Statement of Senator Jeff Bingaman Opening Statement – Floor Debate March 5, 2002
Mr. President, I am pleased that the Senate has now proceeded to debate, amendment, and hopefully, final action on the Energy Policy Act of 2002.
This fact that we are at this point is the culmination of a tremendous amount of work. In the Committee on Energy and Natural Resources alone, we have held over 50 hearings in the 106th and 107th Congress that are relevant to today’s bill. I would like to express my appreciation to my Ranking Member, who chaired many of those hearings. I think we have a good base of understanding of these issues to inform our debate as we go forward, and many of the elements of this energy bill are not going to shake out on party lines here in the Senate. I anticipate that we will see all sorts of combinations of sponsorship on amendments, both on party and a regional basis, before we are done and ready to go to conference with the House.
Rationale for an energy bill
At the outset of full consideration of this bill by the Senate, it is important to recall why have we invested so much time on the topic of energy, and in preparing for this bill. Why is it so important for the Senate, now, to consider and pass comprehensive energy legislation?
I believe that there are two basic answers to these questions.
First, energy is central to our present and future economic prosperity. Because of its importance, improving and strengthening our national energy system can provide significant economic benefits for every American. Similarly, vulnerabilities in our national energy system can present major threats to our national economic health.
Second, there have been significant changes in energy markets since the last time Congress considered comprehensive energy legislation. Our last major energy bill was the Energy Policy Act of 1992. Since that time, we have moved, as a nation, further away from command-and-control regulation of energy toward a system relying more on market forces to set the price of energy. In the process, energy markets have become more competitive and dynamic, but not without some significant bumps.
Consumers are now more vulnerable to the vagaries of energy markets, and volatile prices for energy cause repercussions that ripple through the economy. We saw that phenomenon at work in California last winter and spring.
The structures to regulate these emerging market forces, particularly with respect to trading in natural gas and electricity, are not fully developed, as the collapse of Enron has shown.
Gasoline supplies nationwide have become increasingly subject to local crises and price spikes, due to the proliferation of inflexible, local fuel specifications and tight capacity in both refining and pipelines.
The events of September 11 have caused many to reflect on the inherent vulnerabilities of our energy transmission system. The time might be ripe for a rethinking of how we site energy infrastructure, and the balance between central and distributed generation of power in our electricity system.
Congress must respond to these changes, challenges, and opportunities. If it does so in a balanced, comprehensive, and forward-looking way, then we will develop an energy policy that will lead to a new economic prosperity for the country and the world. But we won’t get there by simply perpetuating energy policy approaches from the past. New ideas and approaches are needed, as well as greater investments to move us into the future. That is what today’s bill will do.
This bill has three overarching goals: [CHART]
first, ensuring a diversity of fuels and technologies for adequate and affordable supplies of energy, including renewables, natural gas, oil, coal, hydropower, and nuclear power;
second, improving the efficiency and productivity of our energy use, including the reliability and productivity of our electric transmission system, and the efficiency of energy use in industry, vehicles, appliances, and buildings; and
third, keeping other important policy goals, such as protection of the environment and global climate, in mind as we sort through energy policy choices.
We can achieve these three goals if we accelerate the development and introduction of new technologies and if we create flexible market conditions that empower energy consumers, so that they can make choices that will benefit both them and society.
This combination of technology and policy innovation in pursuit of a diverse and robust national energy system can be seen in the provisions of the bill related to its first major goal–adequate and affordable supplies of energy.
Renewable energy
To start the discussion of energy supply, I will speak first about the important subject of renewable energy.
The Senate bill contains numerous provisions to enhance the contribution of renewable forms of energy to our future energy mix. Under the business-as-usual approach of the House energy bill, H.R. 4, the contribution to our energy mix from renewables will not markedly grow over the next 20 years. The result will be an energy system, particularly for the production of electricity, that will go from being 68 percent based on coal and natural gas to being 80 percent based on these two fuels. That over-dependence would leave our country very vulnerable to shortfalls in the delivery of either of these commodities, and consumers exposed to severe risks of price spikes. We need more diversity in the ways in which we produce electricity in this country, not less.
Such an over-dependence also does not make sense in light of the commitments to renewable energy that we have been seeing from other countries, particularly in Europe. [CHART] Even France, which is often held up as a model for its commitment to nuclear power, has outpaced the United States in recent years in its investment in renewable sources of electricity.
The United States needs to lead the world in renewable technologies. We have abundant domestic renewable resources, and the world market for such technologies is capable of strong growth in the future. Renewable technology leadership would help U.S. firms achieve a strong position in winning these markets, and thus create new jobs domestically. If the United States is to lead the world in renewable energy technologies, though, we need to do a better job of getting them into our markets.
The new Senate bill boosts our future use of renewables in five major ways.
First, the bill contains market incentives that would triple the amount electricity produced from renewable energy over the next 20 years. [CHART] The orange band at the bottom represents the EIA projection for non-hydro renewables absent this bill, and the green wedge represents the contribution we expect to be made by the incentives in this energy bill.
These incentives include a Renewable Portfolio Standard that creates a market for new renewable sources of electricity, be they wind, solar, biomass, or incremental hydroelectric generation at existing dams.
A second market incentive is a Federal purchase requirement for renewables that grows to 7.5 percent of all Federal electricity purchases by 2010.
The renewable energy production incentive, an existing program to help rural electric cooperatives and municipal utilities generate renewable energy, is reauthorized in this bill and extended to include Indian lands, which contain prime renewable resources.
When the Senate considers the energy tax incentives amendment from the Finance Committee during its consideration of this bill, it will have an important opportunity to boost the future production of renewable energy. Existing renewable tax incentives expired on January 1 of this year. The package that will come from the Finance Committee will reinstate the highest priority incentives for 5 years, and expand the coverage of the production tax credit to include open-loop biomass and geothermal energy.
