Energy Legislation - Pick Your Poison
August 13, 2007
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
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
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
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
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.