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September 17, 2008

Flaws in the New No-New Energy Plan

September 17, 2008
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Yesterday the House embarked upon yet another in a long series of energy debates. Like its predecessors, this new energy bill, entitled the “Comprehensive American Energy Security and Consumer Protection Act” (H.B. 6899) does almost nothing to improve our energy situation. Further, the measure seems to increase costly regulation on buildings and imposing additional burdens on taxpayers by subsidizing expensive forms of energy.

This bill, like the recent “Gang of Ten” proposal, does almost nothing to increase domestic energy production. Instead, it offers more of the same government imposed mandates that promote inefficient or untested types of energy.

The following is an analysis of the most recently available proposal:

Title 1—Federal Oil and Gas Leasing

While the authors may seek to open up additional areas on the outer continental shelf (OCS) to new exploration and development, the bill permanently locks up the most oil and gas-rich areas of the OCS. For example, this would permanently ban about 97 percent of the undersea oil lying off the coast of California.

Subtitle A—Outer Continental Shelf Oil and Gas Leasing

  • Permanently institutes a ban on new offshore development out to 50 miles. [Sec. 102]
    • The vast majority of undiscovered oil and gas reserves are projected to be between the coast and 50 miles offshore. Instead of allowing the production of great quantities of oil and gas, this section locks up billions of barrels of oil and trillions of cubic feet of natural gas.
  • Permits leasing only between 50 and 100 miles offshore only if the adjacent state legislature ‘opts-in’ to allow leasing off its coastline. [Sec. 102]
    • Section 102 fails to provide royalty revenue sharing for the states near new offshore development. States will not have any incentive to allow oil development if there is not revenue sharing from the actual production.
  • Fails to open new, energy rich areas for exploration and development in the eastern Gulf of Mexico. These areas in the Gulf could start producing oil and gas very quickly because they are close to existing infrastructure.
  • Creates a new duty for the Secretary of the Interior, notwithstanding all current environmental laws, to make sure any activity “provides for the protection of the coastal environment.” [Sec. 104]
    • Offshore exploration and development is already subject to a large number of environmental laws such as the Marine Mammal Protection Act, the Coastal Zone Management Act, the Endangered Species Act, and the Magnuson-Stevens Fishery Conservation and Management Act.
    • Because this new language is not defined in the bill nor the U.S. Code, it is an invitation for environmental groups to sue so courts will determine what it means for the Secretary to “provide for the protection of the environment.” [Sec. 104] This will only slow new offshore development.

Subtitle B—Diligent Development of Federal Oil and Gas Leases

  • Requires oil and natural gas leaseholders to “diligently develop” the leases they hold. [Sec. 121]
    • The bill does not explain how this would change existing law and existing requirements because existing law already requires leaseholders to develop leases or give them back to the United States.
    • This subtitle is a reference to the myth that there is 68 million acres with economical deposits that are leased by oil and gas production that oil companies are not using. More information on that myth is available here.

Subtitle F—National Petroleum Reserve in Alaska

  • Accelerates leases sales on National Petroleum Reserve—Alaska (NPR-A). [Sec. 162].
    • NPR-A is estimated to contain 10.6 billion barrels of oil but those reserves are spread out over NPR-A’s 23 million acres. This bill does not open up nearby ANWR. ANWR also holds more than 10 billion barrels of oil, but ANWR’s resources can be accessed from a very small area. More information about the NPR-A and ANWR is available here.
    • The bill states that the Secretary must offer leasing in an “environmentally responsible” manner. This section does not define “environmentally responsible” potentially allowing environmental groups to sue to define what this means.
  • Requires the President to facilitate construction of a natural gas pipeline from Alaska with unionized labor [Sec. 165-166]
  • Bans the export of Alaskan oil. [Sec. 166]

Subtitle G—Oil Shale

There are more hydrocarbon resources in oil shale in the western United States than there are oil reserves in Saudi Arabia. The United States Geological Survey (USGS) has estimated the U.S. has 2 trillion barrels of resource of which 556 billion barrels is recoverable. A better approach would be to remove all impediments to oil shale research and development.

  • Allows oil shale leasing for research, development, or production of oil shale only if states specifically pass a law permitting oil shale leasing within their borders. [Sec. 171]
    • This is only a half-measure to developing oil shale. Developing oil shale is expensive and requires experimentation to improve oil shale extraction technology. It is currently not necessary to get state approval for experimental projects, but this bill creates additional hurdles for experimental projects—the type of projects necessary to one day utilize this vast resource.

Title II—Consumer Energy Supply

  • Sells 70 million barrels of light grade crude oil from the Strategic Petroleum Reserve and buys heavy grade crude. [Sec. 201]
  • It is unlikely this scheme will have any effect on gasoline prices, as evidenced by this information here.

Title III—Public Transportation

From 1993 to 2003 capital expenditures for public transit grew by 100 percent, but transit ridership only grew by 13 percent. By that measure, federal subsidies for public transportation has been a bad investment, but it seems measure throws good money after bad.

