September 11, 2002

September 11, 2002 | WebMemo on

WM143: Energy Bill Will Hurt Consumers. Taxpayers

T he Department of Energy's Energy Information Administration predicts that over the next two decades, the growth in energy demand will increasingly outpace U.S. production if production continues to grow at a rate comparable to that of the past decade. This imbalance threatens America's economy, national security, and standard of living.

Given that the United States is at a crossroads in energy policy, policymakers in Washington have a choice. They can 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). Or they can endorse special-interest policies that suppress energy supplies and worsen this imbalance as the Senate-passed version of H.R. 4 does.

The House-Senate conferees on this legislation have an opportunity to 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, such as the mandatory renewable portfolio standard (RPS), Kyoto-like climate change titles, regulation of the electricity sector, and a new "tax" on consumers through a federal ethanol mandate, are inconsistent with this goal. Not only will these provisions exacerbate the current imbalance between energy demand and supplies, but they also will raise the cost of energy for the nation's consumers.

For example, despite two decades of billion-dollar taxpayer subsidies, renewable energy sources have failed to capture a significant market because they are unreliable and uneconomic. In 2000, nonhydroelectric renewable sources accounted for only 2 percent of total U.S. electricity generation.1 Production from these particular renewable energy sources is projected to increase to a mere 3 percent in 2020.2 Imposing a renewable energy may be perceived as "politically correct," but is irresponsible as these sources will raise the cost of energy for consumers and fail 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.

Nor do energy-suppressing climate titles have a place in a responsible national energy plan. Despite the myriad uncertainties surrounding the science of climate change and the expert opinions of more than 17,000 criminologists, 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,"3 the Senate-passed 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. National energy policy should be based on sound scientific evidence, not alarmist rhetoric; therefore, Titles X, XI, and XIII should be stripped from this legislation.

Likewise, Title II of the Senate-passed version of H.R. 4 purports to further the trend toward competitive electric markets. Regrettably, however, it re-regulates the energy sector. For example, it expands the regulatory powers of the Federal Energy Regulatory Commission (FERC); 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.4 The conferees should replace this Title's regulatory provisions and marketplace interferences with measures that promote competition and provide consumers with more reliable and less costly energy.

Title VIII of the Senate-passed version of H.R. 4 would nearly triple the use of fuel-ethanol by 2012.5 The ethanol mandate that the Senate leadership endorses is nothing more than a subsidy for a small number of ethanol producers at the expense of consumers. Furthermore, ethanol is not environmentally safe,6 is expensive to produce, and lacks a national infrastructure to transport it to the entire country.7 Moreover, although proponents claim that ethanol is a renewable fuel source, gasoline is used in ethanol's production, thereby disqualifying it as a renewable source.8 While big business benefits from this "corporate welfare" scheme and is protected from liability under the bill's "renewable Fuels Safe Harbor" provision,9 consumers are forced to pay what essentially amounts to a new gas "tax." Another loser is the federal highway trust fund.10 In short, the ethanol mandate included in the Senate-passed version of H.R. 4 is irresponsible, ineffective, and will increase consumer costs at the pump. It has no place in this or any other bill.

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

The Senate-passed version of H.R. 4 fails to enhance crucial energy supplies needed for economic growth and national security. Rather, 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 fail to do so, the President should veto this legislation.

Stay tuned for the soon-to-be-released Backgrounder of the same title, in which Coon will elaborate at length on the following:

  • A federal renewable-energy mandate is uneconomic and irresponsible.
  • Climate change titles in Senate-passed bill are inconsistent with the dual goals of economic and energy security.
  • Title X - National Climate Change Policy
    The "Sense of Congress" provisions are not supported by existing scientific facts.
  • Title XI - National Greenhouse Gas Database
    Nothing more than a "domestic" form of the "fatally flawed" Kyoto Protocol. The conferees should soundly reject this title.
  • Title XIII - Climate Change Science and Technology
    Authorizes billions of additional taxpayer dollars over the next decade for a plethora of climate-related research and development activities,11 despite the U.S. having already invested some $45 billion in climate-change research over the past 10 years,12 with no facts to support the notion of catastrophic human-made warming as a basis for drastic carbon dioxide emission cuts.13

    Congress should deregulate - not re-regulate - electricity.
  • Tapping oil reserves in a tiny sliver of ANWR is environmentally sound and energy wise.
  • Title VIII - Ethanol Mandate
    This is nothing more than a new gas "tax" on consumers.

1U.S. Department of Energy, Energy Information Administration, Annual Energy Outlook 2002, DOE/EIA-0383 (2002), December 2001, p. 79.




3Brett Schaefer, "A Needless Tradeoff," August 29, 2002, at (September 10, 2002).


4Thomas M. Lenard, "The Senate's Electricity Bill: A Regulatory Wolf in Free Market Clothing," Progress & Freedom Foundation, Progress on Point, Release 9.17, May 2002, pp. 1-2.


5Brent D. Yacobucci and Jasper Womach, "Fuel Ethanol: Background and Public Policy Issues," CRS Report for Congress No. RL30369, Congressional Research Service, February 21, 2002, pp. 5, 20.


6Senator Dianne Feinstein (D-CA), Congressional Record, April 11, 2002, p. S2508.


7Brent D. Yacobucci and Jasper Womach, "Fuel Ethanol: Background and Public Policy Issues," CRS Report for Congress No. RL30369, Congressional Research Service, February 21, 2002, p. 4.


8Brent D. Yacobucci and Jasper Womach, "Fuel Ethanol: Background and Public Policy Issues," CRS Report for Congress No. RL30369, Congressional Research Service, February 21, 2002, pp. 3-4.


9Senator Charles F. Schumer (D-NY), Congressional Record, April 11, 2002, p.S2513.


10Marlo Lewis, Jr., "Heed Hillary's Herald," Op-Ed in Tech Central Station, Competitive Enterprise Institute, May 8, 2002.


11Mark Holt and Carol Glover, "Omnibus Energy Legislation: H.R. 4 Side-by-side Comparison," Congressional Research Service, CRS Report for Congress No. RL31427, Updated June 7, 2002, pp. CRS-9, CRS-166.


12Sallie Baliunas, Ph.D., "Warming Up to the Truth: The Real Story About Climate Change," Heritage Foundation Lecture No. 758, August 22, 2002 (delivered June 19, 2002), p. 1, at (August 25, 2002).



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