Second, in addition to these incentives for renewable production of electricity, this bill greatly expands the contribution of renewable fuels, such as ethanol and biodiesel, to powering vehicles in transportation. By 2005, 75 percent of the Federal government’s vehicles that can burn alternative fuels will be required to do so, creating more market certainty for renewable fuels and their associated infrastructure. During the course of the Senate’s consideration of this bill, we will probably adopt language providing that 5 billion gallons per year of renewable fuels be blended into gasoline, decreasing our import dependence on foreign oil.
Third, the bill helps renewables contribute more to our energy mix by removing existing regulatory barriers affecting renewable energy. For example, wind and solar power can be effectively tapped by small, distributed generation systems. But current practices and rules in the marketplace often discriminate against distributed generation.
Our bill deals with this problem by requiring electric utilities to offer their customers "net metering," in which a customer can offset his electric bill by the amount of electricity that he generates and sells to the local utility. This provision will facilitate the use of a wide variety of distributed generation technologies by electric customers, including renewable technologies like solar and wind power.
Our bill also requires fair transmission rules for intermittent generation, such as wind and solar, so that they are not unfairly penalized because of the natural variability of those resources from day to day and hour to hour.
Finally, our bill mandates easier interconnection for distributed energy production into the interstate transmission grid and requires States to examine facilitating interconnection of distributed energy in local electric distribution systems.
A fourth major way in which our bill promotes the use of renewables is by disseminating information about, and facilitating access to, areas with high resource potential, particularly on public lands. There are many places in the nation, particularly the western part that have significant, untapped renewable energy potential.
The bill creates a pilot program at the Department of the Interior and the U.S. Forest Service for development of wind and solar energy projects on federal lands.
The bill authorizes a study of renewable energy development potential on Indian tribal lands.
The bill also requires an annual publication of an assessment of available domestic renewable resources by the Department of Energy. This will provide the public with reliable information on the location and extent of those resources, in order to speed resource development.
A fifth and final area in which the bill helps make renewable energy a bigger part of our supply picture in the future is through enhanced research and development (R&D) programs. Under our bill, these R&D programs at the Department of Energy will grow from an authorized level of $500 million in fiscal year 2003 to $733 million in fiscal year 2006. Renewable energy R&D was cited by a distinguished Presidential task force in 1997 as being significantly underfunded relative to its long-term promise. Our bill expands the program consistent with the recommendations of that task force.
These measures to increase the contribution of renewables to our energy supply picture are balanced in our bill with a strong commitment to our other, more traditional energy supply sources.
Natural gas
I would like to briefly describe what the bill will do to support continued development of these traditional sources of energy.
In the area of natural gas, our nation is at the crossroads of a major policy decision about its energy security. U.S. natural gas demand is expected to increase from 23 trillion cubic feet per year now to 35 trillion cubic feet per year by 2020. Much of that demand will be driven by the use of natural gas for electricity generation.
As can be seen from the red line on this chart, [CHART] consumption of natural gas is growing much faster than domestic production. As a result, we are at risk of becoming, as a nation, dependent on imported natural gas brought in on tankers for a substantial part of our natural gas consumption. The countries on which we would rely for much of that gas are prone to political instability and are in the early stages of forming an OPEC-like organization for natural gas exporters. The cover story in the June 2001 issue of the OPEC Bulletin was "Iran hosts inaugural meeting of Gas Exporting Countries Forum." We don’t want to put our nation in the position of having to deal with a cartel in natural gas, in addition to the cartel that tries to control the price of oil.
Our bill takes several steps to come up with a different policy for natural gas.
It increases funding for research to develop domestic natural gas deposits in deepwater areas of the Gulf of Mexico and in harder-to-tap geological formations onshore.
It provides research funds to explore the potential of methane hydrates trapped on the ocean floor at great depths.
The bill authorizes more funds to facilitate the permitting and leasing of Federal land for natural gas production in places where it is environmentally acceptable.
It addresses a number of developing problems in natural gas production, such as conflicts over coalbed methane and hydraulic fracturing, to bring those conflicts to resolution before they reach the crisis stage.
But even all of these steps, as useful and important as they are, will not be enough to close the gap between projected supply and demand.
The most significant thing this bill does for future natural gas supply is to provide financial incentives to build a pipeline to bring down, from Alaska, the vast reserves of natural gas that have been discovered and have been already developed in the Prudhoe Bay region. These existing reserves are estimated to be over 30 trillion cubic feet of gas. It is estimated that the total natural gas resource on the North Slope of Alaska is enormous--on the order of 100 trillion cubic feet. A natural gas pipeline from Alaska to the lower 48 states would provide at least 4 to 6 billion cubic feet a day of natural gas before the end of this decade. Once a pipeline is constructed, it will provide gas to American consumers for at least 30 years and would be a stabilizing force on natural gas prices.
This project makes a lot of sense, but it isn’t happening because of a lack of certainty about the investment risk of building such a major pipeline. We are talking about an immense undertaking. [CHART] By any measure, this pipeline would be one of the largest construction projects ever undertaken. Construction of the pipeline would take 8 years from start to finish and require an investment of $15 to $20 billion. The pipeline project would create a massive number of jobs in Alaska, Canada and in the lower 48. It would require the construction of the largest gas treatment plants in the world and the laying of about 3600 miles of pipe, requiring 5 to 6 million tons of steel. Just the jobs in steel production, pipe manufacturing, trucking and shipping, and construction of the pipeline itself would create at least 350,000 to 400,000 jobs. At a time in which the U.S. steel industry is suffering harm from global overcapacity of steel production and foreign dumping, a project that would require over 5 million tons of steel means real jobs for workers and communities in steel states that are hurting.
Since natural gas prices vary from $2 to $10 per million cubic feet, it is hard for the free market to take this challenge on by itself. At the same time, we want to rely on the private sector to the greatest extent possible in putting the project together. There are two major groups of potential investors in the pipeline, and the provisions in the bill are aimed at giving them both a shot at proposing a successful project, or, even better, of combining forces to make it a reality.
