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POLICY BRIEF FROM AMERICANS FOR TAX REFORM
President Bush's Energy
Plan
In this Policy Brief:
Energy Basics
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America faces the most
serious energy shortage since the oil embargoes of the 1970s.
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A fundamental imbalance
of supply and demand had led to this crisis. Our future energy
needs far outstrip present levels of production.
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Over the next 20 years,
U.S. oil consumption will rise by 33 percent, natural gas consumption
will grow by more than 50 percent, and demand for electricity will
rise by 45 percent.
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If America continues
to produce energy at the same rate we did in the 90s, we will face
an ever-increasing gap between supply and demand.
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To meet projected demand
over the next 20 years, America must have in place between 1,300
and 1,900 new electric plants – more than one per week for
the next two decades.
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We now rely on foreign
imports for almost 60 percent of our oil. On our present course,
we will have to import two of every three barrels of oil 20 years
from now.
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We have let our energy
infrastructure deteriorate. Our current outdated network of
generators, transmission lines, refineries and pipelines is in critical
need of repair and modernization.
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Not a single major oil
refinery has been built in nearly a generation, causing the kind
of bottlenecks that lead to sudden spikes in gasoline prices.
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An antiquated and inadequate
transmission grid prevents us from routing electricity over long
distances and thereby avoiding regional blackouts, such as in California.
How Energy
Impacts Real People
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Last winter, heating
bills for many families tripled. Average natural gas heating
costs in the Midwest rose by 73 percent last winter. New Englanders’
heating bills jumped by 27 percent.
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Millions of Americans
are dealing with rolling blackouts or brownouts, threatening their
homes, businesses and families – and their own personal safety.
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Low-income Americans
and seniors have been hardest hit. While energy costs typically
represent only 4 percent of a middle-class household budget, last
winter, costs for the average low-income household were 14 percent
of the household budget.
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Drivers across America
are paying higher and higher gasoline prices. In 2000, fuel
prices on average rose 30-40 cents a gallon from a year earlier.
This summer, in some parts of the nation, gasoline prices may skyrocket
to $3.00 per gallon.
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High fuel costs are
also destroying jobs. For example, trucking company bankruptcies
are at an all-time high.
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Businesses and factories
are being forced to lay off workers and curtail production.
In the Pacific Northwest, for example, high energy costs forced
Georgia-Pacific’s paper mill to close, forcing 800 workers
out of their jobs until diesel generators could be installed.
The company has seen its average power costs soar from $1.2 million
to $10 million.
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Farm production costs
are spiking sharply because of higher energy prices, while farm
income remains low. Surging natural gas prices have increased
the price of fertilizer by 90 percent since 1998.
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Rising energy costs
are dampening business prospects. For example, in California,
43 percent of small businesses surveyed in February 2001 said the
power problem had dimmed their views about California as an attractive
place for doing business. More than 31 percent said they will
probably or definitely cut back on planned investment, and nearly
20 percent are exploring a move to another state.
Actions
Taken by The President To Address Short-Term Energy Challenges
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Since taking office,
the Bush Administration has actively helped California minimize
the risk of blackouts and lower electricity costs by removing obstacles
to supply and conserving electricity use. Governor Davis has
thanked President Bush for his assistance.
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One day after being
sworn into office, the President directed the Energy Secretary to
call Governor Davis to offer the Administration’s full support
to minimize the risk of power shortages.
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Three days after taking
office, at Governor Davis’ request, the Bush Administration
extended the emergency electricity and gas orders to give California
time to develop legislation aimed at maintaining electricity supplies.
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In February, also at
the request of Governor Davis, President Bush issued an executive
order directing Federal agencies to expedite permits relating to
construction of new power plants in California. In response
to the President’s directive and through their own initiatives,
federal agencies have been regularly and actively working with state
and local officials to remove obstacles to new supply. (A
detailed list of specific actions to remove obstacles to new supply
by federal agencies follows).
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Following up on a meeting
with Governor Davis, Secretary Abraham issued a letter indicating
that the Administration did not oppose the State’s proposed
purchase of the California utility transmission systems, conditioned
on the adherence to open access requirements
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President Bush and the
Energy Secretary have engaged in discussions with the Government
of Mexico about increasing electricity imports from Mexico.
