Bingaman Keynote: North American Energy Summit

April 19, 2004
10:30 AM
Influential policymakers from three countries are gathered in New Mexico this week for the North American Energy Summit. Sponsored by the Western Governors’ Association, the three-day meeting has drawn together government leaders, energy experts and other interested parties to explore ways to ensure a secure, affordable and environmentally responsible energy future for the continent. Sen. Jeff Bingaman, top Democrat on the Senate Energy Committee, was a featured speaker today: North American Energy Summit
Sen. Jeff Bingaman
April 15, 2004
I am here this morning to provide my perspectives on North American Energy Policy. The daily news in the United States over the past month have featured stories on high gasoline and natural gas prices, as well as concerns about the reliability of our electricity system. These stories share some commonalities. They illustrate the fact that the United States has run out of excess capacity margins in its energy system. This development was not unforeseen. Before the introduction of competition into energy markets in the 1980s and 1990s, we had national policies that resulted in large excess capacity margins across the board. Consumers paid a lot for that past excess capacity, and it resulted in substantial inefficiency in the energy system. Competitive forces were introduced, by design, into the energy system in the United States and other countries as a way of using the marketplace to bring greater efficiencies. But we were living during the 1990s on borrowed time, as far as energy policy was concerned. As the economic growth of the last decade used up that excess capacity in the fuels, power, and natural gas sectors, the frictions and imperfections in those markets became more apparent. One illustration of that development was the California electricity crisis of 2000 and 2001. When electricity was in plentiful supply in the West, the flaws in the design of the California electricity system – specifically the discouragement of long-term contracts and the near-total reliance on the spot market to set electricity prices – were not so apparent. But when electricity suddenly became more scarce in 2000, due to unusually dry weather and increased demand in other Western States, these market flaws came to the forefront. The result was very high prices for electricity and extraordinary financial stress on both California's regulated utilities and their customers. Shortly after President George W. Bush first took office in 2001, he commissioned Vice President Cheney to lead a task force to develop an improved national energy policy. In the energy policy plan issued by President Bush in May of 2001, his Administration laid out a series of goals and objectives that I thought made a lot of sense in terms of a proactive energy policy. Some of the themes he hit were very similar to conclusions reached in previous Presidential Energy Strategies. Other recommendations mirrored recommendations reached by a number of individual States, including Western States represented in this room, that have formulated and adopted their own official energy policies over the past several years. The President's proposal, though, came to Congress in a very generic fashion, and without any legislative specifics. The proposal was also weakened by method used to develop it. To this day, public interest groups are still fighting in court to find out whom the Cheney Task Force actually met with. That was, and that remains, an unnecessary and self-inflicted handicap to developing a national policy. To my mind, the key question in April of 2004 is how we can move forward from where we are today. How can we get something useful done in terms of national energy legislation this year? I think that can happen, if we are willing to take energy legislation in more manageable bites. We just don’t have the time, this year, to go through the process you would need to re-construct a bipartisan consensus on a broad, comprehensive bill. But there are many elements of energy legislation that are, by themselves, broadly supported on a bipartisan basis. This is because they have been extensively worked out in the past. Since early this year, I have been advocating taking these worked-out pieces and moving them forward to President Bush’s desk for signature. A case in point where Congress can act easily is with respect to energy tax provisions. I am a member of the Senate Finance Committee. For two Congresses in a row now, the Senate Finance Committee has crafted a bipartisan package of energy tax incentives. I have been part of that process in both Congresses. The bipartisan Senate consensus on energy tax incentives balances measures for additional energy production, additional energy efficiency, and modernization of energy infrastructure. It contains many provisions encouraging energy production here in the West. Along with several colleagues, I have been advocating for a few months now that we add those provisions to one of the other tax bills going through the Senate this year. Last week, the Senate agreed to do just that. Last Thursday night, the Senate unanimously added the bipartisan energy tax package I have been supporting to what is probably the last major tax bill Congress will pass this year. When the Senate returns after this next recess, it will first deal with a bill on asbestos liability, and then come back to this important tax bill and complete action on it. I think it is a great accomplishment that we have gotten these crucial energy tax incentives out of the line of fire that has bogged down the bigger comprehensive energy bill. Another