Energy Policy Act Of 2005
ENERGY POLICY ACT OF 2005 -- (Senate - June 28, 2005)
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Mr. REED. Mr. President, I would like to take this opportunity to say a few words about the Energy Policy Act of 2005, H.R. 6. While I did not support the bill for several reasons, I do acknowledge that the bill is, in many respects, better than the bill the Senate rejected in 2003. I am pleased, for example, that the bill we are sending to conference does more to address the reliability of our electricity grid, contains a 10 percent renewable portfolio standard for electricity production, and does not include an unnecessary liability waiver for the MTBE industry.
We all agree that reliable, affordable energy is critical to the economic well being of our Nation. And increasingly, our Nation's energy policy is central to our national security. As I considered how to vote on the energy bill, I asked myself three questions. First, would this bill take meaningful action to reduce our dependence on foreign oil? Second, would the bill enhance homeland security? And third, is this $48 billion bill fiscally responsible and does it set the right priorities for our Nation?
As for the first question, unfortunately, I find that this bill does not do nearly enough to reduce our dependence on foreign oil.
Oil prices have recently soared to around $60 a barrel, a level that, even when adjusted for inflation, has not been seen in over 15 years. Imports of foreign oil are draining valuable economic resources out of our communities and Nation. The U.S. imports 4.5 billion barrels of oil per year. With prices up $20 a barrel over the past year, an increase that appears to be with us for the foreseeable future, we are experiencing an effective annual reduction in domestic income of $90 billion. That is $90 billion that we could better invest in energy efficiency and renewable energy, as well as police, firefighters, workforce training, and education for our children.
Over the next 10 years the world's daily energy demand will grow to nearly 100 million barrels. We will have to find an extra 50 million barrels of oil per day to meet that demand. The industry is already spending $200 billion a year to find oil, but even at that extraordinary level of investment, there are enormous difficulties in finding recoverable reserves to fill the gap between supply and demand. The United States has about 2 percent of the world's oil reserves. We simply cannot drill our way out of this crisis.
Reducing our dependence on oil must be both a national energy and a national security priority. But that is not a high priority of this Energy bill. This bill fails to promote meaningful reductions in our oil dependence by casting aside a much-needed increase in CAFE standards for cars and by omitting Senator Cantwell's 40 percent oil savings amendment.
According to the Rocky Mountain Institute, since 1975 the U.S. has doubled the economic activity wrung from each barrel of oil. Overall energy savings, worth about $365 billion in 2000 alone, are effectively the Nation's biggest and fastest-growing major energy source--equivalent to three times our total oil imports. CAFE standards were a primary reason for these savings. We must make even greater strides in fuel efficiency if we want to move our country towards true energy independence.
Gasoline consumption in the transportation sector represents about 44 percent of total oil consumption in the United States each year. If one includes diesel fuel, that number jumps to 57 percent. To bring about any serious reduction in our dependence on foreign oil we must increase the fuel efficiency of our cars and light trucks through an increase in CAFE standards, as well as by promoting the use of hybrids and vehicles that use alternative fuels. In model year 2002, the average fuel economy for cars and light trucks was 20.4 miles per gallon--a 22-year low. Yet, if performance and weight had stayed constant since 1981, the average fuel economy would have improved 33 percent--enough to displace the amount of oil we import from the Persian Gulf 2.5 times over. Not only will raising CAFE standards improve our energy security, it will also ensure our economic security. China is putting in place fuel efficiency rules that will be significantly more stringent than those in the United States. The Chinese standards call for new cars, vans, and sport utility vehicles to get as much as two miles a gallon of fuel more in 2005 than the average required in the U.S. and about five miles more in 2008. And they plan to export these cars to the United States. We need to improve efficiency to remain competitive.
For these reasons, I am an original cosponsor of S. 889, Senator Feinstein's bill to close the SUV loophole by gradually increasing fuel efficiency standards for SUVs to 27.5 miles per gallon--the same standard that now applies to passenger cars--by 2011. The legislation would also require that the average fuel economy of new vehicles purchased by the Federal Government be increased by three miles per gallon by 2008 and six miles per gallon by 2011. In addition, the bill would increase the weight range within which vehicles are bound by CAFE standards, making it harder for automotive manufacturers to build SUVs too big to be regulated by CAFE standards. The legislation would save the United States 1 million barrels of oil a day; reduce our dependence on foreign oil imports by 10 percent; prevent about 240 million tons of carbon dioxide--the top greenhouse gas and the biggest single cause of global warming--from entering the atmosphere each year; and save SUV and light duty truck owners hundreds of dollars each year in gasoline costs. It is unfortunate that the Senate energy bill includes no provision to require increased CAFE standards so that we can make real progress in reducing our dependence on foreign oil.
Moving to my second question: would this bill enhance our homeland security? Unfortunately, it would not.
Consumption of natural gas is growing at a faster rate than for any other primary energy source and is growing in all sectors of the economy--families heat their homes with natural gas, businesses use natural gas to produce products, natural gas vehicles are becoming more common, and power producers generate cleaner energy with it. According to the Consumer Federation of America, since 2000, the toll of higher natural gas prices on consumers is an estimated $80 billion. Similar to oil, demand is growing faster than available supplies can be delivered and the tightening in supply is resulting in dramatic price volatility. One way to increase natural gas supply in the United States is through liquefied natural gas, known as LNG. Again, however, we would do well to learn from our lessons with oil. One-third of the world's proven reserves of natural gas are in the Middle East, nearly two-fifths are in Russia and its former satellites, and significant reserves exist in Nigeria and Algeria. Political stability and terrorism are very real threats to the reliability of natural gas from these countries.
