In his State of
the Union Address, President Bush rightly called for a reliable
energy policy, one that decreases our dependence on foreign energy.
Demand for energy is fast outpacing supply, and this imbalance is
growing.
The path away from
dependence does not involve the government selecting winners and
losers through mandates, subsidies, and giveaways. Instead the
country needs a policy that will ensure reliable and affordable
energy by enhancing our supplies of domestic energy sources. This
policy must let the market and the private sector do the rest. The
President should call for policies that would:
- Open access to
energy-rich areas currently "off-limits" for exploration of oil and
gas resources off-shore and in the Outer Continental Shelf;
- Provide access to
gas and oil exploration in the Rocky Mountains and other federal
lands; and
- Authorize use of
a tiny portion of land in the Artic National Wildlife Refuge (ANWR)
for exploration - an area which contains more then twice the proven
reserves in all of Texas.
Such commonsense
goals are all but missing in the energy bill that now languishes in
the Senate. Riddled with special interest spending and subsidies in
the forms of grants, spending authorizations, and tax giveaways,
this bill is devoid of any substantial policies that would enhance
our supplies of domestic energy. The President should hold firm and
demand broad policies that will provide diverse sources of energy
while avoiding the pitfalls of special interest treatments
disguised as incentives, such as those in the current energy
bill:
- Over $9 billion
in giveaways for the oil and gas industry;
- About $3 billion
in tax credits for the use of renewable fuels to produce
electricity;
- $2.5 billion for
investment and production credits for clean coal technology;
- Over $2 billion
for alternative motor vehicles incentives; and
- Almost $2 billion
in tax breaks for the electric power industry and other
businesses.
These measures
will not improve domestic energy production. We know from
experience that mandates and subsidies for the production of
ethanol create an artificial market that raises gasoline prices for
consumers and benefits a few big agribusinesses. Additional
mandates and more subsidies will cause even more distortion in the
market. Markets don't work when policymakers choose winners and
losers, and the energy market is no exception. If the President is
serious about increasing domestic energy production, consumers --
not the government -- must make these determinations.
The President also
called for improvements to the electricity grid so that we can
avoid suffering from the same devastating electrical blackouts that
paralyzed the Northeast last summer. Sound policy should attract
investment to the grid without needless mandates and regulations. A
very modest start to this is contained in the energy bill that
now:
- Grants FERC
limited "backstop" authority to issue permits for interstate
electricity lines in bottleneck areas, and
- Repeals the
Public Utility Holding Company Act, an antiquated law that
prohibited power companies from investing in unrelated
businesses
In short, the
President was right to call for an energy policy that will provide
affordable, reliable energy and protect the nation's economy by
decreasing our dependence on foreign sources. He should resist
temptations to get legislation quickly to his desk and call on
Congress to dump the empty promises and lucrative giveaways and
goodies of this bill and start over. The key will be to open access
to our own resources, eliminate special interest meddling, and let
the markets do the rest.
Alison Acosta
Fraser is director of the Roe Institute for Economic Policy Studies
at The Heritage Foundation. Charli E. Coon is Senior Policy Analyst
for Energy and the Environment in the Thomas A. Roe Institute for
Economic Policy Studies at The Heritage Foundation.