‘New Era’ Energy Legislation

by

Bipartisan Energy Bill

The need for a comprehensive national energy policy has never clearer.  There is a strong bipartisan consensus on the need to achieve energy independence, for both financial and geopolitical reasons.  There is also strong scientific evidence that our carbon-based energy economy is contributing to climate change, and hence a need to develop and adopt renewable energy sources.

Although the prices of crude oil, heating oil and gasoline are down from their recent highs because of reduced worldwide demand, they are still substantially higher than they were a year ago, and most Americans are feeling the pinch.  Inflation is higher than at any time in the past twenty years, and the spike in oil prices has been a contributing factor.  Politicians as well as ordinary folk are increasingly aware that the United States imports too much oil from countries that are either unstable or hostile toward us – countries such as Iran, Nigeria, Russia, Saudi Arabia, and Venezuela.  A constant stream of TV advertisements sponsored by T. Boone Pickens has made us aware that the United States is spending almost $700 billion per year on oil imports.  We need a national energy policy to reduce and eventually eliminate our dependence on foreign oil.

The global current account deficit of the United States is now larger than it has ever been-nearing $800 billion, almost 7 percent of US GDP. To finance both the current account deficit and its own sizable foreign investments, the United States must import about $1 trillion of foreign capital every year or more than $4 billion every working day. The situation is unsustainable in both international financial and domestic political (i.e., trade policy) terms.[i]  Note that our dependence on foreign oil accounts for $700 billion of the $800 billion that we are in the red in our trade with other countries.

World reliance on the burning of oil and coal to power industrial and post-industrial economies has resulted in climate change that threatens our civilization.  The polar ice caps are melting and hurricanes are becoming larger and more powerful.  An expert panel has determined that the world is the warmest it has been in 400 years, and the amount of carbon dioxide and other greenhouse gases already in the atmosphere will ensure further warming in coming years, a rise of about 1.5°C.[ii]  In the absence of substantial changes in energy sources and innovative mitigation, the rise in the average world temperature could rise two to three times that amount by the end of this century.   The need to reduce the emission of greenhouse gases, such as those coming from the burning of petroleum- and coal-based fuels, has been well documented by the U.N. Intergovernmental Panel on Climate Change,[iii] which — along with Al Gore – won the Nobel Peace Prize in 2007. 

Responding to a request from Senators Kent Conrad (D-ND) and Saxby Chambliss (R-Ga.), the U.S. Senate held a day-long, bipartisan energy summit on Friday, September 12 to discuss efforts to develop a plan to achieve America’s energy independence. The Friday talks set the stage for an imminent Senate vote on the New Energy Reform Act of 2008.

Better known as New Era, the plan was developed by a bipartisan coalition of 10 Senators led by Senators Conrad and Chambliss. New Era lays the groundwork to reduce gas prices, lessen our nation’s dependence on foreign oil, and strengthen America’s economy. The New Era plan has now been endorsed by 20 senators – ten Republicans and ten Democrats.

The New Era bill is a comprehensive blueprint for a national energy policy that includes responsible offshore drilling, but also directs robust new investment in alternative fuels and stronger conservation efforts to reduce the demand for gas. The goal of New Era is to move as much as 85 percent of the nation’s trucks and cars to alternative fuels within 20 years – an Apollo Project-like effort supported by $20 billion in new federal funds collected from the oil and gas industry.

Quoting from Senator Kent Conrad’s web site:

The New Era bill contains three main components:

  • An intensive effort to transition vehicles to non-petroleum based fuels;
  • a robust federal commitment to conservation and energy efficiency; and
  • targeted, responsible domestic production of energy resources

Converting Cars and Trucks to Non-Oil Fuel Sources to Regain Energy Independence
The New Era legislation funds a $20 billion “Apollo Project” like effort to support the goal of transitioning 85% of America’s new motor vehicles to non- petroleum-based fuels within 20 years. To accelerate this transition, the legislation includes:

  • $7.5 billion for R&D focused on the major technological barriers to alternative fuel vehicles, such as advanced batteries;
  • $7.5 billion to help U.S. automakers and parts makers re-tool and re-equip to become the world leader in making alternative fuel vehicles;
  • Consumer tax credits of up to $7,500 per vehicle to incentivize Americans to purchase advanced alternative fuel vehicles (those that run primarily on non-petroleum fuels) and up to $2,500 to retrofit existing vehicles with advanced alternative fuel engines.

Enhancing Conservation
To ease gas prices and protect our environment during the transition, the proposal includes a significant federal commitment to promoting conservation and efficiency. These include:

  • Extending renewable energy, carbon mitigation and energy conservation and efficiency tax incentives, including the production tax credit, through 2012 to create greater certainty and spur greater investment
  • New consumer tax credits of up to $2,500 to purchase highly fuel efficient vehicles, to help Americans reduce their annual gas costs and reduce oil imports;
  • Extending and expanding the $2,500 tax credit for hybrid electric vehicles;
  • $500 million for R&D into new materials and other innovations to improve vehicle fuel efficiency;
  • $2.5 billion in R,D&D on next generation biofuels and infrastructure;
  • Tax incentives for the installation of alternative fueling stations, pipelines and other infrastructure;
  • Expanding transmission capacity for power from renewable sources;
  • New dedicated funding for the weatherization assistance program.

