Energy plan offers no relief for high gasoline prices, marginal wells

The Bush administration's energy strategy will not offer relief for high gasoline prices or marginal well production, White House officials said. It will advocate controversial lease sales, on the Arctic National Wildlife Refuge coastal plain and in the eastern Gulf of Mexico.

By the OGJ Online Staff

WASHINGTON, DC, May 17 -- President George W. Bush will release his administration's energy strategy recommendations this morning, to address what the White House calls "the most serious energy shortage since the oil embargoes of the 1970s."

Bush is due to disclose the strategy in a talk at St. Paul, Minn.

Senior White House officials said the document is a broad blueprint for Congress to follow with legislation over the coming weeks, although no timetables have been set.

Senate Committee on Energy and Natural Resources Chairman Frank Murkowski (R-Alas.) pledged he will push the Senate to pass bipartisan energy legislation this summer that will include many if not all of the recommendations in the energy task force's report. Vice-Pres. Richard Cheney guided preparation of the document.

Proposals that would require congressional action include: allowing exploration on the Arctic National Wildlife Refuge coastal plain; comprehensive electricity restructuring legislation; crafting a "multi-pollutant," market-based program to reduce power plant emissions; and expanding tax credits for hybrid cars.

As expected, the report did not call for expanded tax incentives to keep marginal wells in production during times of low prices. However, pending Senate Republican and Democratic energy bills seek to encourage domestic production through more favorable tax treatment.

Democrats, however, do not support ANWR production and some are calling for more drawdowns of the Strategic Petroleum Reserve when oil prices are high.

The White House does not advocate use of the SPR absent a severe supply shock.

The energy strategy also will not ask Congress to reduce or suspend the 18.4¢/gal federal excise tax on gasoline. Some lawmakers want the tax cut to ease the impact of record high retail gasoline prices on consumers. So far, Congressional leaders have resisted the idea.

President Bush is expected to issue two executive orders soon. The first would direct all federal agencies to consider the impacts of major, pending regulations on energy supplies. The second will direct federal agencies to expedite permits and coordinate federal, state, and local actions necessary to approve energy-related projects.

The energy plan also will accelerate a US Geological Survey inventory of potential oil and gas reserves on federal lands; direct the Environmental Protection Agency to consider ways to regionalize reformulated gasoline programs; and support an International Energy Agency program to gather more accurate global energy data.

The White House also endorsed the Interior Department's plan to hold controversial eastern Gulf of Mexico lease sale 181 in December, and to hold another sale of leases in the National Petroleum Reserve-Alaska.

In the foreign policy arena, the report seeks better communication with Congress on what role trade sanctions play in US foreign policy. It did not say under what conditions the White House would be willing to retool or eliminate existing sanctions against Iraq, Iran and Libya. The State Department is expected to propose a "smart" sanctions policy next month.

The task force report also did not offer specific recommendations on how the US could persuade the Organization of Petroleum Exporting Countries to increase production. A senior administration official said the White House prefers "quiet diplomacy" on the subject.

Earlier in the week, the White House disclosed some of the conservation and efficiency proposals in the energy strategy.

A White House fact sheet said businesses find combined heat and power (CHP) systems attractive, but replacing old, inefficient boilers with highly efficient CHP systems can add new regulatory requirements (such as air permits) without offering the same depreciation incentives the tax code grants to power plants.

It recommended Congress shorten the tax depreciation life for CHP projects to 7 years; that the US Environmental Protection Agency work with local and state governments to encourage the use of CHP and other clean power generation at brownfields sites; and that EPA allow more flexible permitting for CHP plants.

The White House said hybrid (gasoline/electric) or fuel cell vehicles are more fuel-efficient than standard autos, potentially doubling vehicle mileage.

It said the energy policy will recommend Congress provide an individual, temporary, income tax credit for purchase of new hybrid or fuel cell vehicles between 2002 and 2007.

The White House noted that the federal program promoting energy efficiency, Energy Star, has been limited.

It recommended the Department of Energy expand the program beyond office buildings to include schools, retail buildings, health care facilities, and homes, plus additional home products and appliances.

Also, EPA would develop and implement a strategy to increase public awareness of the potential savings from energy efficiency. "The typical homeowner can save 30% (about $400/year) on their home energy bill by using Energy Star-labeled products such as computers, air conditioners, and other products."

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