'We'd be doing the country a favor if more of that oil were produced here at home'

From Vice President Richard B. Cheney's luncheon address to the US Chamber of Commerce on June 11:

"Confidence should also be the watchword when it comes to energy policy. And that's the third economic decision we need to get right. By almost any goal you have in mind - whether it's lower gas prices, a stronger economy, national security, or greater energy independence - it all points in the same direction: We must produce more energy right here in the United States.

"With crude oil already over $130/bbl and [gasoline] at $4, everyone in elected office ought to explain what solutions they have in mind for bringing the cost down, or at least slowing the trend. And if they're honest about it, they'll end up talking about increasing supply.

"Twenty, 40 or 50 years from now, I'm pretty sure this country will have energy sources that are more diverse and environmentally sound than many of us can even imagine today. A good deal of credit will belong to President Bush for giving unprecedented support to developing alternative and renewable fuels, and the engine technology to use those fuels with high efficiency. These are tremendously promising fields. And the United States, driven by a combination of market forces, concern for the environment, and our own native ingenuity, has chosen to lead the way.

"I'm also confident that our nation will find sensible ways to address long-term concerns about carbon emissions. President Bush has outlined the principles for a solution, an approach that offers reasonable incentives and gives strong support to technology research. The cap-and-tax legislation, however, that was debated in the Senate last week was exactly the wrong way to address carbon emissions.

"That bill would have effectively increased taxes by about a trillion dollars over ten years, raised the price of gas and electricity, and killed manufacturing jobs, and all of this while having no significant effect on the climate. No fewer than ten Democratic senators wrote to their leaders to make clear they could not support final passage of the bill. On the Republican side, Senator Jim Inhofe and others rightfully insisted that the bill be debated in full. That was enough to put the bill on the path to defeat - and for that, I think all Americans can be grateful.

"Meanwhile, in the here and now, we are an economy that runs on petroleum - some 20 million barrels of it a day. That can and will change over time, but it will be a very long time. It will not change overnight. We'd be doing the whole country a favor if more of that oil were produced here at home, with the money going into American pockets and supporting American jobs. Yet on Capitol Hill, many have ignored the obvious and have stood in the way of more domestic energy production. You can't even call them shortsighted, because they fail to see the immediate, day-to-day needs of the economy.

"It's my own view that we should be drilling in [the Arctic National Wildlife Refuge] in an environmentally responsible way, which could increase our daily domestic oil production by as much as a million barrels a day. As for other locations, George Will pointed out in his column the other day that oil is being drilled right now 60 miles off the coast of Florida. But we're not doing it, the Chinese are, in cooperation with the Cuban government. Even the communists have figured out that a good answer to high prices is more supply.

"Yet Congress has said no to drilling in ANWR, no to drilling off the East Coast, no to drilling off the West Coast, no to drilling off Florida. Given the high prices Americans are now paying, we should hear no more complaining from politicians who've stood in the way of increasing energy production inside this country. They are part of the problem.

"And it's not just crude oil or natural gas production that's being held up. We also have to import ever larger amounts of refined gasoline, because we don't have enough refining capacity to satisfy our own demands. We haven't built a new refinery in the United States in three decades. It's high time we did so. There's not a reason in the world that our gasoline should not be made right here in the United States, at American refineries, by American workers.

"In each of these areas - taxes, trade, and energy - the choices we need to make soon are going to have an enormous impact on our way of life. As board members of the Chamber of Commerce, you know this because all of you deal with major economic issues every day, not as abstractions, but as practical, real-world concerns. You know better than most how public policy can help private enterprise, or harm it. And with great decisions at hand, the nation's policymakers need your voice, your input, your experience, and your wisdom.

"I'm sure you agree with the president that in times of challenge the best thing to do is to go to our strengths. And America's greatest economic strengths are the free market and the entrepreneurial spirit. If we make the choice to face the world with confidence, and turn loose the greatness of our free enterprise system, our nation will thrive and prosper as never before."

US CHAMBER OF COMMERCE PRESIDENT THOMAS J.
DONOHUE: "Mr. Vice President, that was a great talk. I was prepared to stand up and ask you some questions about when we are going to start to drill for the stuff that we have and we need . . . Because of your experience in the industry, which sometimes in this town is not respected, perhaps you could just extend your remarks a little bit about where we can best put pressure. Where are the weak spots for us to probe and see if we can get some results in the Congress?

