National Commission on Energy Policy's New Energy for America Summit
*** As Prepared for Delivery ***
"Thank you for that introduction, and for the opportunity to speak with you this morning.
"A special thanks to the Bipartisan Policy Center, the National Center on Energy Policy, and all who are here to participate in this conference. I appreciate your commitment to bipartisanship and your focus on energy. As leaders and experts in this field, you will play a key role in shaping many of the policies considered during the 111th Congress.
"The importance of your involvement is hard to overstate. These are difficult days filled with difficult decisions, and the choices we make now will have lasting consequences. The surest path to success will be the same as always - to keep an open mind, consider all options, and work together to develop sensible solutions. I have every confidence that this is possible - that we can overcome our challenges, and our differences, and revitalize our nation.
"You've invited me here to share my thoughts on energy policy, in particular the Obama Administration's plan for it. So, let me begin by saying that I look forward to working with our new president, and wish him well in the days ahead. We won't always agree on the issues. There will be times when it appears that consensus simply cannot be reached. But as long as we keep the best interests of the American people in mind, we should be able to bridge our differences and make genuine progress on their behalf.
"As we discuss the direction of our energy policy, it‘s important to remember what has already been accomplished. As a result of the landmark energy bills that were signed into law during each of the past two Congresses, the "new" direction has, to some extent, already been set.
"As the benefits of these measures continue to kick in, our nation will benefit greatly. Many of you were involved in those efforts, and I am grateful for your support and willingness to work toward a balanced energy policy.
"Despite our recent progress, we also know that our work is far from finished. In recognition of this, the Senate Energy Committee is now at work on another comprehensive measure. I know there's a lot of interest in the scope and timing of this bill, so let me provide you with an update on where it stands.
"At the beginning of this Congress, Chairman Bingaman and I agreed that our committee staffs would work together to draft legislation on issues where there was broad consensus. We agreed to jointly introduce legislation where possible, and to use those measures as the basis of the broader bill considered by the committee.
"That's still the plan. So far, though, we've only introduced two measures - a reauthorization of research and development provisions from the Energy Policy Act of 2005, including some workforce items, and a study of the impact that energy production has on water resources.
"There are more issues that the Chairman and I agree on, and we expect to introduce measures in several of those areas. We agree on the need to improve energy efficiency, renew federal support for methane hydrates, and find a solution for the disposal of spent nuclear fuel. Other areas where agreement is possible include clean energy financing, the development of clean energy on public lands, and energy market transparency.
"Taken together, those provisions could provide the foundation for a strong energy bill. As late as last week, however, Chairman Bingaman told me that he would like our committee to start marking up on March 24th. That would leave us exactly one week to reach consensus on many other provisions, including several that are top priorities for the majority.
"At risk of being labeled an obstructionist, I have to tell you - I have serious doubts that the committee will be able to produce a good bill on such an aggressive timeline. There are a number of areas where we should ultimately be able to hammer out a compromise, but it will take time - and a serious investment in bipartisanship - to get to that point.
"By virtue of the rushed pace, differences in ideology, or both, there are also many areas where Chairman Bingaman and I are likely to disagree. Changes to the Strategic Petroleum Reserve and changes to the federal programs for oil and gas leasing top that list.
"The Renewable Portfolio Standard, now known as the Renewable Electricity Standard, is another proposal where we remain far apart. The majority has changed its name to broaden its appeal, but that hasn't resolved the underlying flaws of the policy.
"Even though it has never cleared Congress, the mandate for renewable energy has increased from 10 percent in the 107th Congress to as much as 25 percent in this one. In the absence of agreement, it is difficult to comprehend how the targets have continued to rise.
"Some clean resources that produce little to no carbon dioxide are excluded from the proposed mandate, so it remains unclear whether the goal is to increase renewable generation or reduce emissions. And, perhaps most unacceptable is that some regions of the country, particularly the Southeast, stand to be severely disadvantaged by a one-size-fits-all mandate. Proponents of an RES insist the Southeast has enough biomass resources to meet the mandate, but I'm uneasy about leaving an entire region of the country with only a single option for compliance.
"And as it stands today we know that the nation's transmission infrastructure is woefully inadequate to meet the 20 percent mandate proposed by Chairman Bingaman. Even Secretary Chu agrees with that assessment.
