Congress, at this writing last week, was ready to pass a comprehensive energy bill. A House-Senate conference on July 26 produced compromise legislation on which both houses were likely to have voted by the weekend.
If the bill passed as expected, congressional leaders have reason to be proud. They wanted an energy bill. President George W. Bush wanted an energy bill. Business groups wanted an energy bill. So the nation has an energy bill. It’s a triumph of bipartisan compromise, a symbol of what perseverance can accomplish. And now that congressional leaders have achieved their political goal, they should dedicate themselves to serious work on energy.
Energy supply
A serious energy bill would act meaningfully on energy supply. The 1,724-page conference committee energy bill does not do that. It makes grand gestures on US wishes about energy supply, such as hydrogen vehicle fuel and renewable energy. But at least a generation will pass before those energy sources satisfy more than a tiny portion of total demand. For the energy forms that can make real contributions to supply in response to real, pressing needs, the bill does far too little.
An energy bill serious about supply would remove obstacles to full development of domestic oil and natural gas, which together represent 63% of the energy used in the US. The compromise bill avoids the most-promising measures, most having to do with access to the resource.
An energy bill serious about supply, for example, would approve leasing of the Arctic National Wildlife Refuge coastal plain. Instead, the omnibus bill leaves ANWR leasing to a spending bill, where its prospects are questionable. Instead of lifting moratoriums on leasing of most of the Outer Continental Shelf, the compromise bill calls only for an inventory of oil and gas resources in off-limits areas. And instead of confronting leasing opponents with hard facts about the costs of inactivity and the manageability of environmental risk, the compromise bill treats resource access as a housekeeping issue addressable through faster permitting. Against immediate US needs for energy, especially domestically produced natural gas, the omnibus bill’s actions on resource access are far from sufficient.
An energy bill serious about supply would not have left the US refining industry in legal jeopardy over methyl tertiary butyl ether. A legislature that required the addition of oxygen to gasoline now refuses to grant companies that responded in good faith the limited protection they need against opportunistic lawsuits. And politicians wonder why nobody builds refineries in the US.
An energy bill serious about supply also would not require the addition of 7.5 billion gal/year of ethanol to gasoline. Ethanol’s problems as a fuel additive are well known. The energy-supply and environmental advantages claimed on its behalf are exaggerated or untrue. The mandate is a political gift to grain growers and distillers, a swindle of gasoline consumers and taxpayers, and a corruption of energy politics. In terms of overall effects on oil and gas markets , it’s also the most important measure in the compromise bill. What else needs to be said?
Of course, bill sponsors didn’t talk much about energy supply. They talked mainly about the needs to lower gasoline prices and to reduce US dependency on oil from abroad. By those standards, the compromise bill will fail. The ethanol mandate will certainly raise the costs of bringing gasoline to market, and those costs will be passed through to consumers as market conditions allow. Gasoline prices will surely fall from current levels in the future, but the reason will be market cycles, not the energy bill.
Imports grow
Nor will the bill affect oil imports, which will continue to grow no matter how many hydrogen-powered vehicles take to the streets. Producing hydrogen, like growing and distilling grain, requires energy, most of which comes from oil and gas. And the question must be asked: How serious can Congress be about reliance on foreign energy when its best response to concerns about gas supply is not opening access to domestic hydrocarbon resources but consolidating permitting jurisdictions for LNG import terminals?
Much work remains to be done on energy policy. Some of it relates to congressional credibility on the issue. US energy demand continues to rise. It’s time to address supply.✦