Politics & Power; Fueling America's 21st century economic growth

Commentary by H. Sterling Burnett

Due in no small part to misinformation spread by the President's political opponents, much of the public remains largely uniformed concerning what the Bush administration hopes to accomplish with its national energy policy, and how.

In formulating its national energy plan, the administration confronted a number of sobering facts. Energy is and will remain an important factor in the American economy's growth. While for much of the 20th Century, America has enjoyed excess energy capacity in the transportation and utility sectors, this is no longer the case.

Sustained economic growth since the 1980s combined with declining domestic fuel production, an aging energy delivery infrastructure, increasing numbers of power plants reaching the end of their licensed and/or productive lives and increased federal, state and local regulatory barriers to the construction of new power plants have produced rapidly rising energy prices.

Estimates indicate that during the next 20 years, U.S. oil consumption will grow by one-third and electricity demand could increase by more than 45 percent.

It is clear that if substantial action is not taken soon, the U.S. will soon confront energy shortages the likes of which we have not seen since Jimmy Carter was President. That would be an economic catastrophe.

The administration's plan is not perfect, no plan is. However, the President's energy task force did several things right.

First, they recognized that California's energy woes were largely self-created, and that with intelligent action -- neither driven by radical environmentalists nor by calculations of the political harm from short-term price hikes -- the nation could avoid California's fate.

Second, the task force focused its efforts on promoting innovative technologies that would satisfy America's long-term energy needs while improving environmental quality. Finally, they put together a balanced, comprehensive plan that promotes energy diversity, energy production, reasonable conservation measures and that updates the energy delivery system.

Of the 105 recommendations in the 170-page plan, 42 encourage conservation and promote environmental protection, while 35 of the recommendations deal with diversifying the U.S. energy supply and modernizing our antiquated infrastructure.

The conservation and environmental proposals include, improved efficiency standards for home appliances, tax credits for improving the energy efficiency of homes and offices, $4.2 billion dollars in tax credits for purchaser's of hybrid or new fuel cell vehicles, improving the efficiency of older coal fired power plants by reducing their emissions of certain pollutants and providing increased funding for conservation and renewable energy programs out of royalties for oil and gas production on public lands.

This leads us to one of the lessons learned by the Bush energy team from California's energy predicament. California is a leader in reducing energy demand through conservation and energy efficiency. Despite their best efforts, however, California was unable to meet the energy demands of the growing Internet economy through conservation alone. Neither can the rest of the nation.

In California, no new major power plant had been brought on-line in eight years. In contrast, the Bush administration is reducing redundant regulations in order to bring between 1,300 and 1,900 new power plants on-line during the next 20 years. And because power plants require both a source of power and a way of getting the power to the consumer, the administration's plan diversifies and increases domestic energy production while upgrading the delivery system.

The supply side of the energy plan has come under sustained criticism. Some critics claim that the administration is giving away America's last wild places to Big Oil and Big Coal. Others charge that the administration is ignoring "clean" renewable sources of energy. Neither claim is true.

Coal is a plentiful and relatively inexpensive source of electricity. Accordingly, coal is burned to generate more than 50 percent of the electricity used in the U.S. Almost every energy expert not aligned with an environmental lobbying group argues that it will continue to be a major source of energy in the future.

With this in mind, the Bush administration has requested $2 billion in tax credits for clean coal technologies. This is hardly a "give away" to coal producers or utilities since they can only claim the credit if they use technologies that will reduce pollution from coal-fired power plants.

Although I am not a fan of tax policy being used to socially engineer the economy in general or people's energy choices in particular, one could hardly say that this policy trades-off energy production at the expense of the environment.

Concerning oil and gas production, there are no tax credits for oil or gas production in the Bush plan. The administration does, however, wish to open some additional public lands -- including a small area in the coastal plain of the Alaskan National Wildlife Refuge -- to oil and gas production and delivery. From the outraged response of environmentalists, you would think Bush had proposed using the Grand Canyon as a landfill.

Oil drilling on 2,000 acres of ANWR's 19 million acres would not destroy the United States' last wild place. This country has nearly 100 million acres of designated or de facto wilderness. All of this land is off-limits to energy production.

In addition, there is no reason for thinking that oil production and a pristine environment are incompatible. As with the rest of the economy, technology has improved in the oil patch. Just ask the Audubon society, which allows oil and gas production on several of its most important and unique nature preserves.

Oil accidents do happen, but they are relatively uncommon and they do not cause irreparable harm. As environmentally harmful as the Exxon Valdez spill was, fewer birds were killed by that accident than are killed every year by the wind turbines driving California's much touted wind energy farms.

There are substantial incentives for renewable energy production and use in the energy plan. For instance, the plan extends for 10 years tax credits of 15 percent for the production of energy from wild power and biomass resources. In addition, it provides tax credits for the purchase of residential solar energy systems and for the capture and production of energy from the methane gas produced at landfills.

A large part of the energy and gasoline price spikes that consumers currently face is caused by an outdated energy delivery system. Environmental activists shouting "not-in-my-backyard" have ensured that no new refineries have been built in the U.S. in over a decade, that the nation's natural gas pipeline system is more than 20 years old and that its electricity transmission system is as much as 50 years old.

While the high prices of gasoline are encouraging the construction of some refining capacity, the Bush energy plan would speed up the process by reducing redundant federal, state and local environmental reporting requirements. And, the administration is asking that federal energy agencies be granted eminent domain powers when necessary to seize private property for pipelines and transmission wires.

The Administration's proposed energy policy will go through significant revisions in Congress. Politics is the art of compromise. In the end, some of the more controversial proposals, like opening more public lands to oil and gas production and granting federal agencies the power to take property, will likely be limited or stripped from the bill entirely. One can only hope that Congress will work with the White House to produce as farsighted a national energy policy as that developed by the Bush Energy Task Force.