DOE is also working expeditiously to approve several cross-border
electricity expansions between California and Mexico that should
be approved later this year.
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In early March, at the
behest of Governor Davis, Secretary Abraham sent a letter to the
Federal Energy Regulatory Commission (FERC) asking that the agency
act on his request for an extension of the waiver for qualifying
facilities from certain fuel requirements.
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On March 29, Secretary
Abraham met with a group of California energy suppliers to impress
upon them that the next several months should not be viewed as "business
as usual," and to ask for their help to avoid foreseeable disruptions
in supply.
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On April 4, Secretary
Abraham met with a group of electricity experts to discuss the California
electricity crisis and to explore actions that could be taken by
the federal government and State to increase supply or reduce demand.
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On May 3, President
Bush directed federal agencies in California and other regions where
electricity shortages are likely to reduce electricity use by the
maximum extent, particularly during peak demand use periods.
Agencies will report to the President within 30 days on specific
conservation actions taken.
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On May 3 the President
announced that the Department of Defense would reduce its electricity
demand in California this summer during peak demand periods.
The reduction will be achieved by a combination of energy conservation,
energy efficiency investments and power generation. This initiative
augments ongoing energy conservation efforts that have resulted
in a 23 percent decrease in energy consumed per square foot in Department
of Defense buildings nationwide since 1985.
Actions
Taken By The President To Remove Obstacles To New Generation in California
And Minimize Blackouts
In response to the President’s
Directive and federal agencies’ initiatives, the following expediting
actions have been taken:
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Expediting major power
plant construction. Since the President issued his directive
on February 15, the Environmental Protection Agency (working cooperatively
with the State of California) has issued final construction permits
for four new power plants totaling 2,450 megawatts (MW) of new energy
supplies (Elk Hills, 500 MW; High Dessert, 700 MW; Pastoria, 750
MW; Midway Sunset 500 MW).
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Expediting small, “peaker”
power plant construction. Working cooperatively with the State
of California and local air quality boards, EPA has issued Administrative
Orders on Consent (AOCs) that allowed immediate and expedited construction
of peaking power plants.
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On April 9th and 10th,
EPA issued AOCs to Wildflower Energy for two simple cycle power
plants – its Larkspur (90 MW) and Indigo (135 MW) facilities
in the San Diego and South Coast Air Districts, respectively.
The plants are expected to be in operation early this summer.
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On April 30th, EPA issued
an AOC to Alliance Colton for two 40 MW facilities to be built at
their Drew and Century substations in the South Coast Air District.
Both facilities are expected to be in operation by mid·summer.
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EPA expects additional
requests for AOCs for new peaker power plants, although none have
yet been received.
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Peaker plant flexibility:
Working cooperatively with the State of California and local air
quality boards, EPA issued an AOC to Mirant for its Potrero (San
Francisco) peaking turbines on April 6. These turbines are
fired on distillate oil, and had taken a limit of 870 hours per
year to avoid a NOx control requirement. Due to January’s
emergency, the ISO required Mirant to run the turbines almost
continuously, and it is now close to exceeding its hour limit
on some of the turbines. EPA’s order, which only applies
this calendar year, anticipates exceedence of the limit.
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The order is paired
with one from the Bay Area Air Quality Management District.
The District’s order additionally collects $20,000/ton to
be used for emissions reductions in the area of the Potrero plant.
Each of the three turbines subject to the order has a capacity
of 52 MW. California executive order D-24-01 ordered local
air quality management districts to modify limits on the hours
of operation of power plants, provided the operators pay a mitigation
fee for all excess emissions to fund pollution offset projects.