CHENEY: "I think that's a key question, Tom. A few years ago, I think it was '95, the Congress passed legislation authorizing the development of ANWR. The Alaskan National Wildlife Reserve was established, as I recall, back in about 1979 or 1980. I was relatively a junior member of the House in those days, serving on the Interior Committee, we considered and reported and passed the legislation.

"And as I recall we set this area up as a wildlife reserve because that was less restrictive than if we designated it a wilderness. The reason we did that was because it was believed that there were energy resources there that we might someday want to develop for the country, and therefore we designated it, as I say, as a wilderness reserve.

"In '95 Congress said let's open it up and go develop it and, of course, Bill Clinton vetoed it. And that was some 12 or 13 years ago. Today, if we had, in fact, followed through on what the Congress wanted to do then we would have roughly a million barrels a day is the estimate; but certainly that would be a positive impact on today's situation.

"The frustration I sense, and I think a lot of people sense, I'm all for pursuing new technologies. I think we ought to invest in new, more efficient engines, and hybrid and electric and hydrogen, and all the technologies you can think of out there, we need to obviously see what can be developed.

"One of the benefits, frankly, that we'll see I think now given the current situation of the market is a lot of those will get a push because of the basic fundamental economics of it.

"But we have to recognize that there isn't anything out there that is going to get us away from a hydrocarbon economy any time in the near future. We've got a huge hydrocarbon resource. We've got an enormous infrastructure that's been built up over a century. That's the way our economy operates. That's the way the world economy operates basically. And at this point, there really isn't anything on the horizon that today is economic relative, for example, to basic good old oil and gas.

"And the solution for us in the near term, near term being over the next few years, is to increase production. But we have, as a nation, had in place now for many years set up policies that limits our ability to produce those products in the United States. We put a cap on what we're able to produce. Now that was a choice that was made by previous administrations and previous Congresses. That was a time, obviously, when gasoline cost a lot less than four dollars a gallon.

"Today, we're in a situation where we're supposed to go out and scream and yell at folks who are producing and try to get them to produce more while we aren't willing to produce all that we have here at home ourselves.

"The situation is such that I think with the pressures that Congress is feeling now because of prices, I think the tremendous adverse impact that a lot of this is having on the American people, it's just huge. For somebody out there who's living close to the edge or living on a fixed income, or having to live from paycheck to paycheck, all of a sudden to get hit with a doubling of the price of gasoline is a major blow. And I think Congress has got an obligation to act and I think at the heart of that strategy needs to be the basic proposition that we want to increase the supply of domestically produced oil.

"And I think if we do that, we're not going to produce all we need, we're still going to be dependent on imports, but we could go a long way towards moderating the current situation in the marketplace. Instead, we've got a lot of people running around looking for scapegoats and the legislation that was defeated this week in the Senate, for example, the windfall profits tax, it's not going to produce a single additional barrel of oil. We tried it. Jimmy Carter put on a windfall profits tax in 1980 and the Congressional Research Service, non-partisan, bi-partisan, not linked to any industry, concluded that in the period from 1980 to 1988 that windfall profits tax reduced our overall production. You do not get more of something by taxing it higher. That's just a basic fundamental law of economics and that's still valid here.

"So we can do it. We've got the technology to do it. Our technology these days in terms of developing and producing oil and gas in an environmentally safe and sound manner is unbelievable. We can do all kinds of things: deep water, off-shore, and directional drilling. You know, [Hurricane] Katrina hit Louisiana and one of the amazing things that happened down there that never got reported was we didn't have any oil spills; no pollution, if you will, of the environment as a result of one of the worst natural disasters in history, in an area that is absolutely smack-dab in the heart of our producing country.

"So we can do it. We can do it in a sound and safe manner. We just need [a] serious effort and I think the recognition that, for far too long, too many politicians have advocated all kinds of other courses of action without facing up to the basic fundamental fact that today we have a hydrocarbon economy and if you're going to have cheap, affordable energy available in the amounts it needs to be to run our economy, you're going to have to produce more of it."

Contact Nick Snow at nicks@pennwell.com

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