Paul Ryan on Energy Reform

By Congressman Paul Ryan

Recent Congressional Action on Energy Legislation

Earlier this year, Congress passed H.R.1, the American Recovery Reinvestment Act. While intended as emergency legislation to stem the economic crisis, this bill also contained a significant number of misguided energy provisions. Instead of overhauling the outdated and inefficient energy policies of the 20th century, a piecemeal approach will do little to address the systemic problem that is directly affecting families. The economic well-being of the United States and the livelihood and safety of our citizens is largely dependent on maintaining a strong energy supply. We depend on electricity to light our homes and businesses, natural gas to heat them, and gasoline to operate the cars and trucks that carry us to work and transport our goods.

Unfortunately, the U.S. House of Representatives has continued to take the wrong approach in achieving our shared objectives of meaningful reform to our nation’s energy policies. In the 110th Congress, the House has passed legislation, including H.R. 6, H.R. 2776, and H.R. 3221, which mandate energy standards and create a plethora of new government programs ripe for waste and abuse. These bills also fail to consider the feasibility and costs of such mandates, and increase our reliance on foreign energy sources instead of addressing oil and gas production here at home.

The energy provisions contained in the American Recovery Reinvestment Act expand on these flawed policies. At a time when Americans are facing harsh economic conditions and stretching each dollar as far as it can go, H.R. 1 does nothing to address high energy costs. Congress must move quickly and bring energy legislation to the floor. This legislation should allow America to invest in its own natural resources instead of sending more than $1.5 billion a day overseas to hostile countries. This legislation should reduce bureaucratic red tape and open up areas such as the Outer Continental Shelf (OCS) for oil and gas exploration. This legislation should promote the development of alternative sources of energy such as oil shale, hydrogen, coal-to-liquid, and nuclear power. And, just as importantly, this legislation should aim to build a framework for reducing our reliance on fossil fuels and encourage the adoption of clean and renewable energies.

H.R. 1 also imposes $1.8 billion of new fees on non-producing Gulf of Mexico leases, and requires retroactive lease payments back to October 1, 2007 on certain leases. The bill would raise taxes on oil and gas companies engaged in domestic energy production by nearly $13.9 billion over 10 years, all to provide tax breaks to favored energy projects and products. By raising costs on domestic production, this bill would limit efforts to expand U.S. energy supplies, ensuring continued dependence on foreign oil and keeping energy prices high for American families. The bill also limits the use of foreign tax credits on the international operations of oil and gas companies, which pushes the overall tax hike in the bill up to $17.7 billion. Unfortunately, these costs will be passed directly onto consumers in the form of higher energy costs. At a time when we are facing arguably the greatest economic crisis of our generation, I believe it is irresponsible to push tax increases on the American public and put jobs at risk.

A Long Term Solution for Energy Independence

Any national energy proposal must take a three-pronged approach focused on increasing American-made energy, reforming outdated fuel regulations, and investing in alternative energy sources.

More Production

To address this problem, Congress should support efforts that would open up the resources available to America in the Outer Continental Shelf. On December 15, 2006, Congress passed a comprehensive package that included a measure to allow oil and natural gas exploration in two specific areas of the Gulf of Mexico. I voted in favor of this measure and was glad to see this provision pass into law on December 20, 2006.

Next, I support Arctic National Wildlife Refuge (ANWR) oil exploration because it will significantly increase the domestic supply of oil in the United States. Our society continues to demand more gasoline, but we have not increased our domestic supply of crude oil and are forced to import more and more to meet our needs. Currently, we import approximately two-thirds of the crude oil that we use and are expected to import 80% by 2020. This dynamic poses a threat to our national security and our economy. It leaves the price of gasoline in the U.S. subject to the actions of the Organization of Petroleum Exporting Countries (OPEC) and the political conditions in countries like Iraq, Saudi Arabia, and Venezuela. It also forces individuals to pay more for the gasoline that they rely on to go about their daily lives and makes our businesses less competitive by making it more expensive for them to produce and transport their goods to consumers.