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Backup generator flexibility:
In response to a request from the California Environmental Protection
Agency, EPA sent a March 9 letter to California’s Environmental
Protection Agency allowing the use of emergency backup generators
to avert blackouts where such blackouts are imminent. This
authority will expire October 31, 2001
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RECLAIM program flexibility:
On April 6, EPA issued a letter to the South Coast Air Quality Management
District (SCAQMD) outlining EPA concurrence with several District
proposals to add flexibility to its RECLAIM program (SCAQMD’s
program that allows trading to comply with CAA emissions requirements)
by: 1) allow power producers to operate at high capacity this summer
and make up credit shortfalls for 2001·2003 NOx exceedances
in the second compliance year; 2) permit California to provide three
years of NOx offsets obtained from diesel truck engine retrofits
for peaker units operating this summer, and; 3) permit the District
to use as offsets credits generated from categories of sources currently
being expanded through the District’s rulemaking process.
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The result of EPA’s
concurrence on these points will be to permit the District to expand
the pool of NOx credits available for use this summer by all power
generators and, to the extent that NOx credits are not sufficient,
allow offsets to be made up in a subsequent year.
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Expediting natural gas
infrastructure expansion to increase electricity generation.
In response to a request from the State of California, and working
cooperatively with the Mojave Desert Air Quality Management District,
EPA issued an AOC to Williams Co. to allow immediate construction
of a compressor turbine at the existing compression station of their
Kern River Gas Transmission Co. facility in Daggett, CA. The
new compressor turbine will come online July 1, 2001, and increase
gas flow in the pipeline by about 20 percent. On April 6, FERC approved
construction of a new natural gas facility in only three weeks.
The Executive Director of the California Energy Commission noted
the Bush Administration was moving at “lightning speed.”
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Expediting the review
of operating permits. EPA has reduced its review of state·issued
Clean Air Act operating permits from the statutorily·allowed
45 days to 5·10 days for emissions control projects associated
with power generation. This is an EPA initiative not tied
to any specific executive order issued by Governor Davis.
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On March 14, FERC issued
a series of orders designed to expedite energy supplies to California,
including streamlining regulatory procedures for wholesale power
sales, expediting natural gas pipelines, and urging hydropower licensees
to assess the potential for increased hydropower generation.
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The Army Corps of Engineers
initiated discussions with power generators and concluded that 25
of the 32 first-tier priority power sites identified by the California
Energy Commission do not require Department of the Army permits.
The Corps is prepared to work with the remaining seven power generators
on any permits that may be required.
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Expediting expansion
of electricity transmission. Within 24 hours of receipt of
a request, the Defense Department concurred on April 5 on an application
from San Diego Gas & Electric to amend a Presidential Permit
to connect a new 510-megawatt Otay Mesa power plant to an existing
230,000-volt electrical transmission line and to double the number
of conductors on this line. This upgrade will result in additional
generation becoming available in Southern California.
Modernize
Conservation
Critics say the Administration’s
energy proposals lean too heavily on producing more energy instead of
encouraging greater energy conservation and renewable energy development.
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They are wrong.
Here’s why:
- More than one half of the domestic
recommendations in the report are targeted to conservation,
environmental protection, renewable and alternative energy,
and measures aimed at helping consumers deal with rising energy
costs.
- The plan calls for a consumer
income tax credit for the purchase of new high efficiency hybrid
(gasoline/electric) or fuel cell vehicles.
- It promotes combined heat and
power (CHP) technologies units that are both highly efficient
and have low emissions.
- It directs federal agencies to
responsibly conserve energy use at their facilities – especially
during periods of peak demand.
- It calls for increased funding
for energy efficiency research and development programs that
are performance-based and cost-shared.
- It would extend the EPA’s
and DOE’s “Energy Star” efficiency program to
include schools, retail buildings, health care facilities, and
homes and extend the “Energy Star” labeling program
to additional products and appliances.
- It would fund the federal government’s
Intelligent Transportation Systems program, the fuel cell powered
transit bus program, and the Clean Buses program.
- It directs the Secretary of Transportation
to review and provide recommendations on establishing Corporate
Average Fuel Economy (CAFE) standards with due consideration
to the National Academy of Sciences study of CAFE standards
to be released in July, 2001.
Modernize Our Energy Infrastructure
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Outdated regulations
have frozen America into an antiquated energy supply network that
can’t meet out needs. The President’s plan help
create a new high-tech energy delivery network by doing the following:
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Direct agencies to improve
pipeline safety and streamline the process for building much-needed
pipelines.
