Patrick Crow
Managing Editor, OGJ Online
The key elements are in place for the US to reconsider its energy policies this year.
Because of recent electricity shortages and oil and gas price spikes, many Americans now consider energy to be one of the "problems" facing the nation.
Congress�which often is unable to pass legislation absent a crisis�will begin work in February amid the backdrop of high energy prices in winter's coldest month.
Oil and gas industry associations, concerned about limitations on their ability to produce and transport energy, have been clamoring for a national energy strategy. Electricity groups are divided on decontrol issues, but mostly agree on the need for transmission reform.
But little or nothing will happen if the administration of President-elect George W. Bush does not provide leadership and realistic proposals for energy priorities. It's questionable whether Bush will be able to respond with an energy policy quickly enough and completely enough to satisfy the various interest groups.
This week Bush named Sen. Spencer Abraham (R-Mich.) to be his Energy Secretary. Abraham presumably would guide any energy policy revamp, although both Bush and Vice-President-elect Richard Cheney�both former oil company officials�know more about the industry than does Abraham.
The two other nominees presumably would play a major role in energy policy. They are former Colorado Atty. Gen. Gale Norton, named to head the Interior Department, and New Jersey Gov. Christie Whitman, selected to be Environmental Protection Agency administrator.
The Senate could take up to 2 months to confirm the trio. The staffing of key positions in their departments will take even longer. (The Bush administration has nearly 6,000 appointive positions to fill.)
Even if the personnel were in place, the process of drafting a detailed energy program could be a long one. When the Energy Department compiled the nation's last in-depth energy plan�in the administration of Bush's father�it spent more than 18 months to explore issues, hold hearings and meetings, and draft the document. The result was a 300-page book that the Clinton administration ignored.
Bush's focus
In press conferences announcing his cabinet appointees, Bush disclosed his latest thinking on energy issues.
He is mindful of his campaign pledge to draft "a comprehensive energy policy for our country." He said a key element will be to meet increased demand with increased domestic exploration and production "in an economically sound and environmentally sensitive way."
Abraham picked up on that theme. "We have vast resources within the US, and these are crucial to our country's security. We can make good use of them, while at the same time, I believe, meeting our responsibilities as good stewards for the land, the air and the water."
Asked about restrictions on the development of public lands, Bush said, "I strongly believe that we must work in concert to increase the amount of supply available for American consumers: supply of natural gas, supply of coal, supply of plant(s) and equipment.
"I believe we need to review all federal land policy to make sure that we're not missing an opportunity to explore for natural gas in the country. Natural gas is hemispheric; I like to call it hemispheric in nature, because it is a product that we can find in our neighborhoods, and it is immune from price manipulation by the Organization of Petroleum Exporting Countries.
"The issue with natural gas is not only its discovery, but its transportation. So we must review all policies that would prevent construction of pipelines to be able to move gas from field to market.
"When we're undersupplied as a nation and demand increases, prices will go up. And that's what happening in the energy field."
Bush said, "The shortest, quickest impact on the price of energy, particularly crude oil, will be to work with OPEC nations and to foster relations so that they may be convinced to open up the spigots to keep the pressure off price."
OPEC is due to meet Jan. 17, only 3 days before Bush takes office. The organization is expected to consider reducing production 1.5 million b/d to prevent oversupply in the spring.
Bush said, "The fact that OPEC is thinking about reducing world supply of crude oil and thereby affecting the price at the pump and the price of heating oil, indicates the need for us to have an energy policy that makes us less dependent on foreign sources of crude.
"The ideal world is one in which we don't have to worry about somebody reducing supplies on the world markets. We've got a long way to go from there. But we need to be exploring in an environmentally sensitive way for oil and gas here at home."
Associations push
Even before they knew who the new president would be, industry associations began lobbying for consideration of a national energy strategy in 2001.
Red Cavaney, American Petroleum Institute president, said there is a growing gap between the nation's energy demand and producers' ability to meet it (OGJ, Sept. 25, 2000, p. 48).
"If we dare to reverse this troublesome trend, our nation must develop a more contemporary energy policy," he said.
API has been drafting a list of legislative proposals the administration should consider. They include fewer government restrictions on exploration, quicker refinery construction, and a lifting of sanctions that prevent US companies from operating in certain nations overseas.
Cavaney said, "There has not been a broad discussion about energy policy in this country since the 1970s. For the last couple of decades, whatever changes that occurred in energy policy were not subject to broad debate. Each element was handled in isolation," often by the Interior Department or EPA.
He said API and other oil groups hope to agree on a list of policy recommendations.
Other associations also have taken up the cause. The Interstate Oil and Gas Compact Commission passed a resolution in December urging the next Congress and the president to develop an energy strategy that increases industry's access to public lands for gas production.
The National Ocean Industries Association said because of current and projected energy shortages, Interior's Minerals Management Service should consider offering areas in the next 5-year offshore leasing program that have been omitted in recent years.
And the National Association of Manufacturers is drafting policy recommendations for the 107th Congress, including a chapter on energy policy.
A preliminary draft said the US economy is threatened by uncertainties over future energy supply and prices. "NAM seeks a renewed debate about energy policy that can lead to a new, more coherent, and balanced reliance in the future both on more energy efficiency and on more domestic exploration and production.
"Technology has made it possible for the US to develop more of its substantial domestic energy resources�coal, oil, and natural gas�in conjunction with protecting the environment. Our current regulatory regime fails to recognize this and excessively limits their domestic development and use."
Congressional hurdles
Bush's energy policy so far mostly reflects that of Sen. Frank Murkowski (R-Alas.), the Senate Energy and Natural Resources Committee chairman.
Under Alaskan political influence, the Republican Party platform last summer called for a national energy strategy�one that includes development of millions of barrels of oil believed to lie beneath the Arctic National Wildlife Refuge coastal plain east of Prudhoe Bay field (OGJ, Aug. 14, 2000, p. 30).
Bush is expected to leave much of his energy policy to Murkowski. The senator filed a bill last session, offering a laundry list of policy changes that he said could reduce US oil imports to 50% of total supply by 2010 from 56% now (OGJ, May 22, p. 28). Murkowski plans to reintroduce the legislation this session.
At a hearing in December, Murkowski said, "We clearly need to develop a comprehensive and balanced national energy strategy for the next decade: one that takes advantage of all our energy sources, one that takes economic and environmental factors into account at the same time, and one that provides a cleaner, more secure energy future."
The close balance of power in Congress will make it difficult�although not impossible�to get legislation passed on energy policy this session. Even if a majority of members of congress agreed on legislation, it could die in a leadership vacuum.
Republicans and Democrats both hold half the Senate seats. Republicans want to maintain control, claiming that the vice-president's role as presiding officer gives them a majority. Democrats want to "share power" on the floor and in committees, which�for instance�would make it very difficult for Murkowski to pass his legislation.
In the House, Republicans hold 221 seats, 10 more than Democrats. (There are two independents and one vacancy). Republicans will keep control of the floor and a one or two-vote majority in committees. But all of the three key committees handling energy bills�Ways and Means, Commerce, and Resources�will get new chairmen.
With the combination of higher energy prices, quick action by the administration, and resolve by Congress, the nation could get a formal energy policy this year or next. That combination, however, appears unlikely.