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Two Cheers for House Energy Bill

Posted By Nicolas Loris On June 19, 2012 @ 5:30 pm In Energy,Featured | Comments Disabled

Often when policymakers introduce legislation in Washington, the title of the bill doesn’t always correspond with what the bill actually does. This is not one of those times. U.S. House Majority Whip Kevin McCarthy (R–CA) recently introduced the Domestic Energy and Jobs Act, which would greatly improve access to America’s resources, bringing jobs and much needed economic activity along with it.

The legislation combines seven different bills that would open areas to oil and gas exploration, streamline the permitting process for all energy sources, provide lease certainty, and provide transparency and accountability on Environmental Protection Agency (EPA) regulations. While some of the language focuses too much on federal planning of energy policy and delays implementation of regulations rather than preventing them, the legislation would increase energy supply and drive economic growth.

An important component of this legislation is that it streamlines the permitting of all energy projects. Receiving a permit for any energy project, not just fossil fuels, takes entirely too long. Duplicative and unnecessary regulations slow the process. Furthermore, environmental activists delay new energy projects by filing endless administrative appeals and lawsuits. McCarthy’s bill would create a manageable time frame for permitting for all energy sources, including renewable energy projects.

Last year, the U.S. Chamber of Commerce identified 351 energy projects stalled by “not in my backyard” suits, regulatory red tape and, of course, endless challenges from environmentalists. Almost half these projects (140) are renewable-energy ones.

The legislation also calls for an end to the lengthy permit process in the Natural Petroleum Reserve area of Alaska. It would require the Department of the Interior (DOI) to approve drilling permits in 60 days and infrastructure permits in six months.

Lease certainty is another critical issue. The act states that the DOI cannot cancel or withdraw a lease sale after the winning company pays for the lease. Further, the DOI could not add stipulations to the lease after the sale unless the “Secretary deems such stipulations as emergency actions to conserve the resources of the United States.”

Leasing has been problematic for oil and gas companies for a number of reasons. Not only has the government failed to issue leases during the statutorily defined timeframe, but the DOI has also cancelled and suspended leases. In 2010, it suspended 61 oil and natural gas leases in Montana alone because environmental groups charged that the energy production would contribute to climate change. Ensuring that the federal government does not pull the rug out from a company that wins the lease sale would provide the certainty necessary to pursue energy projects.

The act would also provide transparency and accountability for EPA regulations by establishing an interagency committee that would report on the full economic impact of the rules implemented by the EPA that affect fuel prices. The legislation also delays the implementation of Tier 3 fuel standards (designed to replace the Tier 2 regulations issued in 2000) that would lower the amount of sulfur in gasoline but could add 6–9 cents per gallon to the cost of manufacturing gasoline. The EPA has declared no measurable air quality benefits from these standards.

McCarthy’s bill would also delay the New Source Performance Standards for refineries, which would drive up the cost of gasoline for no measurable change in the earth’s temperature. It would delay new ozone standards, which are unnecessary because the ozone standard set by the EPA is already more than stringent to protect human health. The preferred approach would be to prohibit the implementation of these three standards altogether.

An unneeded part of the legislation is the attempt to create all-of-the-above energy production plans on federal lands. It would require the federal government to create production objectives for fossil fuels and renewable energy and allows the relevant agencies to make additional lands available to meet those objectives.

Simply put, we don’t need the government establishing production goals and attempting to meet them. We’re witnessing the unintended consequences, economically and environmentally, of this approach with respect to the ethanol production goals established in the 2005 and 2007 energy bills. The government is terribly inadequate in predicting how our energy needs should be met. The market is not.

A much simpler, effective solution would be to open all federal lands for energy production of all sources and allow the private sector to determine what sources of energy and what technologies meet America’s electricity and transportation fuel demand.

Government restrictions and regulations are significantly impeding the market’s effectiveness in responding to changes in energy prices and making it difficult for suppliers of all types of energy to produce energy and create jobs. The Domestic Energy and Jobs Act would provide America with much needed energy supply and a much needed economic stimulus.


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