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Make it easier to build
power plants in an environmentally sound manner by better coordinating
federal, state, and local approvals.
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Create a more reliable
electric transmission grid by working with Congress to obtain authority
to obtain rights-of-way for electricity transmission lines, similar
to the authority that already exists for natural gas pipelines and
highways.
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Enact comprehensive
electricity legislation that promotes competition, encourages new
generation, protects consumers, enhances reliability, and promotes
renewable energy and energy efficiency.
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Improve the reliability
of the interstate transmission system and enact legislation to enforce
electricity reliability standards.
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Expand the Energy Department’s
research and development on transmission reliability and superconductivity.
Increase Energy Supplies
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America faces the worst
energy supply crisis since the 1970s. President Bush wants
to advance new, 21st Century technologies to increase energy supplies
while protecting the environment. His plan will:
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Open a small fraction
of the Arctic National Wildlife Refuge to environmentally regulated
exploration and production using leading-edge technology.
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Promote research into
alternative and renewable energy resources – such as wind,
solar, biomass, and geothermal – by earmarking $1.2 billion
of bid bonuses from the environmentally responsible leasing of ANWR.
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Expand existing alternative
fuels tax incentives to include landfills that capture methane gas
emissions for electricity generation.
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Promote clean and renewable
resources such as wind and biomass through tax incentives.
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Provide $2 billion over
10 years to fund clean coal technology research and a new credit
for electricity produced from biomass co-fired with coal.
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Promote clean and renewable
hydropower by streamlining the current cumbersome and costly relicensing
process.
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Promote the use of advanced
nuclear energy technologies to produce safe, clean and cheap electricity
for America and establish a national geologic repository for nuclear
waste based on sound science.
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Direct all federal agencies
to consider the impact on energy supplies in any regulatory action
they take.
ANWR
Critics say oil and
gas exploration in ANWR would harm wildlife and wouldn’t help our
current crisis because the oil won’t be available for a decade.
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Here’s why they’re
wrong:
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We need to increase
our domestic production and lessen our reliance on foreign oil.
America’s dependence on foreign oil has risen sharply in recent
years, going from 39% in 1988 to 56% today.
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In 2020, if trends continue,
we will import 2 of every 3 barrels of oil.
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We are proposing to
open only a small fraction – 8 percent – of ANWR for oil
and gas exploration.
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Between six and 16 billion
barrels of oil exist in ANWR. The mean estimate (10 billion
barrels) would make ANWR the largest oil field discovered in the
world in the last 40 years.
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The expected output
of oil would equal 30 years of oil imports from Saudi Arabia and
almost 60 years of Iraqi oil imports.
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21st century technologies
like horizontal drilling, 3-D seismic mapping and ice roads can
help us minimize the production footprint to only 2,000 acres out
of the 19 million acres in ANWR. That is equivalent to four
average American family farms in an area the size of South Carolina.
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The Clinton Administration
opened up more than twice as much acreage in Alaska’s coastal
plain for supplies estimated to be only one-fifth as large.
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Oil and gas development
has successfully coexisted with wildlife in Alaska’s arctic
for over 30 years. The Central Arctic Caribou Herd at Prudhoe
Bay has grown from 3,000 in 1970 to 27,000 today – a nine-fold
increase.
Renewable Energy
Critics say the Administration
isn’t doing enough to promote renewable energy generation.
Here’s why they’re wrong.
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The President’s
energy plan includes a wide range of recommendations aimed at promoting
more renewable energy development. For example, it calls for
action to:
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Extend and broaden tax
incentives for wind and biomass energy.
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Provide tax credits
to individuals who install solar energy systems in their homes.
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Make it easier to locate
and build renewable geothermal power plants near existing geothermal
resources.
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Increase funding of
renewable research and development programs.
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Provide a tax credit
for landfills that capture and use methane gas emissions to produce
power and cut greenhouse gas emissions.
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Promote more purchases
of renewable power by companies and individual consumers.
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Further increase funding
of renewable research and development by earmarking an estimated
$1.2 billion of bid bonuses from the environmentally responsible
leasing of ANWR for this purpose.