The provisions include an expedited process for the permits, rights-of-way and certificates needed for the U.S. segments of the pipeline. Time is money in any construction project, and in one of this magnitude, uncertainty and delay will be project-killers. The government has an obligation on behalf of U.S. consumers to see that it exercises its role in a responsible and expeditious fashion.
The Alaska Natural Gas Transportation Act of 1976 provided a framework for construction and operation of a gas pipeline along a designated route known as the Alaska Highway route. Our legislation preserves this option. It also provides an alternative expedited procedure, in the event the parties decide to pursue another route or decide not to use the framework in the 1976 Act.
Because of the enormous benefits this long-term supply of energy will have for our economy, and the significant uncertainties in natural gas prices, the government has an interest in reducing the financial risks associated with the project. Accordingly, this bill authorizes loan guarantees for a project, as long as the appropriate filings are made within 6 months after the date this bill is signed into law. It also encourages the use of North American steel and union labor in the construction of the pipeline.
I understand that there are a number of refinements and modifications that may be sought as we move forward on this bill by the distinguished Ranking Member of the Energy Committee, who is also vitally interested in this project. For example, we are working together to come up with a tax provision that would reduce the financial uncertainty of the economics of the project going forward. Both he and I have strongly encouraged the Alaska North Slope producers, the interested pipeline companies, the State of Alaska, and other interested parties to begin serious negotiations on the final outlines of a commercial agreement. That has begun to happen. We are both committed to staying in close touch on their progress.
I believe that it is important for the Senate to be proactive on this project, and not simply sit back, cross our fingers, and hope it all turns out okay. lf we do not act while there is substantial private-sector interest in building the Arctic gas pipeline, we will lose an important opportunity to bolster our national energy security in natural gas. As a consequence, we might be hearing speeches, 10 or 20 years from now, about our dependence on foreign natural gas that sound a lot like what we now hear about imported oil.
Oil
Having mentioned imported oil, let me discuss the provisions of the bill that relate to increasing our domestic production of oil.
The volume of rhetoric about drilling in the Arctic National Wildlife Refuge, from both proponents and opponents, might lead one to think that it is the only place in the United States where one could find more oil. But that is far from true. There are 32 million acres of the Outer Continental Shelf off the coast of Texas, Louisiana, and Mississippi that have already been leased by the government to oil companies for exploration and production. [CHART] They are shown on this map by the yellow blocks. You don’t have to pass a law to drill there.
In addition to production in the Gulf of Mexico, there are outstanding prospects for increasing production from the National Petroleum Reserve-Alaska, which lies to the west of the Prudhoe Bay region. Under the Clinton Administration, leasing was expanded in this area, and industry has made some major finds. There is no law that needs to be passed to have additional leasing in this area, either.
If the problem really isn’t finding areas to lease under current law, why isn’t there more domestic production going on in the areas already leased for exploration and production? In my view, an important reason might be the differences between our federal and State royalty and tax policies and those of other countries with oil and gas resources.
Oil exploration and production is a world-wide business. Areas such as the ones on this map and in Alaska compete with other producing regions around the world. U.S. companies are making major commitments of capital, derived from their earnings in the United States, to develop energy resources elsewhere in the world. For example, ExxonMobil is investing $20 billion to develop natural gas in Saudi Arabia. Other U.S. companies are actively looking for oil in the Caspian region.
So, a key initiative in our bill to support increased domestic oil production is to have a top-to-bottom review of both federal and State royalty and tax policy on domestic oil and gas production, in comparison with other countries. Our current U.S. policies were put in place when the U.S. had abundant and easily accessible reserves. We have fewer such reserves now. While technology for finding oil has continued to improve, we should consider whether our tax and fiscal policies should change to policies that enhance the economics of exploring for oil and gas in more challenging geological formations.
Our fiscal policies should also be changed to take into account the boom-and-bust nature of the industry, and provide incentives to maintain domestic production when prices are low. They might also include disincentives for buying and sitting on leases without developing them in a timely way. All that is a tall order, and I don’t believe that Congress has the background it needs to revamp those laws in a sensible way right now. But we need to have a distinguished external group investigate this topic, so that we can deal with it in the future. Setting this process in motion might be one of the most useful things we do to boost domestic production in the long run.
A second proposal to boost domestic production in the near future is to provide adequate funding for the federal programs that actually issue new leases and permits for oil and gas production. For all the rhetoric from the Administration about the need to boost domestic production, in its budget request for fiscal year 2002, it did not ask for enough money to do it right. The result of inadequate funding for U.S. land management agencies is delay and frustration on the part of U.S. oil and gas producers. This bill provides increased budget levels for these functions. The federal government can then take the necessary steps to make oil and gas leasing faster and more predictable where it is already permitted.
The bill also contains increased R&D funding to support domestic oil and gas production by the smaller companies and independent producers. These entities account for the majority of onshore U.S. production of oil. They do not have the resources to do their own exploration and production R&D. Improving their ability to use new technology to find and produce oil and gas is a good policy for increasing domestic production. Here, too, there is room for improvement on the part of the Administration. In their latest budget request, these programs at DOE are being slashed. Both my Ranking Member and I oppose these cuts, and it is important for the Senate to take a position in favor of increased authorization for these programs, not cuts. That is what this bill does.
Coal
Another important contributor to our current energy supply picture is coal. 59 percent of our electricity generation nationwide is based on coal. [CHART] The United States has tremendous coal resources–we have been called the "Saudi Arabia of coal" by some. But, coal’s place in our energy future must be clean and emission-free. Coal-based generation produces more greenhouse gas emissions per BTU of energy output than does natural gas-fired generation. Other pollutants from coal-fired plants have been the source of regional tensions between States where coal-fired plants are based and States downwind.
