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Energy Legislation - Pick Your Poison

August 13, 2007
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In June, the Senate passed an energy bill. This month, the House of Representatives followed with its own energy legislation. This points to a conference committee in order to hammer out differences. We'd all be better off, however, if Congress just dropped the matter altogether.

Small businesses and consumers, of course, are seeking positive policy changes that help to make energy more affordable and supplies more reliable. Unfortunately, both legislative measures do the exact opposite. And it looks like a conference committee would mean taking two pieces of bad legislation and combining them into something even worse.

So, in the face of high energy costs, Congress is playing a misguided game of “pick your poison” that will push energy costs even higher.

Neither bill includes measures to reduce the governmental obstacles that oil and gas companies face in terms of exploration, development, and production. In fact, the House bill would actually jack up those costs due to tax increases totaling an estimated $16 billion over 10 years.

Higher taxes obviously are not the way to boost domestic energy production. Yet, this is what the House has proposed.

The House version also would impose a federal renewable energy mandate of 15 percent on electric utilities. That is, according to The Wall Street Journal, the House “would require electric utilities, which rely heavily on coal, to generate 15 percent of their power from renewable energy sources such as solar and wind power,” with new hydroelectric plants counting toward the target, “but not necessarily existing hydroelectric plants.” Renewables now account for between 3 percent and 6 percent, so an increase to 15 percent would be a massive shift in energy production.

Given that renewables like solar and wind are more costly than fossil fuel-based energy, small businesses and consumers will face higher electricity costs.

The news at the gas pump is no better. The Senate mandates a seven-fold increase by 2022 in the use of ethanol to replace gasoline. Whenever the government chooses to overrule decisions made in the market with its own dictates, costs inevitably rise. Taxpayers will fork over more in subsidies for the ethanol industry.

Indeed, both bills jack up already sizeable subsidies to seemingly every renewable energy effort in existence. Some critics have labeled this as “green pork,” and they are absolutely correct.

The costs of vehicles promise to increase as well. For example, the Senate would increase CAFE standards by roughly 40 percent by 2020 for cars, SUVs, and light trucks. That means higher sticker prices, as well as higher costs on the road in terms of more injuries and deaths as smaller and lighter vehicles that meet CAFE requirements are far less safe.

Meanwhile, the House also would eliminate the tax deduction for small businesses buying large SUVs, and the Senate would require that half of all cars manufactured by 2015 be equipped to run on E-85.

Again, when politics trumps economics, costs increase.

Republican critics in the House, according to Reuters, labeled the House bill as the “no-energy bill.” The Associated Press quoted Rep. Ralph Hall (R-Texas) observing: “There's a war going on against energy from fossil fuels. I can't understand the pure venom felt against the oil and gas industry.” It is hard to disagree with such sentiments. In fact, one could add that the venom extends to automakers as well.

It is simply bewildering that Congress would advance legislation seemingly designed to hurt U.S. energy and automobile companies. Of course, such attacks are accompanied by extensive collateral damage. U.S. consumers suffer. Small businesses - as both consumers and suppliers - are injured too.

Fortunately, the White House has threatened to veto any energy bill that reaches the president’s desk if it fails to address energy security and high energy costs, and if it harms the oil and gas industry. Well, it is clear that both the House and Senate have passed legislation worthy of a veto. In fact, if the lowlights from each measure are combined in conference, this could add up to the worst piece of energy legislation ever passed. A veto by President Bush is not just an option; it is a necessity.

Publication date: 08/13/2007  

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