Energy Policy

Updated January 2013

Background

Energy security is expected to remain a high agency priority in 2013. The ongoing political upheaval in the Middle East may lead to a rise in oil and gas prices that would impose a debilitating effect on the US economy, as it has in the past (every recession over the past 35 years has been preceded by---or occurred concurrently with---a spike in oil prices), causing increased prices at the pump as well as increased food and production costs. In addition to its security implications, our dependence on foreign oil incurs environmental damage that pollutes the air, leads to increased health risks and hastens the effects of global climate change.

AJC has long believed that the United States must set as a primary national goal a comprehensive energy policy aimed at a substantial reduction in U.S. dependence on imported oil, with the potential for energy flexibility and near independence in the longer term. Such a policy should encompass: substantial increases in vehicle fuel efficiency; reduction in wasteful energy consumption; increases in domestic supplies with appropriate attention to environmental safeguards; further diversification of foreign oil sources; and development and commercialization of alternative sources of energy and alternative vehicle technologies.

The following is an overview of major energy issues that are likely to arise during the 113th Congress.

 

Fuel Economy Standards

In the Energy Independence and Security Act of 2007, Congress increased Corporate Average Fuel Economy (CAFE) standards from 27.5 miles to 30 miles per gallon and, for the first time, made them applicable to medium-duty and heavy-duty vehicles. These new standards were first enforced in 2009 and 2010, marking the first substantial improvement to the nation's fuel economy standards in 30 years. Thereafter, in July 2011, the Obama administration reached an agreement with 13 major auto makers to raise the Corporate Average Fuel Economy (CAFE) standard for cars and light trucks to 54.5 miles per gallon by model year 2025, essentially doubling the fuel efficiency of cars that are currently on the road.

Position: AJC works to safeguard—and further increase—these standards as part of our commitment to decreasing dependence on foreign oil through enhancement of vehicular efficiency.

 

Open Fuel Standard

In order to truly be rid of U.S. dependence on foreign oil, the United States must develop alternative fuel options. Since most cars sold in America today can run only on gasoline, most consumers have no choice but to buy oil that is supplied by unstable and often unfriendly regimes. Fuel choice via flex fuel can break that monopoly. Since cars consume approximately half of the 20 million barrels of oil we consume daily, this would have the greatest impact for the least cost. As part of a broad coalition of policy makers, energy industry groups, and grassroots organizations, AJC continues to work toward passing the Open Fuel Standard Act, introduced in the 112th Congress as H.R.1687/S.1603, which mandates that 50% of new automobiles in 2014 be manufactured to operate on non-petroleum fuels (such as ethanol, methanol or biodiesel) in addition to or instead of petroleum-based fuels, 80% in 2016, and 95% in 2017. The additional cost to the manufacturer of making a car flex-fuel capable is approximately 100 additional dollars per vehicle.

Position: AJC is continuing its efforts to promote enactment of legislation aimed at expanding the number of vehicles that can run on flex-fuels.

 

Electric and Natural Gas Vehicles

In his 2011 State of the Union, President Obama set a goal for increased production and infrastructure of 1 million plug-in electric cars by 2015. Vice-President Biden subsequently stated that this effort will be supported by plans to transform an existing $7,500 tax credit for electric vehicles into a rebate that will pay out immediately at the point of sale; ramp up federal investments in advanced vehicle technology by 30 percent; and expand a community incentive program for early adopters of electric vehicles by awarding up to 30 grants of up to $10 million each to individual communities.

During the 112th Congress, Sens. Menendez (D-NJ), Burr (R-NC), Chambliss (R-GA), and Harry Reid (D-NV), introduced in the Senate the bipartisan New Alternative Transportation to Give Americans Solutions (NATGAS) Act of 2011, S.1863—with Rep. Sullivan (R-OK) introducing the parallel bill, H.R.1380. The bill would expand tax credits to provide between $7,500 and $64,000 for the conversion of trucks to operate on compressed natural gas, and provide property tax credit for companies that build refueling stations up to $100,000 per station. These credits would spur the development of natural gas vehicles and infrastructure, increasing the availability of natural gas as a domestic alternative to oil.

