsidy for a small number of ethanol producers at the expense of consumers. There are numerous shortcomings regarding the use of ethanol fuel: It is not environmentally safe, it is expensive to produce, and there is no national infrastructure that could transport ethanol to consumers throughout the country. Proponents of mandating the use of ethanol claim that it is a renewable fuel source. On the contrary, because gasoline is used in the production of ethanol, it cannot be categorized as a renewable energy source. While big business will benefit from this "corporate welfare" mandate and will be protected from liability under the bill's "Renewable Fuels Safe Harbor" provision, consumers would bear the burden of what is essentially a new gas tax, in the form of higher prices. In addition, the federal Highway Trust Fund would be another loser in this scenario, given that the mandate would exacerbate the current loss of revenues to this fund by billions of dollars by 2012. In short, the ethanol mandate included in the Senate-passed version of H.R. 4 is irresponsible and counterproductive and will increase consumer costs at the pump. It should not be incorporated in the nation's energy legislation.

Similarly, to the detriment of national security, the leadership of the Senate majority is pandering to environmental alarmists in its refusal to allow a fair up-or-down vote on opening a small sliver of the Arctic National Wildlife Refuge (ANWR) to oil and gas exploration. The conferees should follow the House's sensible lead on this issue and authorize exploration in what is a comparatively minuscule portion of ANWR (2,000 acres out of a total of 19 million acres).

The Senate-passed version of H.R. 4 fails to enhance crucial energy supplies needed for economic growth and national security. On the contrary, it would harm an already weak U.S. economy and raise the cost of energy for consumers. The conferees should soundly reject the energy-suppressing provisions in the Senate-passed bill. If they do not, the President should veto this legislation.

--Charli E. Coon, J.D. , is Senior Policy Analyst for Energy and Environment in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

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