America needs an energy policy that promotes economic development, but many Members of Congress and the Administration are promoting policies and promulgating regulations that centralize power in Washington—an approach that leads to the high prices, technological stagnation, energy shortages, and dependence on foreign sources that politicians use to justify their failed big-government policies.
America is one of the few nations to put known domestic supplies of oil and gas off-limits to exploration. Harsh restrictions aimed ostensibly at protecting the environment place oil, coal, and natural gas out of favor, and despite a major effort by Congress to transition to renewable energy sources through taxpayer-funded subsidies, renewable energy still provides only a small fraction of America’s energy needs. Moreover, because of a broken regulatory process and no legitimate solution to spent fuel management, we are not building nuclear power plants at the rate we could be, even though nuclear energy is America’s only reliable and emissions-free source of large quantities of affordable energy.
U.S. energy policy should rely on market forces and the private sector’s research and development capabilities to provide Americans with affordable energy. Traditional supplies can be delivered, and new supplies can be created through the private sector rather than through mandates, regulations, and subsidies ordered by government. It is important for the U.S. to keep the global marketplace for energy open and ensure private-sector innovation. Congress should focus on increasing supply, reducing onerous regulations, and eliminating energy subsidies.
- Get moving on offshore and onshore permits. As the only country that places a majority of its territorial waters off-limits to oil and gas exploration, the U.S. should be drilling more efficiently in the areas that are open. Removing the de facto moratorium on drilling—both onshore and offshore—would immediately increase supply, create jobs, and bring royalty revenue to federal and state governments. Federal regulators should work to return the permitting process to pre-moratorium levels. In some instances, oil and gas companies purchased leases on federal lands to explore and drill for oil and gas, but the Department of Interior (DOI) failed to issue the leases—despite the law stating that it has 60 days to do so. DOI needs to act on these permits.
- Open access and require lease sales when ready. Congress should open the limited area needed to drill in the Arctic National Wildlife Refuge and completely open America’s coasts to exploration and drilling. Congress should also require the Secretary of the Interior to conduct lease sales if a commercial interest exists to explore and drill and provide the funding for DOI personnel necessary to lease new onshore and offshore areas to oil and gas companies. Although it will take time for the federal government to lease these areas and for the energy companies to develop them, the process at least can begin.
- Introduce market principles into nuclear waste management reform. The federal government’s inability to fulfill its legal obligations under the 1982 Nuclear Waste Policy Act has often been cited as a significant obstacle to building additional nuclear power plants. Given nuclear power’s potential to help solve many of the nation’s energy problems, now is the time to break the impasse over managing the nation’s used nuclear fuel. Congress must first ensure that the U.S. Nuclear Regulatory Commission (NRC) finishes reviewing the Department of Energy’s application to construct a nuclear waste repository at Yucca Mountain, Nevada. In addition, the federal government’s responsibility for nuclear waste management should be transferred to waste producers. This would allow waste producers to seek the most economically rational methods to manage and dispose of nuclear waste. Private firms, operating under NRC guidelines, would emerge to provide those services.
- Allow the U.S. Department of the Interior to provide the appropriate lease sales for oil shale. According to the Department of the Interior and the Bureau of Land Management, a moderate estimate of 800 billion barrels of recoverable oil from oil shale in the Green River Formation is three times greater than the proven oil reserves of Saudi Arabia. The technology to collect and refine oil shale is developing at a rapid pace, and private companies are willing to invest in it. When the private sector demonstrates that oil shale is economically feasible and that extraction can be done safely, the DOI should allow commercialization to move forward.
- Stop the Environmental Protection Agency’s regulatory train wreck. Congress needs to freeze new environmental regulations, which have massive costs and dubious environmental benefits. Congress should amend the Clean Air Act to exclude carbon dioxide and other greenhouse gas emissions from the Environmental Protection Agency’s purview and stop the EPA from implementing other regulations including regulations covering cool water intake structures, coal combustion residuals, hazardous pollutants from power plants, hazardous air pollutants from commercial and industrial boilers, and the Clean Air Transport Rule for sulfur dioxide and nitrogen oxides.
- Reform the arduous permitting process for new nuclear power plants. Permitting new nuclear plants and new nuclear reactor technologies is becoming prohibitively complex and expensive. Though the U.S. Nuclear Regulatory Commission plays an important role in maintaining U.S. nuclear plant safety, it must operate in a way that allows the industry to move forward safely. To do this, the current four-year permit schedule should be reduced by two years for new reactors to be built on or adjacent to existing nuclear power plants. Second, the NRC must prepare to regulate newly commercialized nuclear technologies that, absent a regulatory framework, are now effectively prohibited from entering the marketplace.
- Reform the offshore oil and gas liability regime. Congress should establish a liability and claims process that fully assigns risk of offshore oil and gas operations, allows for victims to be fully compensated, and protects companies from frivolous lawsuits. Such a regime should include a multi-tiered insurance and liability system that relies on private insurance to cover liability for normal operations and a voluntary insurance pool for liability exceeding $1 billion; an industry-funded organization governed by an independent board to reduce the likelihood of spills by setting and enforcing safety standards at individual sites, collecting safety data, sharing best practices, and working with government regulators; and a prepositioned industry-funded preparedness and response capability, certified by an independent organization, to deal aggressively and effectively with accidents if they do happen and provide a more robust and integrated federal oversight and national response.
