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Home / Washington Business - April 2006 / The Energy Policy Act of 2005 |
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The Energy Policy Act of 2005 |
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Written On: April 2006 |
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Written By: by Ron Dalby |
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"This bill will strengthen our economy and it will improve our environment, and its going to make this country more secure. The Energy Policy Act of 2005 is going to help every American who drives to work, every family that pays a power bill, and every small business owner hoping to expand."
So said President George W. Bush in Albuquerque, New Mexico on Aug. 8, 2005, when he signed the nation's newest energy bill into law.
Whatever its pluses and minuses, this is definitely not a tree-friendly bill. It is 1,725 pages of mind-numbing bureaucratese. The table of contents alone runs for 19 pages. In these pages, though, there are measures designed to warm a liberal's heart and enough tax credits for businesses and individuals to charm the socks off of most conservatives and have lobbyists toasting their success at bending Congress to their will. The only other thing for certain is that this bill will, over time, change the way each one of us looks at and uses energy.
In these political times, even with a bill that contains something for almost everybody, liberal, conservative and independent alike, the elite media predictably uses it as another excuse to bash the administration and the Republican-controlled Congress. In the days leading up to the signing of the legislation, scathing editorials could be found almost anywhere. No one, it seemed, had anything good to say about the bill at all if these excerpts are any indication.
"With the federal deficit at a record high and the nation at war, it's difficult to stomach the sight of Congress contemplating huge tax breaks and subsidies for the far-from-impoverished energy industry." Sarasota Herald Tribune, April 21, 2005.
"[The energy bill] has changed less over four years than the Rocky Mountains. Its emphasis remains almost entirely on drilling and exploration for oil and gas (much of it in environmentally sensitive areas), and on $8 billion in tax breaks for companies." Los Angeles Times, April 20, 2005.
"An energy bill full of tax breaks and subsidies is headed for a vote in the U.S. House. Supporters say it would reduce gasoline prices, which is a lot of hot air. Gas prices are high for many reasons, including increased demand in China and other emerging markets, and the energy bill would do nothing about any of them, at least in the short term. On the contrary, the bill includes mandates for the increased use of ethanol mandates that will increase the price of gasoline." Manchester Union-Leader, April 18, 2005.
If anything, the editorials following the passage of the final bill were even worse. The key question then becomes, "Were the naysayers right or wrong?"
CNNMoney.com described the potential winners and losers in an article written at the end of July, hours before the bill's final passage. In their estimation the winners would be the large oil companies, anyone connected with clean coal and the producers of ethanol. The losers, CNN contended before the final bill was passed, will be consumers and producers of methyl tertiary-butyl ether, a fuel additive designed to reduce pollution that has been criticized for possibly contaminating ground water and causing cancer. The bill omits a limited liability provision for producers of MTBE and could thus open the door to litigation at a later date.
David Pursell, a partner at Pickering Energy Partners, was quoted in the CNN article as saying, "The bill does nothing to reduce our dependence on imported oil, and the only winners will be those that benefit from high energy prices."
On the plus side, CNNMoney.com does list some individual benefits. Consumers can get up to $500 in tax credits for installing a highly efficient central air conditioner ($300) and installing energy saving windows ($200). Solar-powered water heaters or any fuel cell equipment purchased for the home could bring up to an additional $2,000 in tax credits. These credits can only be claimed from Jan. 1, 2006, to Dec. 31, 2007.
The other big incentive is for purchasing a hybrid or diesel-powered car. Tax credits of from $500 to $3,400 are available depending of the fuel efficiency of the car. Buyers of hydrogen- or electric-powered cars can claim as much as $8,000, though the number of these vehicles available and on the road is negligible at present.
The Meat of the Matter
While the above-cited tax breaks are pleasant enough for the individuals concerned, they represent but the tip of the iceberg in the Energy Policy Act of 2005. Here are some of the major points covered by this extensive piece of legislation:
Loan guarantees for "innovative technologies" that avoid greenhouse gases, which might include advanced nuclear reactor designs, clean coal and renewable energy.
Triples the amount of biofuel (usually ethanol) that must be mixed with gasoline sold in the United States.
Seeks to increase coal usage while also reducing air pollution by authorizing $200 million annually for clean-coal initiatives, repealing the current 160-acre cap on coal leases, allowing the advanced payment of royalties from coal mines, and requiring an assessment of coal resources of federal lands outside of national parks.
Authorizes subsidies for wind energy and other alternative energy producers.