In addition, a bipartisan bill introduced in the 112th Congress by Sens. Merkley (D-OR) and Alexander (R-TN), the Promoting Electric Vehicles Act (S.948), would provide billions in funding for the development and deployment of plug-in vehicles, including $2 billion in grants over five years for “electric vehicle deployment communities.” The bill outlines $300 million in grants and loan guarantees to help companies transform large fleets of work vehicles into electric-powered cars and trucks, and $375 million for battery research, a deployment program at the Department of Energy, and to help federal agencies buy electric cars.

Position: AJC echoes the president's call for renewed investment in alternative fuel and electric vehicles as part of our nation's effort to reduce U.S. dependence on foreign oil. In addition, as discussed above, AJC continues to urge the passage of a flexible fuel mandate, either as a stand-alone bill or as part of a larger package encompassing other alternative fuels.

 

Domestic Oil and Gas Exploration (including on and offshore drilling and hydraulic fracturing)

In the wake of the disastrous oil spill in the Gulf of Mexico, the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Oil Drilling issued a report calling for a balanced energy policy that meets the following six criteria: maintains a sufficient petroleum reserve to protect America's national security interests; requires the promotion of energy efficient vehicles and transportation alternatives; promotes the development of clean and domestically produced alternative fuels or sources of power for transportation; manages the inherent risks of domestic production of oil and gas; requires safe operation to protect human health; and protects the natural environment, including steps to limit climate change.

With federal regulators having issued in 2012 the most permits for deepwater drilling in the Gulf of Mexico in any year since 2007, resumption of deepwater drilling—accompanied by increased oversight measures that address the lax safety and environmental regulations that led to the disaster—marks an important step in continuing the development of domestic oil sources and the reduction in our dependence on foreign oil.

In addition, recent years have seen a remarkable growth in natural gas and light crude oil extraction from U.S. deposits deep underground, a development that has been made possible in part through the onset of hydrofracking processes. These advances, taken together as part of a multifaceted approach, will allow the US to take charge of its energy security. At the same time, there is no doubt that there are risks associated with the use of hydrofracking processes—even as, where there have been harmful results associated with the use of hydrofracking processes, these seem often to have arisen because of a failure by producers to conform to existing regulations or to take cautionary measures that have been followed in the past by others utilizing these processes.

Given the foregoing,

Position: AJC strongly believes that a multi-faceted approach to reduction in our dependence on foreign oil must include, at least for the short- and medium-term, serious commitment to development of domestic oil sources—with, of course, substantial environmental and safety safeguards. Learning the lesson of the Gulf oil spill, oil producers must pay better heed to their obligation to harvest petroleum in a manner that is state-of-the-art in its attention to environmental safeguards, the government must be more effective in its regulation and oversight of the oil industry, and greater transparency and accountability must be kept in place for all parties involved in the process. Similarly, even as AJC supports and advocates the expeditious permitting of hydrofracking so as to allow us to reap the benefit of shale oil and gas, whatever failings there may be in the present regime of regulation and oversight should be addressed—even as any regulation and oversight must be designed to encourage and support responsible access to resources rather than stymieing such access.

 

Clean Energy Standard

During his 2011 State of the Union, President Obama called for Congress to pass several clean energy mandates including a mandate to produce 80 percent of the nation's electricity from clean energy sources by 2035. A "clean energy" standard would add nonrenewable sources (such as clean coal and nuclear energy) to the existing renewable energy mandate (i.e. solar, wind, hydro and geothermal). In addition, President Obama requested $8 billion for new clean-energy funding in the upcoming budget, roughly a third more than requested in the 2010 budget. This will likely be paid by cutting tax subsidies for fossil fuel producers.

Position: AJC supports measures aimed at developing clean energy technology, including renewable energy standards, although the focus on AJC's legislative activities is on policies that directly impact America's dependence on foreign oil.