On the domestic front, the siting of liquefied natural gas, LNG, import terminals is an issue that has taken on critical importance for me and for the people of Rhode Island in recent months, as the Federal Energy Regulatory Commission, FERC, is now considering proposals by KeySpan Energy and Weaver's Cove Energy to establish LNG import terminals in Providence, RI and Fall River, MA, respectively.
I recognize that natural gas is an important and growing component of New England and the Nation's energy supply, and that imported LNG offers a promising new supply source to complement our domestic natural gas supplies. In a post-September 11 world, however, we must consider the substantial safety and security risks associated with siting LNG marine terminals in urban communities and requiring LNG tankers to pass within close proximity to miles of densely populated coastline.
That is the major problem with the current siting process and with the underlying bill before us. While States do have certain environmental permitting authorities delegated to them under Federal laws like the Clean Water Act, the Clean Air Act, and the Coastal Zone Management Act, States have no clear authority over the siting of LNG terminals in the one area that everyone is most concerned about: public safety and security.
Senator Feinstein and I offered an amendment that would have ensured that States have an authentic voice in the siting of LNG terminals by giving Governors the same authority to approve or disapprove onshore terminals that they now have over offshore terminals under the Deepwater Port Act. If a Governor has the right to say yes or no to an offshore LNG terminal, it only makes sense that he or she should have the same rights with respect to an LNG terminal located onshore or in State waters. The National Governors Association agreed and wrote in strong support of our amendment.
I know that some of the opponents of this amendment say this is all about NIMBY, or ``Not in My Backyard,'' as if the issue is that our constituents would just rather not have to see these storage tanks and large vessels. But it is a much more serious and complicated matter than that.
The Sandia National Laboratory released a report last December that said a terror attack on a tanker delivering LNG to a U.S. terminal could set off a fire so hot it would burn skin and damage buildings nearly a mile away. For the terminals proposed in New England, that means schools, libraries, and thousands of homes, all within the damage zone. We can argue about the odds of such an attack, but when new LNG terminals are already being developed nearby in the Canadian maritime provinces--an area with reliable pipeline access to New England--and the first U.S. offshore LNG facility recently began receiving deliveries, there is no justification for placing these terminals in the heart of our communities.
I again want to emphasize that I recognize LNG's important role in the energy infrastructure of Rhode Island and the Nation, and I look forward to working with my colleagues to ensure reliable supplies of natural gas to our homes and businesses. I am disappointed that the Feinstein-Reed amendment was defeated, but our efforts have just begun. For now, I hope the 45 votes the amendment received will send a strong message to FERC that the agency should work more closely with Governors and the State environmental and first responder agencies that have firsthand knowledge of the geography and population of our States, so that we can bring more natural gas to our communities while minimizing the risk to our citizens.
Finally, we must ask ourselves, is the $48 billion cost of this bill fiscally responsible given our growing national debt and cuts in funding for other priorities such as education, water infrastructure, and transit? For me, the answer is no.
Over 11 years, this bill would provide $18.2 billion in energy tax incentives for electricity infrastructure, fossil fuels supply, energy efficiency, renewables, and vehicle and fuel incentives. I want to commend the Finance Committee for its work on the energy efficiency and renewable energy incentives in the bill. However, I am disappointed that the bill provides nearly $6 billion in tax breaks for oil, gas, and coal, and in addition, provides tax credits for nuclear energy. These tax breaks are provided despite the fact that President Bush has repeatedly stated that we do not need tax breaks for the oil and gas industry given the high prices Americans are experiencing.
Regrettably, this Energy bill also contains the Archer Daniels Midland ethanol mandate. In 2003, the United States consumed only 2.8 billion gallons of ethanol. But starting in 2006, the Energy bill will require Americans to purchase 4 billion gallons of ethanol, then 8 billion gallons by 2012, and then increasing amounts every year after 2012 in perpetuity by a percentage equivalent to the proportion of ethanol in the entire U.S. gas supply. So in addition to the already high gas prices Americans are paying at the pump, they will now be charged a tax to unnecessarily subsidize the ethanol industry, which already benefits from an income tax credit of 51 cents per gallon of pure ethanol, as well as a 54 cents per gallon tariff on imported ethanol.
The bill also provides loan guarantees for so-called innovative technologies, including nuclear power, a provision that would cost taxpayers $600 million. The legislation sets no limits on the number of projects, or the total principal that could be guaranteed for these speculative investments. As the Congressional Budget Office, CBO, points out, if a borrower defaults on a loan, the Department of Energy could take over a facility to recoup losses, or the Department could take over a loan and make payments on the loan for the borrower. To quote the CBO, ``Such payments could result in DOE effectively providing a direct loan with as much as a 100 percent subsidy rate--essentially a grant--that could be used by the borrower to pay off its debt.'' Is this a responsible use of taxpayer dollars when we are dramatically cutting funding for education, clean water, and energy efficiency programs? In my opinion, the answer is no.
I believe the American people deserve a better Energy bill from the Senate. They deserve a bill that takes seriously the need to reduce our dependency on foreign oil. They deserve a bill that provides for both our national security and energy security. They deserve a bill that requires real reductions in the greenhouse gas emissions that cause global warming. They deserve a bill that reduces energy prices for consumers, not one that hands out unnecessary subsidies to industries. Unfortunately, if history is any indicator, this bill is going to get worse, not better, in conference with the House. I look forward to working with my colleagues to oppose the addition of MTBE liability waivers and any other onerous House provisions to the Energy bill. It is high time we gave the American people an Energy bill that deserves their full support.
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