Coal is too important a resource to write off. Technology holds the promise for dramatically lowering, even to zero, the emissions from coal-based plants. This bill takes a very forward-looking approach to the issue by authorizing a $200 million-per-year research, development, and demonstration program based on coal gasification, carbon sequestration, and related ultra-clean technologies for burning coal. This proposal was the result of a strong bipartisan push on the Energy Committee by Senators Evan Bayh and Craig Thomas. It is just one more example of the crucial role that R&D is going to play in shaping the energy future we want.
Nuclear
Research and development are also key to the future of nuclear power in this country. Nuclear reactors emit no greenhouse gases, so on that basis one would think that they are an option that we should be looking at for the future. But nuclear plants have other characteristics that are not as attractive. They have very high up-front capital costs compared to other generating options. That puts them at a disadvantage in the marketplace. The nuclear waste problem is not solved. Nuclear safety is a continuing concern for the public. Our cadre of nuclear scientists and engineers is growing older and dwindling, and we are not seeing a large supply of students being trained to help us deal with nuclear issues in the future.
The bill takes on these problems by focusing on R&D on new nuclear plant designs that might address these problems, and on a program to strengthen university departments of nuclear science and technology.
This bill also contains a partial reauthorization of the basic nuclear liability statute, the Price-Anderson Act. The part that is in the bill deals with liability of Department of Energy nuclear contractors, including the National Laboratories that are a significant source of our national nuclear expertise. The other main part of the Price-Anderson Act, dealing with the commercial nuclear power industry, is likely to feature prominently in the debate we have on this bill.
Hydropower
Another source of energy supply that this bill addresses is electricity generation from hydropower. Many hydroelectric facilities are reaching the age at which their original licenses under the Federal Power Act are about to expire. The process of relicensing these facilities needs to be protective of the environment, predictable for licensees, and efficient in administration. Our staff has been working for months with both the hydropower industry and environmental groups to develop a consensus for how to achieve these goals. There is strong bipartisan interest in moving in this direction and achieving consensus. We have not reached a final compromise on this issue, and so we have included in this bill the language on hydroelectric relicensing from the House energy bill that was formally endorsed both by environmental groups and the hydropower industry. It may not be perfect, but it is a reasonable starting point for this debate.
Indian energy
A final way in which this bill focuses on increasing the supply of domestic energy is through a series of provisions facilitating the development of energy resources on Indian lands.
A significant share of our untapped domestic energy resources are located on Indian lands. Over the last 20 years, these lands have contributed approximately 11 percent of the nation’s onshore oil and natural gas production, and 11 percent of its coal production.
But the potential energy production from Indian land is much greater than this. The Department of the Interior estimates that only a quarter of the oil resources and less than a fifth of the natural gas resources on tribal lands have been developed to date. The renewable energy potential is even more under-utilized. The Bureau of Indian Affairs estimates that there are almost 90 Indian reservations with energy resource potential, including oil and gas, coal and coalbed methane, wind, and geothermal resources. Developing these resources, particularly those that would enable Indian tribes to generate electricity on-reservation, would make a great contribution both to our national energy supply and to Indian economic development.
The bill achieves these goals in several ways. It establishes a comprehensive program at DOE to assist tribes in developing their resources. It builds up the energy infrastructure on Indian lands. It cuts the red tape imposed by the Federal government on Indian tribes that seek to lease land and rights-of-way for energy production and transmission. There are also a number of incentives for Federal and private purchase of energy generated on Indian lands.
Using our energy supplies more efficiently and productively
So far, I have described all the ways in which this bill achieves the first overarching goal of increasing our supplies of energy. I would like to turn now to the parts of the bill that deal with its second overarching goal, to use our energy supplies more productively and efficiently. As I have mentioned consistently throughout the past year, you can’t have a sound energy policy that is based only on production, or only on conservation. We need to focus on both. Our energy policy must combine programs that boost supplies with programs that use those supplies more effectively.
A 21st century electricity system
The first major way in which we can use our energy supplies more effectively is by having an electricity transmission system that is ready for the challenges of the 21st century. Electricity is essential to our modern way of life. Yet our electric system largely operates on a design that is nearly a century old. The vulnerabilities of the current system by which we regulate electricity were illustrated by the electricity problems faced by California and the West last year and the year before. They should be a wake-up call to the fact that problems and unresolved issues remain in our electricity markets.
But in addition to these problems, there are important opportunities. During the next few years, billions of dollars of investment will be planned and committed to electric generation and transmission. Those investments will have 30 to 50-year life spans.
So, the central challenge we face with electricity is to have two things:
first, market institutions that ensure reliable and affordable supplies of electricity, and
second, policies that favor future investments in new technologies that give consumers real choices over their energy use.
I believe that the provisions contained in this bill do just that.
First, the bill sorts out roles and responsibilities between the Federal Energy Regulatory Commission (or FERC) and the States. FERC is given a clearer role in ensuring that all transmission systems are subject to a consistent set of rules. The States are given clearer direction to set local rules that will enable the introduction of more consumer choice, for example, through enhanced interconnection and net metering standards for distributed generation.
Second, the bill gives FERC the responsibility for making mandatory adherence to rules to promote the reliability of the interstate transmission system. We envision FERC doing that through one or more of the existing industry- or regionally-based reliability organizations.
Third, the bill gives FERC tools to make sure that competitive markets work well to provide customers with affordable electricity by strengthening authority over mergers, clarifying authority over market-based rates, and increasing transparency in energy market information. In connection with these changes, the bill repeals the Public Utility Holding Company Act of 1935, which has limited some companies from entering new markets to build generation facilities. The bill also requires the Federal Trade Commission (or FTC) to protect consumers against unfair trade practices in energy marketing. The FTC is also instructed to create ways to better inform consumers about their energy choices.