case in point where Congress can and should act expeditiously is electricity reliability legislation. In the United States, we lack mandatory rules enforcing the reliability of our interstate electric transmission system. We have known for a long time that this is a crucial gap that needed to be filled. In the 106th Congress, I worked with then-Chairman Frank Murkowski to craft the first comprehensive electricity reliability bill. Governor Murkowski deserves credit for taking that issue on and moving it through the Senate. The Senate passed that bill unanimously on June 30, 2000. This reliability language has since been streamlined somewhat, and has passed the Senate on two more occasions as part of comprehensive energy legislation. The House has also passed virtually identical language. So, at this time, we have bill language on electricity reliability that is completely non-controversial in both Houses of Congress. Last week, the U.S-Canada Power System Outage Task Force delivered its final report on the causes of the blackout of August 14, 2003. The first recommendation in that report was for the U.S. Congress to was to pass that non-controversial reliability language. My colleague, Senator Maria Cantwell of Washington State, introduced this language in the Senate last month and placed it on the Senate Calendar for action as a stand-alone bill. Twenty Senators from both parties have since joined as her co-sponsors. I think the Senate should pass a stand-alone electricity reliability bill without further delay. In fact, I think that a stand-alone bill is the only way that reliability legislation can be passed this year. I don’t think it’s wise or responsible or even realistic to use these needed reliability provisions as some sort of hostage to pass other controversial energy legislation. Both of these developments illustrate that although the situation in Congress is very complex in an election year, there are meaningful steps we can take in Congress to move towards a new, comprehensive energy policy for the nation. I think it’s important to realize that having a comprehensive energy policy does not mean that you need to do all your legislating in one bill. We are, in fact, likely to make more progress by passing smaller bills that won’t get weighed down with provisions that are expensive and ineffectual, or even counterproductive to sound energy policy. Beyond what Congress can do, there is also a great deal to be done by the Administration, using existing legal authorities. When President Bush issued his National Energy Policy Plan, 76 of the 105 recommendations required no action by Congress. They were, in essence, recommendations by the Administration to itself. A number of these recommendations have not been implemented, and it would be a good time to carry them out. Three weeks ago today, I wrote to the President with a list of 13 constructive suggestions for actions the Administration can take in the short- to medium-term to address high gasoline and natural gas prices. I hope the Administration responds to my suggestions and uses its existing authorities more robustly. A case in point that I raised in my letter is the issue of so-called boutique fuels. The U.S. gasoline infrastructure is overwhelmed with over 110 formulations of gasoline required by different localities, as part of their State implementation plans under the Clean Air Act. These mandates for "boutique" fuels periodically result in regional price spikes to consumers when the region-specific fuel is in short supply. There is no essential reason why we can’t get by with a far smaller number of formulations. This is an area where cooperative action by the States, in conjunction with the EPA, could pay real dividends to consumers. I am urging the Administration to take the lead with the States to work on this problem. Another recommendation in my letter, which tries to put more meat on a topic raised in the Bush energy plan, deals with the need for more refining capacity in the United States. This is also a problem calling for close cooperation between Federal and State authorities. The Department of Energy has put a lot of effort into trying to streamline permitting and regulation in another energy area – nuclear power. I think that a similar initiative focused on refineries, again in cooperation with the States, could be very beneficial to the nation. There are also a lot of cross-border issues in energy that we need to focus on. The United States depends on Canada for significant amounts of its natural gas. We need to find a cooperative way to move stranded natural gas in the Mackenzie Valley and the North Slope of Alaska into commerce. These two sources are not mutually exclusive with each other, nor are they really in competition with natural gas we produce here in New Mexico and throughout the West. The reality is that there is a strong and growing market nationwide for all these sources of natural gas. I believe that our national policies in the United States should be to work hard to meet our future demand from these sources on the North American continent, and not from liquified natural gas imported from politically unstable countries. There are other important policies we can implement to increasing the diversity of our energy supplies. We must push forward R&D on ultra-clean ways to burn coal, and R&D on a new generation of safe nuclear power plants. Increasing supply diversity also means that we should tap into opportunities for distributed generation, such as combined heat and power at industrial facilities. Along with these steps, we must also make a greater push to introduce renewable energy technologies for