Congress Considers Measure to Boost Domestic Energy Production

Published July 1, 2008

In an effort to increase domestic energy supplies and bring down rising gas prices, a group of 19 senators has introduced the Domestic Energy Production Act of 2008.

Sponsored by Sen. Pete Domenici (R-NM), the ranking Republican on the Senate Energy & Natural Resources Committee, the bill is one of the first congressional responses to growing nationwide unrest over soaring energy prices.

The legislation would reduce America’s dependence on foreign sources of energy by expanding the recovery and development of traditional energy sources while simultaneously promoting alternative energy technologies.

“For years now, I have been trying to develop more domestic production of oil and gas, and for years, with one exception in the Gulf of Mexico, I have been blocked for political reasons. Consumers are now paying the price for those years of obstruction,” Domenici said in a press statement accompanying introduction of the bill.

ANWR, Ocean Shelf

Nowhere has such obstruction been more obvious than in the failed efforts to open up a small section of the Arctic National Wildlife Refuge (ANWR) and broad swaths of the Outer Continental Shelf (OCS) to exploration for oil and natural gas.

ANWR and OCS together could provide the U.S. with a total of 100 billion barrels of oil, analysts note. The United States currently imports more than 60 percent of the oil it consumes, and ANWR and OCS alone could produce as much oil as the U.S. imports in 50 years from all sources combined.

In addition to allowing resource recovery on just 2,000 of ANWR’s 19.7 million acres, the bill, introduced May 1, would permit states along the Pacific and Atlantic coasts to access the oil and gas reserves in the OCS.

Under a leasing agreement with the federal government, a revenue-sharing scheme would give states 37.5 percent of the revenues, the federal treasury 50 percent, and the Land and Water Conservation Fund 12.5 percent. Revenues from ANWR would be split 50/50 between Alaska and the federal government.

Refinery Bottlenecks

The legislation also addresses the nation’s overburdened refining capacity. No new refineries have been built in the United States in more than 30 years, and as a result America must now import an increasing amount of expensive refined gasoline from foreign countries.

The lack of refining capacity affects consumers because existing refineries are operating near capacity. When a refinery shuts down for repairs, bottlenecks can result, further driving up prices.

The bill would grant the Environmental Protection Agency authority to accept consolidated applications to streamline permits required to construct and operate refineries.

The bill would also free up an estimated 2 trillion barrels of oil in shale lying beneath Colorado, Utah, and Wyoming by repealing a one-year moratorium on funds to complete final regulations for the commercial leasing of oil shale.

Learning from Past Mistakes

“Economists and policy analysts have repeatedly warned the Green movement that their campaign of strangling fossil fuel production would lead to higher energy costs, which would translate into higher transport-related food costs,” said Kenneth Green, resident scholar at the American Enterprise Institute.

“They were also warned that creating a market for biofuels through subsidies and mandates would lead to land being used for fuel rather than food, with inevitable impacts on food price and availability,” said Green. “After 40 years it has all come to a head, and the economic naïveté of Green policies has created a genuine disaster as energy prices soar, food prices soar, and ecosystems are put under the plow for biofuels.”

Myron Ebell, a senior fellow at the Competitive Enterprise Institute, points out opening more domestic production would bring down oil prices long before the operations even begin to deliver product.

“In 1995 Congress passed legislation to open the coastal plain of ANWR to oil and gas exploration,” Ebell said. “President Clinton vetoed the bill, and one of the reasons he gave was that because the oil wouldn’t start flowing for several years it wouldn’t do anything to reduce current [1995] high gas prices.

“Enacting legislation this year to open ANWR and OCS areas would not do anything to raise oil production immediately,” Ebell continued. “However, it would lower crude oil prices immediately. With high demand and many potential threats to production, there is a significant risk premium in oil prices. Opening up potentially huge new fields in a secure country would burst the speculative bubble.”

Bonner R. Cohen ([email protected]) is a senior fellow with the National Center for Public Policy Research in Washington, DC.