Finally, this bill begins to address the tough issue of siting new electric transmission lines. A national transmission grid is a necessity, but cannot occur without a new approach to transmission planning, expansion, and siting. The Bush Administration, in its National Energy Policy Plan, recommended that Congress create Federal eminent domain over transmission siting. That has proven to be a very controversial proposal. I believe that Federal eminent domain, by itself, is not likely to lead to an effective approach to meeting our need for new transmission. Federal eminent domain might, however, be a useful backstop to a more cooperative, regionally based approach to transmission and siting issues. But more consultation is needed with all stakeholders before we decide on a legislative solution.
Accordingly, this bill sets out a framework for the Federal government to assist States in more effective regional coordination on all energy issues, including transmission siting. We will continue the dialogue we have started with electric utilities and with organizations such as the National Governors Association and the National Association of Regulatory Utility Commissioners to see if a consensus emerges on an effective way of siting the transmission lines we will need for our future electricity system.
Energy efficiency
A modernized national electricity system is one major way we can use our supplies of energy more effectively. The second way is to increase the efficiency of the various uses of energy across the board–in vehicles, in industry, in appliances, and in buildings.
The bill contains two provisions that directly bear on the fuel efficiency of vehicles. One mandates higher fuel efficiency in the vehicles purchased by federal agencies for civilian use. A second provides the framework for the Department of Energy to assist States in expanding voluntary incentive programs to get old, fuel-inefficient vehicles off the roads.
The major initiative in this area, though, deals with increasing vehicle fuel efficiency standards, including the Corporate Average Fuel Economy (or CAFE) standards. The House energy bill had a very weak provision on this subject, which translated into only a half-mile increase in the CAFE standard. We have to do better, if we want to have a sound energy policy.
This chart shows why. [CHART] The upper line shows our projected growth in oil consumption in the United States. The second line shows petroleum consumption in the transportation sector. It’s the major factor in our overall oil import dependence. If we don’t address oil demand by cars and light trucks, we have little hope for decreasing our dependence on oil imports. The bottom line shows our domestic oil production. It has been in decline since 1970. This little red line shows the impact of opening the Arctic National Wildlife Refuge to drilling and finding the most optimistic projection for oil. Even with the Arctic Refuge, our dependence on foreign oil imports will continue to grow, unless we act in this legislation to increase vehicle fuel efficiency in automobiles and light trucks. Obviously this has to be done in a manner that protects the safety of the driving public. The National Academy of Sciences has forcefully stated that both objectives–increased efficiency and increased safety–can be met at the same time. The provisions in this bill accomplishes both those objectives and deserves to be broadly supported.
This bill also improves national energy efficiency through a series of non-vehicle provisions that cumulatively are estimated by the American Council for an Energy Efficiency Economy to save over 28 quadrillion BTUs of energy by the year 2020, over the current trend. 28 quads is an enormous number–it is a million times 28 billion. These energy savings come through a series of initiatives that will–
first, improve the energy efficiency of federal buildings, schools, and public housing;
second, reduce energy use in manufacturing and other industries;
third, require increased efficiency for numerous consumer and commercial products; and
fourth, reauthorize important federal grant programs that help low income families pay their energy bills and reduce their energy costs.
Federal and other government energy use
Federal energy use is a major target of opportunity for increased efficiency. I have long believed that the federal government should lead the way for the nation in the use of cost-effective technologies that consume less energy. Such energy-efficient technologies include lighting, appliances, windows, and heating and air conditioning systems. In most cases, retrofitting a federal building with modern energy-efficient equipment provides a rapid payback in lower energy costs and can actually save taxpayer dollars.
In fiscal year 2000, the federal government’s utility bill totaled over $3.4 billion. By enacting the provisions in this legislation, we will save taxpayers $250 million annually or the equivalent of saving 16 trillion BTUs of energy. These provisions would improve the existing Federal Energy Management Program by strengthening energy standards for federal buildings, mandating federal purchases of the most efficient equipment, optimizing building energy systems using real-time metering, and providing a new source of funding for energy projects through a federal energy bank.
A final directive on government energy use would require Congress to improve the energy efficiency of the Capitol building complex under a plan to be developed by the Architect of the Capitol. An especially important component of this provision is a requirement that the new Capitol Visitor’s Center would incorporate the latest energy efficient technologies.
For State and local governments, there is a new program in this bill focused on improving the energy performance of elementary and secondary school buildings. The purpose of the program is to assist local educational agencies, through grants and technical assistance provided by the Department of Energy and the State energy offices, in school renovation and construction projects that are energy-efficient and environmentally sound.
A number of other provisions in the bill facilitate greater energy efficiency in public housing.
The bill also pursues energy efficiency outside of government programs.
Industrial energy efficiency
Energy use in the industrial sector accounts for almost 40 percent of U.S. energy consumption. There is substantial potential for cost-effective improvement in both energy intensive and non-energy intensive industries.
This legislation would authorize the DOE to enter into voluntary agreements with industrial firms or groups to reduce the amount of energy they consume per unit of production by 25 percent over 10 years. Widespread adoption of these voluntary agreements could reduce primary energy use in the sector by about 11 percent in 2010 (4.2 quads) and 16 percent (6.9 quads) in 2020. About 40 percent of the savings would come from reduced demand for electricity with smaller portions from lessened use of fossil fuels. The companies that participate in this program will benefit from additional R&D support through the DOE, and recognition of their efforts in energy efficiency, in addition to the real bottom-line benefits of cutting the energy required to produce a given unit of output.
Commercial and consumer products
For commercial and consumer products, the new efficiency standards in our bill will save almost 9 quadrillion BTUs of energy over a 10 year period, according to estimates provided by the American Council for an Energy Efficient Economy. This is almost double the amount of savings that would be achieved by the comparable provisions in the House energy bill--H.R. 4.
