Monday, June 2, 2008

America's Flawed Energy Policies

Omigosh! Reading this recent editorial by Pete DuPont was like listening in on a conversation here at CARE. It has seemed to us that the public is beginning to get a sense of the scary energy place America is in, that they have become disillusioned with ethanol, and that all of this has the potential to impact America’s economic situation for the worse—and soon. But, we have wondered, is this just us? Is this just because we focus on these issues day in and day out? Hallelujah someone with a louder voice is beginning to say what we have been saying for months. If you missed this opinion piece in your regular reading, please be sure to read it here! This piece is also an excellent follow up to our last posting: Climate Change and the Presidental Election.

Energy and the Executive
This election is notable in many ways. For the first time since 1952, neither the president nor the vice president will be his party's presidential nominee. For the first time since 1960, a sitting U.S. senator will be elected president. And for the first time ever, if the Democrats win, the next president will be female or black.

We are also at a fork in the policy road, for any of the three major candidates would lead us in very different directions on major public policy issues, from spending and taxation on the one hand, to international relations and the war on terror on the other.

Equally critical will be their direction on how we generate the energy America needs. Over the past 20 years, have our presidents and Congresses allowed us to drill for the additional offshore oil available to fuel our economy and reduce imports? No. Have they encouraged the building of nuclear power plants that would generate pollution-free energy? No. Are they now supporting the building of coal-fired power plants to generate the electricity our economy needs? No.
We have an abysmal national energy policy, and as our population grows and our economy expands, energy needs will increase. From 1980 to 2006 America's annual energy usage increased from 78 to 100 quadrillion British thermal units, and the figure is estimated to grow to 118 quadrillion BTUs by 2030. If our regressive energy production policies continue when the next administration takes office, our economy and the personal lives of Americans will be severely affected.

We have failed to increase our country's crude oil production. Domestic oil production has declined, to 1.9 billion in 2007 from 3.1 billion barrels in 1980, while imports increased to 3.7 billion barrels from 1.9 billion. We now importing about 60% of the oil we use.

One reason for the imports is that our public policy has forbidden offshore oil drilling for much of the estimated 85 billion barrels of recoverable oil and 420 trillion cubic feet of natural gas (an 18-year supply) that are on the Outer Continental Shelf, and another 10 billion barrels of oil in Alaska. Together they could replace America's imported oil for about 25 years, but the first President Bush issued a directive forbidding access to a significant portion of the Outer Continental Shelf. President Clinton extended the restriction through 2012 and vetoed legislation that would have allowed drilling in Alaska.

So America has large amounts of oil and gas, but our efforts to extract it have been significantly reduced by the federal moratorium on drilling. America remains the only nation in the world that has curtailed access to its own energy supplies. Meanwhile China will soon begin drilling for oil off Cuba and in Venezuela.

Among the worst antienergy policies we have experienced was President Carter's 1980 "windfall profits tax" on oil companies, which reduced domestic oil production by between 3% and 6% and increased imports by 8% to 16%. Yet last week Majority Leader Harry Reid and 20 other Senate Democrats introduced a similar 25% tax.

We have failed to allow the construction of new nuclear power plants to add to the 104 that we have in operation. Nuclear power is clean and efficient, but no new nuclear plant construction has been granted permits in the past 30 years. By contrast, China plans to build 40 nuclear power reactors in the next 15 years -- two or three each year.

Nor are we fully using the huge coal resources America has. We have in the past, but an effort to prohibit them has become the environmentalists' goal. NASA climatologist James E. Hansen said last month that "building new coal-fired plants is ill conceived," and that it is time "for a moratorium on coal now with phase-out of existing plants over the next two decades." The phase-out is under way: Of the 151 coal-fired plant construction proposals in 2007, more than 60 have been abandoned as the result of environmentalist pressure. And last month Gov. Kathleen Sebelius of Kansas vetoed a bill that would have allowed the construction of two new electricity generators at an existing coal fired power plant -- because they would emit greenhouse gasses.

We have also pursued new energy policies that turn out to be mistaken. Ethanol is perhaps the best example, with congressional enactment of ethanol subsidies -- 51 cents a gallon for production of it, and a 54-cent-a-gallon import fee to keep competitive, less expensive and more environmentally friendly ethanol out of America. Congress in 2005 required 7.5 billion gallons of ethanol to be produced by 2012; and then in 2007 upped that to 36 billion gallons by 2022. President Bush enthusiastically supports subsidized ethanol, and Barack Obama believes there should be a 65-billion-gallon ethanol mandate. Only John McCain wants to end ethanol subsidies and import fees.

Ethanol was a bad idea from the start, for as The Wall Street Journal recently reported, producing one gallon of ethanol requires 1,700 gallons of water (primarily to grow corn). The journal Science recently found that "corn-based ethanol, instead of producing a 20% savings, nearly doubles greenhouse emissions over 30 years."

The good news is that an effort to reverse all these antienergy, antigrowth policies is beginning. Earlier this month Sen. Pete Domenici (R., N.M.) introduced the American Energy Production Act to expand offshore oil production, establish a leasing program to get to Alaska's untapped 10 billion barrels of oil, and support the construction of new oil refineries. The last is a particularly good idea, for it has been 30 years since we have built one in the United States.

The May 11 New York Times contained a surprisingly sensible lead editorial: "The time has come to rethink ethanol. . . . Specifically, it is time to end an outdated tax break for corn ethanol and to call a time out in the fivefold increase in ethanol mandated in the 2007 energy bill."
So perhaps America is beginning to rethink its flawed energy policies. And so it must, for our challenge is to remain competitive in a growing global economy, and that requires feeding the engines of growth with more energy. Our next president must advance drilling for offshore oil, building nuclear power and clean coal fired plants, and developing other energies such as solar and wind power. Otherwise America's people will miss future opportunities and slip backwards economically, and our country will become far worse off than it is today.

Pete du Pont Policy Chairman of the National Center for Policy Analysis. He writes a regular column for, the online news service of The Wall Street Journal.

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