  • Spends $100 million in new federal spending for public transportation. [Sec. 303]
  • Establishes a new pilot program for contracting vanpools. [Sec. 306]
  • Authorizes $1 million in spending for public transportation advertising. [Sec. 307]

Title IV—Greater Energy Efficiency in Building Codes

This title usurps the authority to set building codes from state and local governments and institutes new national building codes standards in the name of energy efficiency. The likely outcome of this title will be an increase in the cost of new construction and renovation of buildings in the United States.

  • Requires states to revise their building codes to comply with certain energy efficiency standards. [Sec. 401]
  • Increases energy efficiency standards for building renovations.

Title V—Federal Renewable Portfolio Standard

This title requires electricity providers (except for state or local governments) to provide 15 percent of their electricity from renewable sources, excluding hydropower, by 2020. Currently, less than 5 percent of our electricity is generated by renewable sources according to the definition in this title. Renewable electricity mandates increase the price of electricity to consumers by forcing them to use more expensive and less efficient sources of electricity.

Title VI—Green Resources for Energy Efficient Neighborhoods

This title contains and myriad of subsidies and directives that interferes with housing markets in the name of “energy efficiency.”

  • Creates new subsidies for people who participate in HUD programs to implement energy efficiency programs. [Sec. 603]
  • Authorizes $50 million in pilot programs for more energy efficient multi-family dwellings. [Sec. 605]
  • Encourages Fannie Mae and Freddie Mac to favor energy efficient mortgages. [Sec. 606]
  • Establishes a “duty to serve underserved markets” regarding energy- and location-efficient mortgages for “very low-, low-, and moderate-income families.” [Sec. 607].
  • Authorizes $5 million for advertisements about energy efficient mortgages. [Sec. 609]
  • Authorizes $10 million for “increasing sustainable low-income community development capacity.” [Sec. 617]
  • Creates new requirements for state certified appraisers to consider the value of energy-efficiency features. [Sec. 620]
  • Authorizes a $5 million fund for loans to states and tribes to carry out renewable energy sources activities. [Sec. 623]

Title VII—Miscellaneous Provisions

  • Mandates each automotive fueling station owned by a major integrated oil company to have at least 1 alternative fuel pump. This section assesses a $100,000 fine for each gas station not in compliance. [Sec. 701]
  • While section 701 appears to greatly increase the amount of alternative fuel pumps, this is not true. Only 3 percent of gas stations are owned by major oil companies.
  • Authorizes $25 million in funding per year for a “National Energy Center for Excellence” at two universities. [Sec. 702]

Title VIII—Energy Tax Incentives

This final title is a hodge-podge of additional subsidies for politically-preferred and economically expensive energy projects, partially paid for by a major tax increase on oil companies. A recent IER analysis found that this could cost America over half a million jobs and tens of billions in lost household income and almost $200 billion in total economic output.

  • Extends renewable energy tax credits. [Sec. 801]
  • Creates new tax credits for “marine renewables.” [Sec. 802]
  • Adds credits for pet energy projects. [Sec. 803]
  • Extends credits for residential renewable energy projects. [Sec. 804]
  • Authorizes $2.25 billion in tax credits integrated gas and combined cycle projects and advanced coal-based generation. [Sec. 811]
  • Increases tax credits for coal gasification projects by $150 million. [Sec. 812]
  • Increases the coal excise tax. [Sec. 813]
  • Commissions the National Academy of Science to devise a taxation scheme to tax greenhouse gases [Sec. 815]
  • Increasing subsidies for biodiesel and renewable diesel [Sec. 822]
  • Creates new subsidies for plug-in automobiles [Sec. 824]
  • Implements tax breaks for heavy duty trucks with idling reduction devices and thick insulation [Sec. 825]
  • Implements special payroll tax breaks for governments around New York City [Sec. 826]
  • Institutes special benefits for bicycle commuters [Sec. 827]
  • Increases tax credits for alternative fuel vehicles [Sec. 828]
  • Subsidizes loans for natural gas refueling at gasoline stations [Sec. 829]
  • Subsidizes bonds for local governments to implement pet “green” projects [Sec. 841]
  • Extends credits for biomass heating [Sec. 842]
  • Extends credits for energy efficient commercial buildings [Sec. 843]
  • Subsidizes for energy efficient appliances [Sec. 844]
  • Institutes tax breaks for smart meters and smart grid systems [Sec. 845]
  • Extends tax breaks for green buildings [Sec. 846]
  • Retains the Gang of Ten’s tax increases on oil companies by ending section 199 credits for oil companies [Sec. 851]

Randal O’Toole, Transportation Costs and the American Dream, p. 5 (2003). http://www.reason.org/pb25.pdf

National Association of Convenience and Petroleum Retailing, Who Sells Gasoline in the United States?, http://64.233.169.104/search?q=cache:3SO5I9pKI18J:cstorecentral.com/NR/rdonlyres/e4byydgy5rac32l3xw2ajs53o2jolqw73vsi6roq5dag2vh2hzrx4flprwtlvzgwcjukq434wwsesxqwzspln4ynzxh/Who%2BSells%2BGasoline%2Bin%2Bthe%2BUnited%2BStates.pdf+what+percentage+of+gas+stations+are+owned+by+major+integreated+oil+companies%3F&hl=en&ct=clnk&cd=2&gl=us&client=firefox-a


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