Some of those additional savings (0.8 quads) are attributable to enacting the efficiency standard for central air conditioners and heat pumps issued by the Clinton administration in January 2001. That standard would have increased the current minimum efficiency of air conditioners by 30 percent. The current administration revoked the standard and has proposed one that would require only a 20 percent increase in efficiency. The Committee on Energy and Natural Resources held hearings on this topic. The record before the committee has persuaded me that the Administration based its decision on economic information that was outdated and inaccurate. A higher efficiency rating for central air conditioning units can do a lot to help avoid summer blackouts and brownouts when high temperatures send electricity demand soaring. Last August, we experienced an intense nationwide heat wave. During that heat wave, peak demand from air conditioning did, in fact, lead to problems in electricity availability in some parts of the country, while others were uncomfortably close to the margin. We need to build more efficiency into this part of our system over the long term. A higher efficiency standard for large air conditioning units will help.
This bill also authorizes DOE to develop standards for other commercial products through rulemakings. The legislation directs the Secretary of Energy to develop efficiency standards for vending machines, for commercial refrigerators and freezers, and commercial unit heaters. The potential energy savings in these products range from 25 to 55 percent, with paybacks of 2 to 3 years.
For three products--exit signs, torchiere lights and distribution transformers--consensus efficiency standards have been included in the legislation. Energy use in exit signs will be reduced by 90 percent through the use of "light emitting diode" lights instead of incandescent bulbs. Torchiere lights that use compact fluorescent bulbs instead of halogen bulbs will use 66 percent less energy as well as reduce fire hazards. Distribution transformers are used in many commercial and industrial buildings to reduce electricity voltage to levels used within buildings. The standards adopted in this legislation will reduce the energy losses associated with this equipment by an average of 33 percent.
The Senate bill also addresses the issue of "standby power." Many types of electronic equipment used in our homes--such as VCRs, TVs, microwave ovens, computers and products with rechargeable batteries--consume small amounts of power even when they are turned off.
President Bush brought the standby power issue to the forefront last summer when he dubbed these products "energy vampires" that use about 4 percent of the electricity in the average home. Secretary Abraham was named chief vampire slayer and the House adopted an efficiency standard of 1 watt for all standby power devices in H.R. 4. The House provision, though, was unworkable, and was opposed by all of the affected manufacturers. One watt is a very small amount of power–one traditional light bulb on a Christmas tree requires over 7 times as much energy to operate.
We have worked with a broad coalition of manufacturers and with efficiency advocates to develop an improved provision on standby power. This provision would call for a DOE rulemaking to develop efficiency standards on battery chargers and external power and an examination of the many other products that use standby power. That examination will determine whether the potential energy savings would justify the development of efficiency standards for these other products.
Energy efficiency research and development
The above efforts to promote more energy efficiency in vehicles, industry, housing, and appliances are supported in this bill by a strong increase in research and development spending related to energy efficiency. The funding increase–from $810 million in fiscal year 2003 to just over $1 billion in FY 2006–will support efficiency progress across a broad spectrum.
One particularly exciting R&D opportunity that is being funded in this part of the bill is a program called the "Next Generation Lighting Initiative." In contrast to a grant program with the same name in the House bill, the Senate provision establishes a government-industry partnership to develop the technology for semiconductor-based lighting that would be ultra-efficient. The model for this partnership is the SEMATECH consortium, which boosted our national competitiveness in semiconductor manufacture in the 1980s and 1990s.
Current lighting technology wastes much of the energy going into the bulb in the form of heat. That is one reason why it feels so hot under the klieg lights. But light-emitting diodes create light with very little energy loss. The only problem is that we don’t know how to commercially manufacture low-cost and reliable light-emitting diodes that produce white light. Yet, there are a lot of good ideas for doing so out there. The Next Generation Lighting Initiative, then, will try to develop long-lasting, cost-competitive, white lights from diodes by 2011.
All the major elements of the U.S. lighting industry are supporting this effort in the Senate bill. The rationale for their interest, and for a government-industry partnership, is clear. Lighting represents 20 to 30 percent of all U.S. electricity use, but the best current systems are only about 25 percent efficient. There is an enormous societal benefit in making lighting more efficient in terms of lower electricity demand. Also, the first company or companies to mass-produce affordable high-brightness white semiconductor lighting could capture an estimated $12 billion worldwide market for illumination lighting. I think we would want those companies to be based in the United States.
Energy efficiency assistance programs
The final major topic related to energy use and efficiency in the bill involves a number of important programs to help working families. One of these is the Low Income Home Energy Assistance Program (or LIHEAP) and the other is the Weatherization Assistance Program. The necessity of adequately funding these programs was painfully evident across the country last winter as millions of families struggled to pay their energy costs. Although a record $2.25 billion in LIHEAP funds were released in FY2000, many households faced this winter’s heating season with unpaid bills from last winter. Funding for this program should be well over $2 billion annually.
The Weatherization Assistance Program provides financial and technical assistance to increase the energy efficiency of dwellings owned or occupied by low-income persons. Over 5 million homes have been "weatherized" since the program was created in 1979, but this represents only 17 percent of the 29 million eligible households. Clearly, more can and should be done.
In addition to these two programs, this bill would establish a pilot program of small grants to community development corporations. Those grants would provide energy-related economic development assistance to low-income communities in both rural and urban areas. Such communities would not otherwise be able to attract the private capital to invest in energy efficiency or alternative energy technologies.
Reducing adverse effects of energy on the environment
The third overarching goal of this bill is to balance energy policy with other important societal considerations.
Energy production and use comes associated with a host of consequences for our environment. Striking the right balance among energy, environment, and the economy has been a long-standing concern in the Senate and in society.
This bill addresses these issues in a number of ways. Several provisions in the bill deal with the legacy of past problems posed by energy production and use for the environment. These include programs to clean up orphaned and abandoned oil and gas wells, and to develop research to remediate groundwater supplies damaged by past energy activities.
Another way in which the bill addresses this connection is by developing and adopting new energy technologies with better environmental performance. Many of these programs have already been described in this statement.
