There are many energy bills currently pending before Congress,
and they fall into two general categories: those that seek to
increase domestic energy supplies and those that seek scapegoats
and diversions instead. Last week, the President gave a speech in
favor of the former, spelling out four useful ideas for expanding
- Removing restrictions on oil drilling in American waters;
- Opening up a small portion of Alaska's Arctic National Wildlife
Refuge to drilling;
- Streamlining the regulations that hamper refinery capacity
- Eliminating the federal barriers to development of oil
All of these measures are embodied in one or more energy bills
that deserve full consideration. Unfortunately, many in Congress
would rather spend time on ideas more likely to increase prices
than provide any relief at the pump, such as raising taxes and
increasing regulations on companies exploring for oil in the U.S.
These ideas are seriously misguided.
Drilling in America's Waters
Federal law currently prohibits energy exploration and drilling
on 85 percent of America's Outer Continental Shelf (OCS)-virtually
everywhere except the central and western Gulf of Mexico. The
Department of the Interior (DOI) estimates there are 19 billion
barrels of oil in these restricted areas, an amount equivalent to
30 years of imports from Saudi Arabia.
DOI has authority over energy production in the nation's
territorial waters, but since 1982 Congress has denied the agency
the funding to conduct energy leasing in new areas. Two current
measures, the Deep Ocean Energy Resources Act (H.R. 6108) and the
National Environment and Development Act (H.R. 2784), would remove
the de facto offshore ban. Both measures would allow coastal states
to decide whether to allow oil leases off their shores, and both
also contain royalty-sharing agreements between the federal
government and participating states. Either measure would lead to
greater supplies of domestic oil as well as natural gas.
The Arctic National Wildlife
America's single greatest concentration of untapped oil-an
estimated 10 billion barrels-lies near the edge of Alaska's 19.6
million acre Arctic National Wildlife Refuge (ANWR). As with
deepwater drilling, advances in technology have greatly reduced the
environmental impact and risk of spills, and drilling would be
subject to the world's strictest standards. Nearby Alaskan drilling
in Prudhoe Bay has had a minimal adverse impact on the environment
and local wildlife, and was performed with decades-old technology
far less environmentally safe than that which would be used in
Legislation enacted in 1980 left open the possibility of
developing the oil-rich part of ANWR, subject to future
congressional approval. That approval is long overdue. Several
bills, such as the American Energy Independence and Security Act
(S. 2758) and the American Energy Independence and Price Reduction
Act (H.R. 6107) would allow ANWR leasing to commence.
Although the high price of oil is far and away the biggest
reason for the increases at the pump, unnecessarily high refining
costs are also a contributor. No new refinery has been built in the
U.S. in over 30 years, and expansions at existing refineries have
at times struggled to keep pace with rising demand. Part of the
reason refinery expansion has halted is the extremely costly,
complicated, and time-consuming maze of federal regulatory
requirements affecting refineries.
Reasonable efforts to streamline and expedite the refinery
expansion process are included in such bills as the Refinery Permit
Process Schedule Act (H.R. 6139) and the American Energy Production
Act (S. 2973).
Potentially hundreds of billions of barrels of oil lies trapped
in layers of shale beneath parts of Colorado, Utah, and Wyoming.
The most promising areas are under federal lands and are subject to
DOI control. Attempts to extract this oil in the 1970s and early
1980s were a failure, but improvements in technology, combined with
today's sky-high price of conventional oil, justify giving this
alternative source a second look. Pursuant to provisions in the
2005 energy bill, several companies are conducting oil shale test
Similar to the restrictions on offshore energy, Congress placed
a moratorium on DOI spending on the regulatory activities necessary
for these projects to continue. Several bills, such as The Oil
Shale Opportunity Act (H.R. 6211) and the Oil Shale Regulatory Act
(S. 3062) would repeal these restrictions and allow the oil shale
research and development to move ahead.
Since 2007, bills like the recently defeated Consumer-First
Energy Act (S. 3044) have become common. The problem with these
bills is simple: the only energy they contain is in their titles.
Their substance is actually anti-energy.
For example, rather than increasing domestic supplies, S. 3044
focused mostly on the tax code, including a repeal of certain tax
deductions for costs associated with domestic drilling. These
changes would have raised tax rates for companies trying to expand
oil supplies. S. 3044 also contained a windfall profits tax on
domestically produced oil. When last tried from 1980 to 1988, this
tax, according to the Congressional Research Service, "reduced
domestic oil production from between 3 and 6 percent, and increased
oil imports from between 8 and 16 percent. This made the U.S. more
dependent upon imported oil." The bill also contained price gouging
provisions, a simplistic attempt to lower gasoline prices by making
high prices illegal. This approach is similar to the price controls
of the 1970s, which only served to reduce supplies and create
shortages and long gas lines.
The provisions in S. 3044 are returning in other bills, such as
the Federal Price Gouging Prevention Act (H.R. 6246).
Other bills propose similarly counterproductive measures. For
example, some in Congress are saying that new energy leasing in
currently restricted areas is not needed because companies are
sitting on the leases they already have. These claims have no
merit, yet bills like the Responsible Federal Oil and Gas Lease Act
(H.R. 6251) seek to penalize oil companies with existing leases if,
in the federal government's opinion, these leases are not producing
oil soon enough.
In reality, the process of exploration and drilling takes many
years, including a lengthy regulatory process, and many of these
"idle" leases are being developed as expeditiously as possible. In
other cases, the leased tracts have no wells because they have no
oil. Indeed, the relatively few offshore and onshore areas where
drilling is allowed are beginning to show evidence of being picked
over, all the more reason to open up new areas. Overall, there is
no evidence of companies paying for leases for the purpose of
sitting on them, and, in any event, current law already provides
that non-producing leases revert back to the federal government
after a period of time.
Energy on the Horizon
The President has rightly signaled his support for any and all
of the above-mentioned pro-energy measures and his opposition to
the anti-energy ones. Congress should take advantage of this
opportunity and enact some useful steps in the fight against high
oil and gasoline prices.
Ben Lieberman is a Senior
Policy Analyst at The Heritage Foundation's Roe Institute for
Economic Policy Studies.