"Because of my concerns with the Chairman's proposed RES, I am working on an alternative version with input from both sides of the aisle. In brief, my proposal will likely call for a 15 percent renewable standard, remove the 5 percent cap on energy efficiency, and take both new and existing nuclear out of the baseline. It makes sense to me to start with a goal that is achievable, and then raise it over time as new technologies are developed and transmission obstacles are cleared.
"While I may disagree with Chairman Bingaman on a number of issues, we should all be grateful for his desire to work out details in committee through careful analysis and negotiation. As we consider legislation that would put billions of taxpayer dollars at stake, skipping the committee process and bringing a bill directly to the Senate floor could have huge potential for unintended consequences.
"Our efforts to draft a comprehensive, bipartisan bill have also been complicated by the lack of political appointees at the Department of Energy. There are no Assistant Secretaries in place - or any Deputy Secretaries - or any Under Secretaries. In fact, Secretary Chu remains the only nominee to be confirmed by Congress.
"As a result of these gaps, the Department is still unable to provide witnesses for almost any of our hearings. You can understand my reluctance to advance major proposals without being able to find out how they would be implemented and managed. My concern is that in our haste, we run the risk of pushing through complicated new policies without fully understanding the impacts they will have.
"Some of you may be wondering how the energy bill fits in with the expected cap-and-trade bill and the President's proposed budget for Fiscal Year 2010. I'm sure you all saw Senator Reid's comments that he would like to package energy and climate into a single vehicle to be considered this summer. The majority leader has also said he's considering pushing climate change legislation through the budget reconciliation process.
"I disagree with both approaches, which is why I joined 32 of my colleagues in sending a letter to the Budget Committee opposing the use of reconciliation and why I remain opposed to combining climate and energy legislation. These are complex and controversial issues, and the legislation we draft to address them will have tremendous impacts on our economy. Each deserves a full and separate vetting through the committee process. The budget reconciliation process, in particular, does not allow for the kind of thoughtful and robust approach that's needed in this circumstance.
"While budget reconciliation is still months away, the Senate expects to consider the budget resolution for Fiscal Year 2010 before recessing for Easter. As with the stimulus, the budget blueprint released last month indicates that President Obama has made energy - along with health care and education - one of his top priorities.
"The President, very clearly, is seeking some fundamental changes for our nation's approach to energy policy. I welcome some of the changes he has proposed, such as accelerating the development of renewable energy and a greater commitment to funding for research and development. But I am also concerned that his budget will create a false dilemma.
"During debate over the stimulus, it became apparent that the administration views renewable resources as the only legitimate form of energy to increase supply and meet demand. The budget is based on the same assumptions. Renewable energy is highlighted and promoted as a driver of economic growth and job creation, while the fossil resources that account for 85 percent of our energy needs receive the exact opposite treatment.
"Even without a detailed, line-by-line document, there are two areas of the President's budget that I find deeply troubling. First are the new taxes and fees that would be assessed on domestic oil and gas producers. These companies already face some of the highest tax rates in America, and the President anticipates collecting an additional $31 billion from them over the next 10 years.
"With oil prices remaining below $50 per barrel, I worry about the consequences of placing such a dramatic new burden on domestic producers. This past weekend, the New York Times ran a front page article declaring that "The great American drilling boom is over." In these tough times, adding to the industry's cost of doing business will only increase energy prices for consumers. It will also make projects here at home even less competitive with those abroad. In turn, domestic production could decline even further, and force our nation to import even greater amounts of foreign oil.
"Punitive proposals aimed at the oil and gas industry will only weaken our nation's energy security and drive jobs and production overseas. And this type of thinking ignores the reality that our nation will rely on fossil resources for decades to come.
"You've probably heard that line repeated a lot, lately, but it seems to mean different things to different people. For some, the continued use of fossil fuels presents an opening to raise taxes, increase federal revenues, and provide funding to preferred energy resources. For others, myself included, it means that we must enact policies that enable us to produce more of our own resources - all of them - and then take full advantage of secure, domestic energy supplies to remain strong economically and facilitate continued development of cleaner technologies.
"The recession has provided us with a rare opportunity to improve our energy security. The President has said we can reduce our dependency on foreign oil by increasing our production of renewables. He's right - but we have an incredibly long ways to go before renewables can replace oil, natural gas, and coal.