Finally, there is the need to anticipate and prevent future problems growing out of the impact of energy on the environment. Probably the most important future problem for us to consider is global climate change from increased concentrations of greenhouse gases in the atmosphere. The reason that this topic is so closely related to energy is that the two most prominent greenhouse gases–carbon dioxide and methane–are largely released due to energy production and use. In the United States, 98 percent of CO2 emissions are energy-related. Every study of how to mitigate the possibility of global change comes up with a list of policy measures that relies heavily on increased energy efficiency and new energy production technologies with lower greenhouse gas emissions.
Because of this intimate connection, much of energy policy and much of climate change policy is interlinked. To do one is, by implication, to do the other. And to ignore one while doing the other is to risk unfortunate and unintended consequences.
For this reason, this bill has numerous provisions to ensure that we integrate climate change strategy with energy policy; that we develop better climate science; that we focus on breakthrough energy technologies with better environmental performance; and that the United States take the lead in exporting the clean energy technologies we develop.
Some of these provisions have already been discussed in connection with topics such as energy efficiency. Those programs and policies in the bill are going to deliver significant benefits in terms of reduced emissions of carbon dioxide. For example, the industrial energy efficiency provisions in this bill are estimated to reduce CO2 emissions by up to 71 million metric tons by 2010 and 95 million metric tons by 2020.
A number of provisions directly dealing with climate change policy, though, are drawn from a bipartisan climate change bill sponsored by Senators Robert C. Byrd and Ted Stevens that has received unanimous support in the Committee on Government Affairs.
These provisions would put in place a strategic plan based on the following four key elements –
first, as a basis for policy development, an examination of approaches both by the United States and other countries that would ultimately culminate in the long-term goal of the stabilization of greenhouse gas concentrations;
second, a national commitment to develop the next generation of bold, breakthrough energy technologies;
third, expanded research into adaptation and hazards mitigation work; and
fourth, expanded research to help resolve the remaining scientific and economic uncertainties.
We need a strategic plan for climate change that can get buy-in from both Congress and the Administration. Just before our President’s Day recess, the President announced a new climate change policy framework based on reducing the greenhouse gas emission intensity of the U.S. economy. Emission intensity is defined as the output of greenhouse gases divided by the gross domestic product. The President announced that his plan would decrease emission intensity by 18 percent by 2012. That sounds impressive until you look at the data in this chart. [CHART]
The black line shows how greenhouse gas emissions intensity has been declining through the 1990s. Greenhouse gas intensity has been declining because the part of the economy that has been growing fastest is the service sector, which produces fewer greenhouse gas emissions than the manufacturing sector.
The red line shows what the President claims his proposals would do. The green line shows what would happen if current trends were simply to continue. It is hard to see the green line in the chart, because it is almost completely covered by the red line. Simply put, the President’s proposal would not change the trend in greenhouse gas intensity over what would likely happen anyway, based on current trends.
While it is perhaps a good thing that the President has indicated an interest in having a climate change policy, a policy that doesn’t improve over what would likely happen anyway cannot be called a strategic plan. And the President’s plan was developed with little or no consultation with Congress. Had there been more transparency in the development of his climate policy, perhaps the fact that the proposed policy delivers no additional benefit over what is likely to occur anyway would have been brought home more forcefully, and influenced the policy development process.
The provisions in this bill that mandate a more open and transparent policy development process is, in my view, validated by what we have just seen. In reality, neither Congress or the Administration can go it alone in setting climate policy–they need to work together.
As important as having a good strategic plan is, a plan without the necessary administrative structure to see if it is being implemented is nothing more than a mission with goals that cannot be achieved. Therefore, the Byrd-Stevens proposal in this bill establishes several new offices, including those within the White House and the Department of Energy, that will focus our national attention and better coordinate an effort that currently seems ad hoc and scattered.
These Byrd-Stevens proposals also recognize that what we truly need is an industrial revolution to begin to solve the climate change problem. Therefore, this bill contains provisions that build on research and technology efforts already underway at the DOE by establishing an aggressive research and development effort in DOE’s new Office of Climate Change Technology. That effort will focus on developing a wide range of bold, breakthrough technologies to help reduce greenhouse gases, specifically in areas that are beyond the time-horizon now being addressed by DOE’s other technology programs.
The Byrd-Stevens proposals have been melded with climate change-related proposals from other Senate committees, including the Energy Committee, the Commerce Committee, and the Environment Committee. These include–
a major expansion in climate change science research on oceans and the atmosphere;
the development of a national database of greenhouse gas emissions from major sources; and
a strengthened focus on exporting clean energy technology to developing countries that are likely to experience major growth in greenhouse gas emissions in the next few decades.
This latter focus on opening and expanding clean energy markets, and on increasing U.S. clean energy technology exports to countries around the world, is a commonsense approach. It will simultaneously help address our energy security, economic development, and global environmental protection goals.
I believe that the climate change proposals in this bill should be broadly acceptable to most of the Senate. We are not proposing to enact unilateral, mandatory emission reductions of greenhouse gases. We are focusing on programs that will protect the environment while being highly beneficial to U.S. industry. It will make sure that our energy choices do not lead to inefficient or wasted energy investments that have to be written off prematurely because we did not consider their climate consequences. Industry needs to have certainty about the rules of the road linking energy and climate. In terms of our long-term economic prosperity, there are jobs to be created and worldwide markets to be captured in climate-friendly energy technologies of the future.
I think that there is a good chance that this part of our energy debate can bring Senators together across the aisle, and perhaps the Administration as well, in support of a comprehensive and bipartisan approach to climate change.
Strengthening our energy infrastructure security
A final area where we need to reconcile energy policy with broader social concerns is in the area of energy infrastructure security. The events of September 11 have caused many to think about the potential security vulnerabilities of our energy infrastructure. This is an area where a considerable amount of work has already been done. Particular emphasis was given to security against energy supply disruptions during Operations Desert Shield and Desert Storm in 1990-1991, in the aftermath of the western-wide electricity blackout in 1996, and during the period leading up to the Y2K transition. Yet, there is still more to be done to address long-standing challenges in energy security policy, and this bill contains several provisions relevant to the subject.