Nuclear Energy
Critics say the U.S.
should abandon nuclear power as an energy supply option because it is
unsafe, expensive and produces dangerous waste for which we have no
long-term disposal plan.
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Breakthroughs in new
technologies for nuclear power make it one of the cheapest, cleanest
and safest ways to produce electricity and protect our environment.
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Average production costs
at nuclear power plants in 1999 was less than two cents per kilowatt-hour.
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New nuclear technologies
have advanced the state of the art considerably. These technologies
promise smaller, safer and more efficient generation … much
of which can be developed by slightly expanding existing plants.
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Nuclear plants do not
produce greenhouse gas emissions like other conventional technologies,
and thus help us combat global warming.
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Countries such as France
realized the environmental benefits of nuclear power years ago.
Today, more than 80 percent of France’s electrical generation
is from nuclear energy. Their success with this technology
is something we examine as we look at options for producing more
power and protecting the environment.
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The federal government
has not granted a single new nuclear power permit in more than 20
years, and many existing plants are expected to shut down.
If we’re serious about environmental protection, then we must
seriously question the wisdom of backing away from what is, as a
matter of record, a safe, clean, and very plentiful energy source.
Protecting The
Environment
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As an avid outdoorsman,
President Bush has made protecting the environment a priority.
He knows that we do not have to choose between more energy and a
cleaner environment. To accomplish both of these goals, the
National Energy Policy will:
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Establish mandatory
caps on harmful emissions by electric power plants of three dangerous
pollutants: sulfur dioxide, nitrogen oxides, and mercury.
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Enhance land conservation
efforts by earmark potentially billions of dollars in royalties
from new oil and gas exploration on federal lands to fund land conservation
efforts.
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Promote greater use
of clean and renewable energy sources for electricity generation,
such as from solar, wind, geothermal, biomass and hydropower resources
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Provide tax credits
to individuals who install solar energy systems in their homes.
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Make it easier to locate
and build renewable geothermal power plants near existing geothermal
resources.
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Enhance funding of renewable
research and development programs.
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Provide a tax credit
for landfills that capture and use methane gas emissions to produce
power and cut greenhouse gas emissions.
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Promote more purchases
of renewable power by companies and individual consumers.
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Promote greater use
of high tech Combined Heat and Power technologies, which significantly
enhance energy efficiency, reduce air emissions and can increase
the use of renewable fuels.
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Increase exports of
environmentally friendly U.S. technologies that generate a clean
environment and increase energy efficiency.
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Critics say the Administration’s
energy plan doesn’t do enough to protect the environment.
Here’s why they’re wrong:
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More than one half of
the domestic recommendations in the report are targeted to conservation,
environmental protection, renewable and alternative energy, and
measures aimed at helping consumers deal with rising energy costs.
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The National Energy
Policy would establish mandatory caps on harmful emissions by electric
power plants of three dangerous pollutants – sulfur dioxide,
nitrogen oxides, and mercury. This is a far-reaching proposal
that will break new ground in environmental protection.
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The National Energy
Policy promotes the use of new, 21st Century technologies to increase
energy efficiency and conservation.
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The Policy promotes
greater use of clean and renewable energy resources, which help
minimize environmental impacts of energy generation.
Increase
Energy Independence
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The President wants
to protect consumers from wild fluctuations in energy prices and
supply uncertainty in America. We must increase America’s
energy independence. The National Energy Policy will:
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Increase U.S. energy
independence and reduce our over-reliance on foreign energy by promoting
the production of more American energy from American resources.
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Dedicate new funds to
the Low Income Home Energy Assistance Program by funneling a portion
of oil and gas royalty payments to LIHEAP when oil and natural gas
prices exceed a certain amount.
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Double funding for the
Department of Energy’s Weatherization Assistance Program, increasing
funding by $1.4 billion over 10 years.
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Direct the Federal Emergency
Management Administration to prepare for potential energy-related
emergencies.
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Support a North American
Energy Framework to expand and accelerate cross-border energy investment,
oil and gas pipelines, and electricity grid connections by streamlining
and expediting permitting procedures with Mexico and Canada.
Direct federal agencies to expedite necessary permits for a gas
pipeline route from Alaska to the lower 48 states.
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