"When I leave here this morning, I'll head to a committee hearing on offshore and renewable energy production. One of our witnesses, Robert Bryce, has done some basic math and will testify that wind and solar meet less than 0.2 percent of America's total energy needs. That's about 76,000 of the 47.4 million barrels of oil equivalent energy that we consume each day. So, it will be important to double renewable energy generation over the next four years - but after that, wind and solar will need to double seven more times in order to generate the same amount of energy as oil alone.
"Along the way, it will be imperative to decrease our dependence on foreign oil even more, even faster, by taking steps to boost domestic production. The Coastal Plain of ANWR, greater access to the Outer Continental Shelf, and an Alaska natural gas pipeline are among our best options for accomplishing that goal.
"My second area of concern is the President's proposed cap-and-trade system. The budget blueprint assumes that $646 billion will be raised by a cap-and-trade system through 2019 - somewhere in the range of $80 billion per year after revenue collections begin in 2012. But according to past studies, the costs associated with this policy will likely be much, much higher.
"In the absence of specifics, our only choice is to compare the President's targets with those contained in measures previously introduced and analyzed. Studies that looked at cuts similar to those contained in the budget have projected costs that are significantly greater than the President assumes. According to figures derived from an M.I.T study, individual households may be faced with an additional $3,128 per year in climate policy-driven costs.
"To offset the cost of cap-and-trade, the administration announced it will make permanent the "Making Work Pay" tax credit. That credit began at $500 per person, or $1,000 per working household, during last year's campaign. It was then reduced to $400 per person, or $800 per household, as part of an effort to reduce the price tag on the stimulus package.
"To be fair, the budget blueprint does note that additional cap-and-trade revenues will be used to increase the size of the tax credit. But with the tax credit already decreased substantially - and the cost of cap-and-trade severely understated - I'm worried that taxpayers will be left on the short end of a terrible bargain. A tax credit of $800 per working family will do nothing if that family is forced to pay an average of $3,128 more per year under a cap-and-trade system.
"Certainly we should all be concerned about climate change and carbon emissions. But there is a legitimate policy debate about which approach, or which combination of approaches, is best. I'm very concerned that the need for increased revenues to pay for all of the programs that the new Administration supports has become the driving force in the climate debate. Perhaps the same emphasis that is placed upon a fair return from oil and gas production in the budget should be matched for taxpayers who stand to face much higher costs as a result of cap-and-trade. Addressing global climate change will cost money, so we must be able to justify those expenses through actual progress on the issue and benefits for the taxpayer.
"It has often been said that when you tax something, you get less of it, and when you subsidize something, you get more of it. The observation of that fundamental truth has been attributed to President Reagan, Congressman Jack Kemp, and many others. No matter who said it first, those words are particularly relevant right now, as we consider far-reaching changes for the direction of American energy policy.
"We certainly want more renewable energy, and we're absolutely right to reward those willing to produce it. Because we must reduce emissions, we also know there is a need to place a price, or tax, on carbon. But by placing additional taxes on the production of conventional resources, we will "get less" of them at a time when we can least afford it. Producing less is not the same as consuming less - dependence is very different, and much more dangerous, than simple demand. We will rely heavily on fossil resources long into the future, and the more of that energy we produce here in America, the better.
"The President has promised a balanced approach to energy policy. I believe he will stay true to his word - but so far, I've been disappointed by several of his administration's decisions, and its first budget proposal as well. I'm still waiting to send out that first press release congratulating, rather than criticizing, the new administration's actions on energy and the environment.
"Even though energy prices are currently low, the stakes are as high as they've ever been. In a moment that matters so greatly, we must work together to develop an energy policy that creates jobs, raises revenue for new technologies, and protects our environment. We can do this by increasing the production of all of our resources, not just those that meet one of our many goals.
"We are faced with a choice. We can view the production of our own resources as a necessity, or we can treat it as a luxury. I believe there is only one policy that will not yield unforeseen consequences for our economic recovery or drive up costs for the average American family. That policy is comprehensive - balanced between the production of traditional resources, the commercialization of new ones, and the more efficient use of both.
"I look forward to working with the President, and all of you, to ensure that "New Energy for America" takes on that meaning and becomes that very policy. It's a tall order, but our nation's strength, security, and prosperity depend on it.
"Thank you again for the invitation to speak with you this morning."
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