One set of relevant provisions has already been described, giving FERC authority to promulgate rules to protect the reliability of the nation’s electric grid.
Another set of provisions in the bill focuses on our nation’s Strategic Petroleum Reserve (or SPR). The SPR is our major insurance policy against a cut-off of oil from the Middle East. Since its establishment in the 1970s, the legal authority to operate the SPR has periodically expired, and sometimes bills to reauthorize the SPR have been held up in Congress as leverage on other legislation. It doesn’t make much sense to let your insurance policy lapse because you are having an argument with your neighbor about something else, so this bill permanently authorizes both the SPR and our participation in international activities to counter energy supply disruptions. This bill also requires the President to fill the SPR to its current capacity, and to study how to make it even more effective as a hedge against future supply disruptions.
The bill also clarifies the DOE’s current authorities to assist industry in responding to the increased security concerns related to the vulnerability of critical energy infrastructure. A new dedicated R&D program is created, as is a broadly based advisory committee involving all stakeholders concerned about energy infrastructure security.
R&D, technology transfer, and education as cross-cutting themes
I have described the many provisions of this bill in terms of the three overarching themes of increasing energy supply, increasing the efficiency and productivity of energy use, and coordinating energy policy with other societal goals. Throughout these discussions, I have described R&D programs that play a major role in achieving these goals. An aggressive and forward-looking R&D program on energy is the pervasive cross-cutting theme of this bill. I believe there is a broad consensus in the Senate that new science and new technology are at the core of any solution to our national energy challenges. Yet, despite the importance of energy R&D, our recent commitment to it leaves a lot to be desired. Federal energy technology R&D today is equivalent, in constant dollars, to what it was in 1966. Yet, our economy is 3 times larger today than it was in 1966. When you look at trends in Federal expenditures for R&D over the last 10 years, some startling facts stand out. [CHART]
First, while Federal R&D expenditures for health science at the NIH (blue line) and basic science at the National Science Foundation (black line) have grown during the 1990s, R&D support for energy (red line) has stagnated or even fallen, in real terms. Today, in real terms, we are still below where we were in 1990 in terms of support for energy science and technology. For FY 2002 and FY 2003, the Bush Administration has not proposed to reverse these trends. Both budget requests cut R&D for energy.
It’s hard to see how you build a 21st century energy system on stagnant, 1960's-level-of-effort R&D budgets. This bill builds these budgets in a rational way to levels that, by 2006, will give us a robust energy R&D effort to support the goals of this bill. The kind of budget growth in this bill is shown by the green line. The rate of increase is still much less than what has been proposed for the NIH, but is a measurable improvement in our energy R&D capacity. It is a realistic and responsible proposal that had broad support in the Energy Committee when this part of the bill was marked up last summer.
There are a number of related proposals to improve the overall management of our energy R&D in the bill, including a new high-level focus for these efforts in DOE, improvements in DOE’s ability to conduct technology transfer, and mandates for DOE to work more effectively with small business. There are also provisions that increase the supply and diversity of trained personnel in science and engineering that we will need if we are to meet the R&D challenges of the future.
A bipartisan approach
As we proceed with this debate, there will be areas in which we reach bipartisan agreement and areas in which we will differ substantially. In the latter areas, we will have to make a choice between alternatives.
With respect to the areas of bipartisan agreement, I am pleased with the support that we have received from the Administration for our position that electricity is an integral part of any energy bill. We may differ on a number of the details, but the President an the Department of Energy have made clear their interest in working on a bipartisan basis to get electricity provisions that increase renewable sources of electricity, protect consumers, and promote a reliable and effective transmission grid.
The Administration has also supported our initiative to promote the construction of the Arctic Natural Gas Pipeline.
There are also some important differences between where we are starting in this bill and the Administration’s positions. Perhaps the most reported-upon difference is on drilling in the Arctic Refuge. We will probably not get to that debate immediately, but when we do, the differences will be apparent.
We support a stronger standard for central air conditioning units, recognizing that their energy use on hot summer days are a key contributor to the threat of brownouts and blackouts. In my view, the Administration’s position to roll back the standards it found when it took office was a mistake, based on incorrect and outdated data on costs. In hearings in the Energy Committee, this point was explored in detail.
We are advocating a much stronger position on CAFE standards in this bill than the Administration is willing to step up to. We believe that there is no conflict between safety, employment, and higher fuel efficiency in cars. The myths that higher standards will lead to less safe cars, or that we will lose domestic employment if we make our cars and trucks more fuel efficient are just that–myths. The National Academy of Sciences pretty much exploded them in the report that Congress commissioned it to write on the subject.
Finally, now that we have seen the President’s proposal on climate change, we must recognize some real differences between our approach, which begin to explore concrete steps to reduce emissions, and the President’s plan, which is simply business as usual.
These are important differences that will underline at least some of our consideration of this bill. I am looking forward to the review, discussion, and debate that is starting today. This bill will take us a few weeks to complete. That is appropriate. Energy is too important to do in a rushed, half-baked fashion. The vast majority of this bill has been on the Senate Calendar since December 6, 2001. Everyone has had two months to review and study it. There are new elements with respect to CAFE standards, as well as smaller technical changes that respond to comments we have received from both sides of the aisle since December. Senators have had the just-completed recess to review these changes. I believe that this bill is a solid product that will withstand close scrutiny. And if there are problems, we will debate them and fix them.
I hope that now that we are on this bill, we will be able to come together in the Senate and with the Administration, and combine a thoughtful analysis of our current energy challenges with a willingness to take the bold policy steps needed to address them. Our country needs no less. Our national security, our future economic prosperity, and the jobs of millions of Americans will be at stake as we shape an energy policy for the 21st century.