Lists ocean energy sources including wave power and tidal power for the first time as renewable technologies.
Provides subsidies for oil companies.
Extends Daylight Saving Time by about four weeks.
Mandates no drilling for oil or gas in or underneath the Great Lakes.
Sets federal reliability standards regulating the electrical grid.
Provides a number of specific provisions aimed at advancing the production of electricity from nuclear plants.
Mixed in with all these provisions and others too numerous to list here are some $12 billion dollars in tax breaks for various facets of the energy industry.
The Congressional Budget Office review of the conference version of the energy bill the final version estimates that the act will increase direct spending by about $1.6 billion and reduce revenues by about $12.3 billion between 2006 and 2015.
Here Come the Nukes
More than anything else, official sanction for pursuing nuclear power plants comes as perhaps the greatest change in policy with this bill. More than $2 billion is given over to nuclear-related research and well over another half billion dollars is set aside for planning and investing in human resources and infrastructure. Coupled with these are construction and operating subsidies totaling almost $9 billion.
Pursuing nuclear power in an official capacity is certainly long overdue. For decades it has been considered politically incorrect for anyone in the United States to advocate in favor of nuclear power, despite advances in technology and the demonstrated safety record in this country and others, notably France.
Yes, there was an accident more than two decades ago at Three Mile Island. Significantly, though, no one died. Even if the Soviet tragedy at Chernobyl is factored into the equation, more people have died and more property has been destroyed or damaged by petroleum, coal and natural gas accidents than nuclear accidents. While nothing designed and built by people can ever be considered foolproof, nuclear power, both ashore and afloat, has proven to be a safe, viable alternative to fossil fuels and should be high on our list of alternative sources of energy.
Electric Transmission
At least partially in response to the massive "brown-out" that occurred on a hot summer day in the Midwest and Northeast a few years ago, the Energy Policy Act of 2005 mandates a number of standards for the nations electronic transmission grid. Among these:
There will be nationwide, common standards established for system reliability to which all utilities must conform.
A national authority will be established to monitor and provide real-time status on the grid throughout the eastern and western interconnections.
The Department of Energy is given more than $750 million in research and development funds for new transmission technologies to enhance reliability, efficiency and environmental performance of power systems.
Beginning within one year and every three years thereafter, DOE will conduct studies to identify national interest in electric transmission corridors that should be upgraded to relieve congestion.
It's anticipated that these provisions will result in more rapid approval for expansions of the grid system at the state level and could form the foundation for state compacts allowed by the legislation to jointly consider transmission projects. In other words, it should be easier and faster to get electrical transmission projects approved and built.
Oil Exploration Emphasized in Gulf
Probably the biggest single complaint about the new legislation concerns the incentives and other "goodies" provided to the oil companies, a lot of which is aimed at the Gulf of Mexico. Indeed, there are significant subsidies that will benefit the oil giants, and in this time of record oil company profits, that's hard for a lot of people to swallow.
The flip side of this is the issue that is never addressed: How does the United States keep its economy moving while decreasing its dependence on imported oil? The answer, in the short term, is to find more supplies of domestic oil. It is impossible for us to quit petroleum "cold turkey." Were we to do so, our economy would collapse overnight. Thus, in the short term 10 to 20 years were at the mercy of foreign oil suppliers unless we can locate and develop additional sources of oil within our own boundaries.
Certainly as new sources of renewable energy are developed and brought on line, we can begin reducing our dependence on petroleum products. However, we must keep our nation viable during the time it takes to bring these technologies to market. That means we will continue to consume oil until such times as it can be economically replaced by alternate sources of energy.
Alternate Sources of Energy
The Energy Policy Act of 2005 gives a decided push to the development of energy sources independent of fossil fuels. There's research money included for hydrogen, solar power, wind generation, wave and tidal effects, and other kinds of energy. Despite critics who claim this bill is a giveaway to the oil industry, the unalterable fact is that money is provided for the research that may ultimately spell the end of energy dominance by the oil companies.
None of this work will bear fruit overnight. Just as with the fledgling oil industry in the late 19th century, there are all manner of problems to be overcome transport, delivery, environmental and so on. The key fact, though, is that the 2005 energy bill, as passed, does give impetus to the necessary research and development of the products we will use in the future. For all its other flaws, both real and perceived, the Energy Policy Act of 2005 will long be remembered as the first step on a national level at weaning ourselves away from fossil fuels.
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