- Authorize no new subsidies, tax credits, or special financing. Congress has used a number of policies to support the production or consumption of various energy sources and technologies. Congress should ensure that no taxpayer dollars are used directly to subsidize energy production and consumption. Further, Congress should work to end existing subsidies by forcing sunsetting tax credits to sunset and expediting sunsets for tax credits that extend beyond 2012. This will prevent the federal government from continuing to pick winners and losers and will also ensure that Congress cannot use the tax code and financing mechanisms to direct investments.
- Eliminate production mandates and tariffs on imported energy. Mandates such as the ethanol production quota guarantee ethanol producers a share of the marketplace. The tariff makes it more costly to import ethanol at a cheaper price and hurts poorer, developing nations that would otherwise be exporting to the United States. Congress should repeal both policies.
- Reduce the role of Department of Energy. The Department of Energy (DOE) has spent billions of research dollars on technologies to reduce carbon dioxide emissions, including energy efficiency technologies, renewable energy sources, carbon capture and sequestration, clean coal technologies, nuclear energy, and alternative-energy vehicles. All these energy sources and technologies are available today, but they are not commercially viable, whether because of burdensome regulations or simply because they are still prohibitively expensive. It is not the government’s role to force these technologies into the marketplace, and Congress should remove all funding for DOE-funded commercial activities.
Facts & Figures
- Three decades ago, proven world oil reserves were 645 billion barrels; five years ago, it was 1.28 trillion, and in 2009, it was 1.34 trillion. New innovative technologies and sound policies to allow access will help to recover that oil and discover more. Regrettably, the Obama Administration’s policies are keeping much of this resource off-limits, which means higher prices and more dependence.
- Proponents of renewable energy subsidies often argue that we need to put renewables on a level playing field with fossil fuels, but the playing field is far from level. Solar and wind receive subsidies of over $23 per Mwh (megawatt hour) compared with $1.59 per Mwh for nuclear, $0.44 per Mwh for conventional coal, and $0.25 per Mwh for natural gas. This does not include the $80 billion allocated in the 2009 “stimulus” bill to the Department of Energy to save or create “green” jobs. Further, Congress mandated that renewable fuels be mixed into the gasoline supply and required production of 36 billion gallons of ethanol by 2022. Energy subsidies and mandates reduce competition, inflate prices, and stifle technological innovation, and Americans have to pay twice for the subsidies: first through higher taxes and second with higher energy prices. Instead of piling on subsidies in a futile attempt to level the playing field, Congress should end subsidies for all energy sources.
- The federal government owns and controls 650 million acres of land in the United States, including large portions in the western U.S. For instance, the federal government owns approximately 85 percent of the land in Nevada, 69 percent in Alaska, 57 percent in Utah, and 53 percent in Oregon. Much of this land could be put to more productive use like ranching, mining, or forestry through private ownership.
- The U.S. gets 20 precent of its electricity (and 70 percent of its emissions-free electricity) from 104 nuclear power plants. Further, at less than two cents per kilowatt hour, nuclear energy is some of the least expensive electricity and, with no injuries or deaths as a result of commercial nuclear energy, some of the safest produced in the U.S. Yet due to an onerous regulatory burden and the federal government’s failed strategy to manage nuclear waste, no new plants have been permitted in over three decades.
Selected Additional Resources
- Nicolas D. Loris, “Natural Gas Policy: Access, Not Over-Regulation and Subsidies,” Heritage Foundation Backgrounder No. 2608, September 21, 2011.
- Nicolas D. Loris, “Energy Exploration Would Create Jobs and Raise Revenue Without Raising Taxes,” Heritage Foundation WebMemo No. 3357, September 8, 2011.
- Nicolas D. Loris, “No More Energy Subsidies: Prevent the New, Repeal the Old,” Heritage Foundation Backgrounder No. 2587, July 26, 2011.
- Nicolas D. Loris, Jack Spencer, and James Jay Carafano, “Oil Spill Liability: A Plan for Reform,” Heritage Foundation Backgrounder No. 2446, August 2, 2010.
- Jack Spencer, “Blue Ribbon Commission on Nuclear Waste: Missing Opportunity for Lasting Reform,” Heritage Foundation Backgrounder No. 2600, August 22, 2011.
- Jack Spencer, “Time to Fast-track New Nuclear Reactors,” Heritage Foundation WebMemo No. 2062, September 15, 2008.
Heritage Experts on Energy & Environment
The energy sector has been hit by an unprecedented regulatory assault, in large part a consequence of the EPA’s global warming crusade. The cumulative costs will prove staggering, and are expected to force the closure of older power plants, thereby threatening electricity supply.
Four interrelated rules governing emissions of dioxin, particulate matter, hydrogen chloride, and carbon monoxide would impose costs of $1.8 billion annually for compliance, and one-time implementation costs of $5.2 billion. Following an outpouring of protest, the EPA postponed the effective dates pending a reconsideration. But the rules remain on the books, and even revised rules will entail significant costs.
Stricter mercury controls recently proposed by the Obama Administration would require power plants using coal or fuel oil to reduce emissions of mercury and certain other pollutants by 91 percent, at a cost of $11 billion in 2016.
A new Cross-State Air Pollution Rule imposes caps on emissions of sulfur dioxide and nitrogen oxide from power plants and industrial facilities. Costs to electric utilities are pegged at $1.4 billion in 2012 and $800 million in 2014.
The EPA is proposing to regulate for the first time coal ash from electric utilities and independent power producers. One study puts the potential cost at $110 billion over 10 years.
New regulations mandating the reporting of greenhouse gas emissions will cost at least $132 million in the first year of implementation, and $89 million annually thereafter.
EPA has revised emission standards for nitrogen oxides from new fossil-fuel–fired steam generating units at an annual cost of $40 million.