Responsible, Targeted Domestic Energy Production
To help meet our energy needs until our economy transitions to advanced alternative fuel vehicles, the New Era bill increases domestic energy production in environmentally responsible ways. The legislation:

  • Provides a CO2 sequestration credit for use in enhanced oil recovery to increase production from existing oil wells while reducing greenhouse gas emissions;
  • Opens additional acreage in the Gulf of Mexico for leasing (in consultation with the Defense Department to ensure that drilling is done in a manner consistent with national security) and allows Virginia, North and South Carolina and Georgia to opt in to leasing off their shores. Retains an environmental buffer zone extending 50 miles offshore where new oil production will not be allowed. Requires all new production to be used domestically. Creates a commission to make recommendations to Congress on future areas that should be considered for leasing. Provides for appropriate revenue sharing for states that allow leasing off their shores;
  • Provides grants and loan guarantees for the development of coal-to-liquid fuel plants with carbon capture capability. Plants must have lifecycle greenhouse gas emissions below those of the petroleum fuels they are replacing;
  • Supports nuclear energy by increasing staff at the NRC, providing workforce training, accelerating depreciation for nuclear plants, and supporting R&D on spent fuel recycling to reduce nuclear waste. [iv]

Supporters of alternative energy sources and alternative fuels have endorsed this legislation.[v],[vi]

Senator Conrad said legislative language for the bipartisan New Era energy plan will be unveiled at a press conference Tuesday.

Early versions of the bill promised to comply with PayGo rules:

“The $84 billion in investments in conservation and efficiency in the New Era bill will be fully offset with loophole closers and other revenues. Approximately $30 billion will come from new revenues from the oil and gas industry through such measures as modifying the Section 199 manufacturing deduction for oil and natural gas production and other appropriate measures to ensure that the federal government receives its fair share of revenue from Gulf of Mexico leases. Remaining offsets will be finalized in consultation with the Finance Committee after accounting for interaction effects with other pending legislation.”[vii]

What is missing?  A cap and trade system for carbon emissions has been proposed and sponsored by other Senators, such as Hillary Clinton, Barack Obama, Joe Lieberman and John McCain.  Hopefully that bill can be passed separately.

We sincerely hope that PayGo will be preserved in the final New Era legislation.

Democratic presidential nominee Senator Barack Obama of Illinois said in August that he welcomes the New Era proposal, which he said avoids “partisan gridlock and special interest influence” and represents “a good faith effort at a new bipartisan beginning.”

“Today’s announcement includes many of the policies I’ve been fighting for during my time in the Senate and over the course of this campaign,” Obama said. “It would repeal tax breaks for oil companies so that we can invest billions in fuel-efficient cars, help our automakers re-tool, and make a genuine commitment to renewable sources of energy like wind power, solar power, and the next generation of clean, affordable biofuels.”

“Like all compromises, it also includes steps that I haven’t always supported,” said Obama. “I remain skeptical that new offshore drilling will bring down gas prices in the short-term or significantly reduce our oil dependence in the long-term, though I do welcome the establishment of a process that will allow us to make future drilling decisions based on science and fact.”

The sponsors of the New Era legislation has risen to 20 U.S. Senators: Kent Conrad, D-ND, Saxby Chambliss, R-GA, Evan Bayh, D-IN, Norm Coleman, R-Minn., Tom Carper, D-DE, Susan Collins, R-ME,  Bob Corker, R-Tenn., Elizabeth Dole, R-N.C,  Lindsey Graham, R-S.C., Johnny Isakson, R-Ga., Tim Johnson, D-S.D.,  Amy Klobuchar, D-Minn, Blanche Lincoln, D-Ark., Mary Landrieu, D-La., Ben Nelson, D-Neb. Mark Pryor, D-Ark, John Sununu, R-NH, Ken Salazar D-CO,  John Thune, R-SD, and John Warner, R-VA.

 

 


 

[i] http://www.iie.com/research/topics/hottopic.cfm?HotTopicID=9

[ii] http://www.nyas.org/ebrief/miniEB.asp?ebriefID=618

[iii] http://www.ipcc.ch/ipccreports/index.htm

[iv] http://conrad.senate.gov/pressroom/events/Gangof10/Gangof10.cfm

[v] http://wind4me.com/2008/09/14/senate-bipartisan-group-on-energy-expands/

[vi] http://alternativefuels.about.com/od/lawspolicies/a/newenergyreform.htm

[vii] http://www.cfr.org/publication/17065/new_energy_reform_act_of_2008_

new_era_bill_proposed.html

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