Importantly, only 2,000 of the 19.6 million acres in ANWR would be affected. This represents only 0.01% of the total ANWR acreage. To further illustrate, ANWR is approximately the size of South Carolina, whereas the total footprint for oil production at ANWR is equal to the size of Milwaukee’s Mitchell International Airport. As a strong supporter of wildlife and land conservation, I would not support exploration in ANWR if it would carelessly or permanently damage excessive areas of the arctic tundra. Thanks to new technology that minimizes the environmental impact of this drilling; we can take steps to ensure that the ANWR region remains environmentally sound while providing relief to consumers.

More Refineries

Congress must also reform our regulatory regime to allow for new refineries to be built in the U.S. We have not built any new refineries since 1976. At that time, our country was only using a handful of blends of gasoline. Now, we are attempting to refine four dozen blends of gasoline in a system designed to only produce a few. This has imposed substantial constraints on our ability to refine the gasoline that we use on a daily basis and has forced us to import more and more of the gasoline that we use. Furthermore, adding new refineries to the market will lead to greater competition and help place downward pressure on prices.

During the 110th Congress, I cosponsored H.R. 6165, the Refinery Permit Process Schedule Act. This legislation would take multiple steps to cut down on the bureaucratic requirements that have prevented the establishment of new refineries. Additionally, this bill would have instructed the President to designate at least three closed military installations as potentially suitable for the construction of a refinery. This innovative attempt to employ untapped resources to provide real energy relief to consumers is an example of sound energy policy that is necessary to lower gasoline prices. Unfortunately, this legislation was never brought before the House for a vote and Congress failed to address this important issue. Congress must make another attempt to address this issue during the 111th Congress, because our limited refinery capacity is a large factor in the high cost of gasoline.

Boutique Fuels

In addition to problems with supply, we pay more for gasoline because of an outdated reformulated gasoline policy that requires different areas of the country to use different blends of fuel to meet environmental requirements. This fragmented system results in the under-production of certain blends and allows refineries to charge more for the unique boutique fuels that they produce due to a lack of competition in the marketplace. The use of boutique fuels also causes price spikes any time that there is a supply disruption, such as a refinery fire or pipeline break, because there are few refineries that can make the special blend to cover the loss in capacity. Furthermore, areas like Southeastern Wisconsin that are required to use different fuels during the winter and summer months experience price spikes when the transition between fuel types is made.

I have been working hard to help address the boutique fuels problem since 2001. During 2005, I was able to make significant progress on this issue when legislation that I authored that capped the total number of fuels that are used in the U.S. and allowed for fuel waivers to be provided in the case of supply emergencies such as Hurricane Katrina was signed into law by the President.

During the 110th Congress I again acted on addressing this problem by introducing H.R. 2493. This bill addressed the proliferation of specialized “boutique” fuels to prevent further fragmentation of America’s gasoline supply. This bill aimed to reduce our fuel blends to a small, manageable number of blends so that gasoline supplies are much more stable. Unfortunately, my legislation experienced opposition from the oil industry and oil state legislators. I will continue fighting this opposition so we can bring common sense to our fuel distribution system, which will help lower prices and prevent future price spikes.

Alternative Energy

From a long-term perspective, the Congress must also support the development of alternative fuel vehicles. American automakers have already made strides in this area with the production of cars and trucks that run on ethanol, electricity, hydrogen and natural gas. We must encourage this type of behavior to continue so that Americans can continue to enjoy the freedom of owning automobiles without contributing to our increasing demand for crude oil. Equally important, this course of action will also have many positive benefits for our environment. That is why I have supported proposals that would require the Environmental Protection Agency (EPA) to implement research programs that would make biofuels more compatible with petroleum-based fuels. While the House passed legislation like this during the 110th Congress, the Senate failed to take action. I look forward to working with my colleagues in the 111th Congress to make this issue a central part of energy reform discussions.

Conservation

We must also affect the demand side of increasing gasoline prices. I believe that energy conservation and responsible fuel efficiency improvements can go hand in hand with our efforts to expand our economy. Initiatives such as requiring efficiency improvements on vehicles using a class-by-class basis, rather a company-by-company basis, are proposals that can help reduce the demand for gasoline while not undermining U.S. auto manufacturers. It is my hope that Congress will pass legislation that will reduce energy consumption in an efficient manner, protecting both industry and ensuring lower energy prices for consumers.

Congressman Paul Ryan serves Wisconsin’s 1st Congressional District. To contact him by phone in Washington, D.C., call (202) 225-3031. Or visit Paul Ryan at www.house.gov/ryan

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