electricity generation. Some of these technologies, such as wind power, are already cost-competitive. But in order to see widespread exploitation of these opportunities, both financial and regulatory incentives will be needed. That means both a meaningful production tax credit for renewable energy and a flexible renewable portfolio standard for electric utilities. Both measures are essential, in my view, in order to give enough certainty to the fledgling market to allow economies of scale to drive down costs and improve manufacturing capacity for renewable energy equipment in the United States. Some of the States represented here today already have their own renewable portfolio standards. But to make these markets more robust, and to make sure there is a level playing field all around, I have been a strong champion for a Federal standard that would be flexible enough to allow each State to specialize in the renewable sources it has in greatest abundance. Most of what I have talked about so far deals with increasing our energy supplies. We also need to increase the efficiency with which we use energy in the United States. While the U.S. has made a lot of progress since the 1970s in improving energy efficiency economy-wide, there is still much more that we can do. If we are serious about reducing our dependence on foreign oil, we have to address our ever-increasing national consumption of oil in the transportation sector. Greater vehicle fuel efficiency is clearly in the national interest. According to a study Congress commissioned from the National Academy of Sciences, we now have the technology to realize significant gains in fuel efficiency without sacrificing safety or passenger comfort. All that we lack is the national will to make this a priority. That will was not on display in the last Congress, or in this one. Greater fuel efficiency is an answer to another energy problem that is brewing. We are pretty close to the capacity limits of our present system of refineries and gasoline pipelines. Refineries and pipelines are notoriously hard to site – we have not built a new petroleum refinery in this country in decades, and there are real limits to how much further we can add on to the existing ones. Unless we want to greatly add to the siting pressures we already have related to energy infrastructure, or unless we want to start importing much more refined gasoline than we now do, we need to push for more efficient use of the gasoline we already consume. Energy efficiency is also a key element in maintaining a reliable and affordable system of electricity generation and transmission. We can reduce the pressure on our electric power grid and natural gas infrastructure by taking common-sense steps to improve the efficiency of end-use of energy in buildings, appliances, and industry. I believe enormous savings are possible in the next decade from increased efficiency in lighting from the introduction of solid-state lighting. Energy efficient lighting, appliances, and buildings also generate benefits in terms of emission reductions and human health improvements, making them even more attractive as part of a comprehensive energy policy. Our national commitment to increasing energy supply and increasing energy efficiency must involve a long-term commitment to the development of new energy technologies. A robust commitment to a coordinated, comprehensive research and development program is essential if we are to meet the challenges that lie before us. If there is one deficiency I can point to on the part of the Administration and the Congress, it is the lack of attention to the importance of science and technology in general, and of energy R&D in particular. 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. It’s hard to see how you build a 21st century energy system on 1960's-level-of-effort R&D budgets. The United States needs to do better, and I believe that there is something the United States can learn from efforts in Canada to improve science and technology infrastructure through the Canada Foundation for Innovation. A final imperative for national energy policy and legislation has be to recognize the ways in which energy use, and energy policy, is intertwined with the topic of climate change. Climate change is so closely related to energy policy because 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. I’m very pleased that one of the keynote speakers at this Summit is Dr. Mario Molina, who has been a leader both in global environmental R&D, and in efforts to improve urban air quality in Mexico City. Improving both the global environment and the environment in major cities has to be a key element of any energy policy for the 21st century. None of the issues I have described this morning are inherently partisan. The reality is that most of the disagreement we have in Congress on energy breaks on regional lines, not party lines. As was demonstrated by the strong bipartisan vote we had on the Senate energy bill in the last Congress, and the unanimous adoption of energy tax incentives last week in the Senate, there is much that Democrats and Republicans can agree on. While we have not reached bipartisan agreement on every energy issue in the old 1200-page energy bill that stalled in Congress, we certainly have bipartisan agreement on more specific issues. I hope that this Summit can help expand the list of areas where agreement can be reached and lead to effective action in States and at the national level. If it does, we will have made real progress towards a strong and balanced energy policy that can benefit the entire North American continent.

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