Re: H.R. 6 - Renewable Fuels, Consumer Protection and Energy Efficiency Act of 2007
Business Roundtable is pleased that the Senate is considering energy legislation. America continues to face serious energy challenges that not only affect consumers but also have important implications for economic growth, capital investment and U.S. competitiveness. We applaud the Senate’s efforts to tackle these challenges.
The Roundtable recently issued a comprehensive blueprint for America’s energy future entitled More Diverse, More Domestic, More Efficient: A Vision for America’s Energy Future (available at www.businessroundtable.org). This report provides a consensus CEO-level vision of the pathways that America should follow to improve our energy security over the next twenty years. A major theme of the report is that long-term progress requires balanced and integrated approaches that take advantage of all tools for reducing energy demand and increasing supply. Enclosed is a list of the tools that we believe a comprehensive energy policy should include.
We have compared H.R. 6 to the principles and recommendations in our report. While we support several elements of the bill, we are troubled by others. We are also concerned that the bill misses important opportunities to boost domestic energy sources that will be vital for long-term diversity of supply.
Energy Efficiency: On the positive side, the Roundtable strongly agrees with the bill’s emphasis on promoting energy efficiency (Title II). Wise and efficient energy use is one of the best strategies for enhancing energy security, and important opportunities to increase efficiency remain untapped in our commercial, residential and industrial sectors. To accelerate investment in energy efficiency, our report advocates a national goal of reducing energy intensity (energy consumed per unit of output) by at least 25 percent above the expected business-as-usual rate. This would mean a reduction of at least 2.2 percent per year for an overall reduction of more than 40 percent by 2025. We are pleased that H.R. 6 would adopt a very similar goal. We also agree that new energy efficiency standards for appliances, motors and other products and modernization of the electricity grid should be high priorities in reducing the nation’s energy intensity. We would, however, encourage the Senate to amend the bill to place greater emphasis on energy efficiency improvements in new and existing residential and commercial buildings where 40 percent of America’s energy is now consumed.
One important opportunity to increase energy efficiency that H.R. 6 does not address is in the power generation sector, where equipment replacements and repairs at existing plants and construction of new plants can increase electricity output without commensurate increases in fuel consumption or greenhouse gas emissions. Financial incentives can provide an important stimulus for upgrades and new plant construction.
In addition, current regulatory barriers to efficiency upgrades at existing plants, such as rigid new source review requirements, should be eliminated.
Carbon Capture and Storage: We support the bill’s research and demonstration programs (Title III) for carbon capture and storage systems. This is an important technology that offers considerable promise in preventing greenhouse gas emissions not only from power plants but also other industrial facilities. Building a sound technical foundation for deploying this technology safely and cost-effectively should be an urgent priority for the federal government, and H.R. 6 would take positive steps in that direction.
Energy Diplomacy: The Roundtable’s report emphasizes that the elimination of energy imports is not a realistic option for the U.S. and that we have a compelling long-term interest in maximizing global energy supplies. Title VII of H.R. 6 recognizes the importance of maintaining open and stable world oil and gas markets by requiring an increased focus on energy diplomacy and security by the Executive Branch. Among other things, it would require the U.S. to establish strategic energy partnerships with major consuming and producing nations. These are constructive steps that will help preserve the integrity of worldwide energy trade and investment.
Expanding Access to Domestic Oil and Gas Reserves: Our principal concern about the legislation is that it fails to address the critical need to increase domestic supplies of petroleum liquids and natural gas. Energy security means having well diversified sources of energy – not putting all eggs in one basket. Greater efficiency and reliance on bio-fuels will not eliminate the need for traditional energy resources, and without additional supply, the tight market conditions that have put pressure on prices are likely to persist. The result may well be greater reliance on imports as conventional U.S. oil and gas reserves continue to decline. Outer Continental Shelf (OCS) legislation enacted by Congress in late 2006 will modestly increase domestic supplies of oil and natural gas in the Gulf of Mexico, but broadened access to both land and offshore fields now off-limits to development can add significantly to domestic volumes. The Roundtable recommends amending H.R. 6 to lift the moratoria on the Atlantic Coast, Pacific Coast and the Eastern Gulf of Mexico regions and improve access to reserves in Alaska and the Rockies.
As a general matter, we believe that additional taxes on the oil and gas industry would not support our recommendations and may prove harmful to these industries. The U.S. needs to do everything it can to encourage globally competitive energy prices and a tax on the oil and gas industry deviates from that goal.
Coal-based Fuels: An equally troubling gap in H.R. 6 is its failure to provide for increased utilization of coal-based fuels, which can augment conventional domestic oil and gas supplies and reduce imports. Coal is available in abundant quantities in the U.S., and we should take full advantage of this low-cost domestic resource. Coal-to-liquids (CTL) plants can convert solid coal into liquid fuels that power cars and trucks. Similar to CTL is coal gasification to produce synthetic natural gas for use in power generation, home heating or industrial processes. We believe that with government support these technologies can become commercially viable on a large-scale. Their successful deployment will require capture of CO2 emissions for industrial use or underground sequestration, a technology path we support. We strongly recommend that H.R. 6 be amended to provide incentives for coal-based fuel and synthetic natural gas production.
Nuclear Power: It is disappointing that H.R. 6 does not recognize the critical need to maintain and, where appropriate, expand the nuclear share of total electricity generation. Nuclear capacity is essential to relieve pressure on fossil fuels (natural gas and coal) used for power generation and to reduce the U.S. greenhouse gas footprint. We believe that nuclear power should play a role in any program authorized by Congress to increase the role of “clean” fuels in the power generation sector.
Bio-fuels: Title I of H.R. 6 would greatly increase the presence of ethanol and other bio-fuels in the nation’s transportation fuel supply. The Roundtable’s membership includes several sectors – automobile manufacturers, fuel distributors and bio-fuel producers – with a vital stake in this issue. As our report indicates, the Roundtable believes that domestically produced bio-fuels can diversify the transportation fuel mix, improve U.S. energy security and reduce the carbon footprint of the transportation sector. However, we strongly feel that inflexible mandates, like those included in Title I, are the wrong way to move forward. We support a voluntary goal of 10 percent ethanol in gasoline as quickly as possible – a goal which can be achieved without legislation and would triple ethanol volumes from 2006 levels. Further increases in the use of bio-fuels will require conversion technologies that are not now commercially feasible – principally the conversion of cellulosic bio-mass to ethanol – as well as the production of vehicles that can accommodate blends with higher levels of bio-fuels and a fueling infrastructure that can deliver these blends to consumers. Rather than mandating targets which are not supported by available technology, Congress should support a collaborative process among vehicle manufacturers, fuel suppliers and alternative fuel producers to resolve marketplace complexities and consumer acceptance issues while continuing to fund R&D programs on cellulosic ethanol and other bio-fuel feedstocks. With these cooperative steps and advances in technology, the ambitious goals proposed by the members of Congress and the Administration could be within reach but should not be mandated now.
Price Gouging: Our members deplore predatory practices of any type, but believe that existing laws are adequate to deal with abusive practices in the marketing and distribution of gasoline and other fuels. Simply put, legislation in this area needs to be very carefully framed to avoid distorting free markets or penalizing honest and legitimate business practices. As currently drafted, the provisions in Title VI could have these unfortunate consequences without reversing recent increases in gasoline prices, which are best addressed by the long-term energy initiatives we recommend in our report.
We appreciate the opportunity to comment on H.R. 6 and stand ready to assist you and other Senators as this legislation moves forward.