Hearings and Business Meetings
SD-366 Energy Committee Hearing Room 02:30 PM
Senator Pete V. Domenici
Energy Forecast Hearing
Chairman Domenici -- Opening Statement
For the past 3 years as the Chairman of this Committee, I have observed the level of concern about energy issues go up as prices have gone up.
It is definitely right that our concern should rise when American consumers are paying more for home energy and transportation, but I do want us to all keep in mind that the economy is strong. We need to take steps to ensure that energy prices do NOT change that fact. The first step we took was signed into law in August 2005.
I am very proud of the bipartisan efforts that resulted in the 74 to 26 vote for passage of the Energy Policy Act of 2005. Working together, the Republicans and Democrats crafted an energy policy with a long-term vision of achieving greater energy security.
The Energy Bill contains a number of requirements across the energy spectrum that will help us achieve energy security. Some examples are provisions that:
• promote advanced technologies, like Integrated Gasification Combined Cycle – IGCC – for coal, and renewable resources, like wind power, which is expected to add 2,500 megawatts this year and reach 14,000 megawatts in 2007 due in part to the Energy Bill’s production tax credit;
• significantly increase the use of domestically produced biofuels through programs such as the establishment of an historic renewable fuels program that will achieve 7.5 billion gallons by 2012 and a loan guarantee program for the world’s FIRST commercial scale cellulosic biomass ethanol plant;
• codify new efficiency standards for commercial and consumer products that are expected to reduce peak demand in 2020 by 50,000 megawatts, which is the equivalent of 80 average-sized coal fired power plants;
• encourage the deployment of clean, emission-free nuclear facilities. Since the passage of the Energy Bill, eight utility companies and consortiums across the United States have announced plans to seek permits to build around 18 new nuclear reactors that, combined, will produce at least 15 GIGAWATTS of new power in the next 15 years. If all 18 plants are built, the construction and operation of the plants would create approximately 18,000 construction jobs and 6,000 high paying, high tech jobs. I noted with great interest that EIA’s Reference Case had 9 GIGAWATTS of additional nuclear power predicted by 2020.
Given the importance of these and many other Energy Bill provisions to our energy security, it is imperative that we remain vigilant on the implementation of the Energy Policy Act of 2005. Today, for example, the EIA will tell us that they expect coal use for electricity generation to go from 50% today to 57% in 2030. Given that prediction, we must ensure clean coal provisions in the Energy Bill are fully funded and implemented. I intend to work with the Senators on this Committee, both Republican and Democrat, and the Administration to make sure that happens.
I also intend to work beyond the implementation of the Energy Bill to address a number of energy issues that we were unable to achieve political consensus on last year. Some examples of these issues are:
• achieving greater efficiency in the transportation sector;
• encouraging investment in oil shale as a way to reduce dependency on foreign resources;
• greater access to domestic oil and gas resources like Lease Sale 181 and ANWR;
• improving U.S. competitiveness in science and energy technology, as embodied in the PACE bills.
The PACE competitiveness bills that Senator Bingaman, Senator Alexander and I worked on together have received overwhelming support from a number of Senators. Every GOP member of this Committee has signed on as a Cosponsor. I expect the Senate to pass PACE legislation this year.
I also hope that this year the Senate will pass a bill Senator Bingaman and I recently introduced to access more domestic natural gas in the Lease Sale 181 area. We did this because a robust supply of domestic natural gas will benefit our economy. In the short-term, this action signals the market that more supply will be available and in the long-term it provides more domestic supply. We expect this policy to achieve lower natural gas prices and keep industrial jobs here in the United States.
The terrible natural disasters in 2005, Hurricane Katrina and Hurricane Rita, that made the lives of so many so hard also added to the nation’s energy stress because they temporarily crippled and revealed the fragile state of our energy infrastructure.
To answer all these challenges, we need to understand our current energy situation. Today, we have Administrator Guy Caruso from the Energy Information Administration to talk about the EIA’s Annual Energy Outlook.
I always look forward to hearing Mr. Caruso’s insights and am particularly interested in what he has to say about oil and coal.
The Outlook predicts oil prices in 2025 that are $21 higher than the EIA predicted last year. That is a major adjustment in the expected future price of oil and makes me wonder about the reliability of EIA predictions, especially in the out years.
Even with this major oil price adjustment of $21, EIA predicts oil in the Reference Case to be cheaper in 2025 than it is today. This morning NYMEX crude futures were trading at $58.20. EIA predicts oil will cost about $55 in today’s real terms (that is about $107 in future nominal terms) in 2025. EIA also predicts the level of petroleum imports to drop from its 2005 forecast of 68 percent in 2025 to EIA’s current forecast of 60 percent in 2025. If this is to be believed, it would be great news. EIA’s solved more problems with their assumptions of cheaper oil and lower imports than our actions.
On the coal front, EIA expects coal for electricity generation to increase from 50 percent today to 57 percent in 2030. This 7 percent increase is an astounding jump based on EIA’s expectations of coal capturing market share from natural gas and coal use for coal to liquids production grows. This is an important trend for us to understand and to promote to ensure our energy security.
I appreciate Mr. Caruso being with us today to tell about these issues and more.