Editorial: Energy bill prospects

July 25, 2005
What if US congressional conferees actually manage this time to reconcile sharply different energy bills passed by the House and Senate? What if they don’t, and comprehensive energy legislation fails again? It’s not too soon to ask.

What if US congressional conferees actually manage this time to reconcile sharply different energy bills passed by the House and Senate? What if they don’t, and comprehensive energy legislation fails again? It’s not too soon to ask.

Heroic as the effort has been to bring it about, passage of a sweeping energy bill wouldn’t do everything needed for energy supply. It would take symbolic steps: mandates and subsidies for renewable energy, for example, and federal funding for use of hydrogen as a transportation fuel. It probably would provide tax incentives for deep wells in the Gulf of Mexico. It might require an assessment of oil and gas resources on Outer Continental Shelf acreage unavailable for leasing. And it would streamline federal permitting in the US West and make jurisdictional adjustments that might incline bureaucratic decisions toward energy development.

Supply boost

The US, however, needs a major boost in energy supply, particularly natural gas, soon. Supply from renewable energy sources, no matter what government does or how fast it grows, remains many decades away from making a meaningful contribution to total energy requirements. And solutions to hydrogen’s thermodynamic and economic problems are nowhere in sight.

Prospects are uncertain at best that compromise energy legislation would make real supply responses to immediate challenges. Approval of leasing of the Arctic National Wildlife Refuge Coastal Plain has sneaked into play in a budget bill. But Congress still has to act, and environmental opposition remains fierce. Leasing of the OCS off the East and West Coasts and off eastern Florida, the quickest potential response to US gas needs, is even less probable. Hopeful signs emerged when representatives of nonproducing states hurt by high gas prices acknowledged the importance of domestic supply and sought ways to relax leasing moratoriums. Yet neither energy bill includes a leasing breakthrough, which awaits some future fight.

If a compromise energy bill passed, its supporters would be stuck with two false promises that have propelled its politics. One is that passage of the bill would make the US less dependent on foreign oil. Because of rising demand and the bill’s limited commitment to domestic oil and gas production, it would not. The other promise is that passage of the bill will reduce gasoline prices. It would not do that, either. By mandating that gasoline by 2012 contain 5-8 billion gal/year of ethanol, it would in fact raise gasoline prices, reduce vehicle fuel mileage, and aggravate ozone pollution, necessitating further costly tightening of fuel-performance standards in the future.

Passage of an energy bill with a lavish menu of mandates and subsidies also would expand the government’s role in fuel choice. The inevitable distortions and inefficiencies would raise energy costs. Anyone who thinks otherwise should compare the economics of subsidized hydrogen with those of the oil and gas that could be produced if Congress simply relaxed leasing limits.

Failure to pass an omnibus energy bill of dubious content would be no tragedy. It has happened before. Failure would disappoint politicians seeking a legislative victory, groups and lobbyists for which an energy bill has become an end unto itself, and special interests keen on individual aspects of the unwieldy package and willing to compromise on or ignore everything else. It would anger lobbyists and lawmakers determined to expand ethanol markets at the expense of taxpayers and fuel consumers.

Roaring inattention

But for all other Americans, meaning most of them, failure would largely escape notice. It is striking that, at this moment of peak drama in the long struggle for an energy bill, conference committee developments barely merited mention in the news until conferees voted to extend daylight-savings time.

For the oil and gas industry, the public’s roaring inattention to energy legislation should be comforting. If the bill passes, few will remember the fatuous promises it was never destined to keep. If it doesn’t pass, the loudest complaints will be from a misguided minority that considers the gasoline market a fitting realm for government activism. In that case, if conferees again can’t reconcile two very complex energy bills, lawmakers, presidents, and the oil and gas industry should abandon an approach to energy governance that tries to do too much at once and ends up doing too little.