Proposals Aim to Deal with Rising Energy Costs

May 6, 2008

Domestic Energy Production Act (S. 2958)

• Authorize drilling in the Artic National Wildlife Refuge (ANWR);
• Allow states to petition for the lifting of federal moratoriums on offshore oil drilling on the Outer Continental Shelf;
• Suspend oil deliveries to the Strategic Petroleum Reserve until gas prices fall;
• Mandate six billion gallons of transportation fuel be produced from coal-to-liquid technology by 2022;
• Repeal the one-year moratorium on funding leases sales for oil shale exploration in the West;
• Grant the Environmental Protection Agency (EPA) the authority to accept consolidated application for permits to construct and operate new refineries;
• Repeal the recently-increased $4,000 fee that producers must pay for applications for drilling permits; and
• Repeal a section of last year’s energy legislation that prohibited federal agencies form using alternative fuels with higher lifecycle greenhouse gas emissions than conventional fuels.

  Senate Democrats were not quick to embrace the proposal. Senate Majority Leader Harry Reid (D-Nev.) said, “Their only answer is to drill for more fossil fuels and drill deeper into Americans’ pockets to line those of Big Oil.” Senate Committee on Energy and Natural Resources Chairman Jeff Bingaman (D-N.M.) countered that drilling in ANWR would be of little benefit. Citing an Energy Information Administration estimate, he argued that, “The Artic Refuge would, at its peak, reduce our reliance on imports by about four percent, from 68 percent to 64 percent.” Bingaman did call on President Bush to suspend the filling of the Strategic Petroleum Reserve.

  Senate Democrats are expected to unveil their own energy package this week.

  Summer Gas Tax Suspension

  Meanwhile, two of the three senators currently running for president have unveiled their own plan to temporarily reduce gas prices: suspend the federal gas tax for three months.

  The first presidential aspirant to embrace the idea was Sen. John McCain (R-Ariz.), who proposed suspending the 18-cent federal gas tax for the summer driving season. The federal gas tax is used to finance transportation infrastructure maintenance and mass-transit projects. Sen. Hillary Clinton (D-N.Y.) also endorsed the suspension but stressed that she would push for a windfall-profits tax on oil companies to offset any benefits such a suspension would provide them to replace the revenue loss to the highway trust fund.

  The proposals have been met with nearly universal scorn. More than 230 economists—including Democrats, Republicans, advisors to several past presidents, and four Nobel laureates—sent a letter to both candidates this week, opposing the proposal.“First, research shows that waiving the gas tax would generate major profits for oil companies rather than significantly lowering prices for consumers,” they wrote. “Second, it would encourage people to keep buying costly imported oil and do nothing to encourage conservation. Third, a tax holiday would provide very little relief to families feeling squeezed.”

  Environmentalists also have criticized the proposal, saying it would undermine efforts to curb global warming by encouraging the increased use of gasoline and reducing incentives for investing in fuel-efficient vehicles and renewable fuels.

  According to an estimate by the non-partisan American Association of State Highway and Transportation Officials, the average American motorist would save approximately $28 under the plan. The group also estimated that the holiday would add $8.5 billion to a federal Highway Trust Fund shortfall.