Energy Policy Act Of 2005--Conference Report
Mr. President, as the Senate is poised to pass the Energy Policy Act of 2005 and send it to the President, Utahns should sit up and take notice, because our State is at the heart of this legislation. So many of the problems in our energy…
Mr. President, as the Senate is poised to pass the Energy Policy Act of 2005 and send it to the President, Utahns should sit up and take notice, because our State is at the heart of this legislation. So many of the problems in our energy structure have solutions that can be found in Utah, whether it is the need for more clean coal, more clean geothermal energy, more natural gas, better hydroelectric, more refining capacity, or more major sources of domestic oil, Utah will play a major part in the solution.
I want to talk more about some of these solutions, but first, let me take a moment to thank Chairman Domenici and Senator Bingaman of the Senate Committee on Energy and Natural Resources for leading us to this point. The Senate Finance Committee, on which I sit, has made a major contribution to the bill with its tax incentives title. Chairman Grassley and Senator Baucus deserve just as much praise for their outstanding coordination and hard work on that important part of this bill.
As the ranking member of the Finance Committee and as a Conferee on this legislation, I was able to watch all 4 of these men work together under pressure, and I could not be more impressed with their leadership and the work their excellent staffs have provided to our nation at this critical time. Working together, they have given us what I consider to be one of the most important bills to be enacted in a long time.
I have, at times, been criticized for reaching across the aisle to accomplish important policy goals. Some believe that compromise signals weakness. Well I just plain disagree, and after 4 years of failing to pass a major Energy bill with a simple majority, I think the Senate has proven that we stand the strongest when we stand together. And our energy situation calls for this type of leadership and strength.
Over the last decade, American consumers have increased their demand for oil by 12 percent, but domestic oil production has grown by less than \1/2\ of 1 percent. Is it any wonder that we rely on foreign countries for more than half our oil needs? We import 56 percent of our oil today, and it is projected to be 68 percent within 20 years.
On the larger scale, global demand for oil is growing at an unprecedented pace--about 2\1/2\ million barrels per day in 2004 alone. While global oil production is increasing, the discovery of new oil reserves is dropping off at an alarming rate. Moreover, trends indicate that the global thirst for petroleum will continue to grow, especially in Asia.
If our Nation must rely on oil imports to meet our future energy needs, we are headed for trouble, because, unless something changes, a sufficient oil supply will not be there. We should keep in mind that the transportation sector in the U.S. accounts for nearly \2/3\ of all of our oil consumption, and that sector is 97 percent dependent on oil. It could not be more clear: if we want to improve our energy security, we must focus on our transportation sector, and we must focus on diversifying our transportation fuels.
Recently, we heard President Bush call on our Nation to ``develop new ways to power our automobiles,'' and he spoke of his proposal to provide $2.5 billion over 10 years in tax incentives for the purchase of hybrid technologies. The President also called for a better alternative fuel infrastructure and the need to develop hydrogen fuel cell vehicles.
As for these policies the President addressed, my legislation, S. 971, the Clean Efficient Automobiles Resulting from Advanced Car Technologies Act, or CLEAR ACT, is exactly where the rubber meets the road. The CLEAR ACT, now a part of this Energy bill, is the most comprehensive and effective plan put forward by Congress to accelerate the transformation of the automotive marketplace toward the widespread use of fuel cell vehicles. And it does so without any new Federal mandates. Rather, it offers powerful market incentives to promote the advances in technology, in our infrastructure, and in the alternative fuels that are necessary if fuel cells are to ever reach the mass market. With the CLEAR ACT we accomplish this goal, but in the meantime, we also get cleaner air, we reduce our dependency on foreign oil, and we help lead our Nation into the future.
Historically, consumers have faced three basic obstacles to accepting the use of alternative fuels and advanced technologies. These are the higher cost of the vehicles, the lack of an infrastructure of alternative fueling stations, and the higher cost of alternative fuels. The CLEAR ACT will lower all three of these market barriers through the use of tax incentives.
First, we provide a tax credit for the purchase of alternative fuels. Next we promote a new infrastructure of alternative fuel filling stations by extending an existing tax deduction for the purchase of the necessary equipment and providing a new tax credit for the cost of installing it.
Finally we provide a Clear Act Credit to consumers who purchase alternative fuel and advanced technology vehicles. This includes fuel cell, hybrid electric, alternative fuel, and battery electric vehicles.
All of the technologies promoted in the CLEAR ACT--whether they be battery or electric motor technologies or advances in fuel storage and alternative fuel infrastructure--lead us closer to the hydrogen fuel cell vehicle. I believe fuel cells are in our future. However, even if the widespread use of fuel cell vehicles never becomes a reality, advances in these other technologies provide a dramatic social benefit on their own.
I have heard from some who question the need for incentives for hybrid vehicles when they are popular in some areas. It may be true that demand for these vehicles is high in a few regions. However, these high-demand areas tend to have local or state incentives in place for the purchase of these vehicles. Where incentives are not in place, hybrid sales are minimal. This demonstrates that incentives can indeed provide a market breakthrough to consumer acceptance of alternative vehicles.
With the CLEAR ACT, we are trying to provide that breakthrough on a national scale. And the numbers show that a breakthrough is desperately needed. It may be true that hybrid sales have doubled in the last couple of years, but they still represent a minuscule 0.48 percent of cars that were sold in 2004. So I am very pleased, Mr. President, that the energy bill will lead us into the future in this regard.
We should also be using more clean alternatives when we generate another form of energy--electricity. I am very pleased that the Energy bill includes S. 1156, my legislation that extends and expands the production tax credit for electricity from renewable sources, including geothermal. This is particularly important to my home State of Utah, which has vast potential for the creation of electricity from geothermal sources, along with other renewable energy sources, such as wind and biomass.
While this production tax credit has been in the tax code for some time, it had an unfair feature that provided the tax credit for 10 years for electricity produced from wind, but only for 5 years for electricity produced from most of the other renewable resources. This inequity has skewed investment in these resources unfairly and in a way that has not led to the best use of these national assets.
I am happy to see that this provision has survived in conference. This should result in a better-balanced and higher output of electricity from all our renewable resources.
And, I have highlighted just two among many important provisions in this bill that will promote the greater use of alternative and renewable sources of energy.
We cannot escape the fact that our nation remains reliant on oil and gas, and we absolutely must increase our supply of these resources in a big way.
It is a little known fact that the largest hydrocarbon resource in the world rests within the borders of Utah, Colorado, and Wyoming. I know it may be hard to believe, but energy experts agree that there is more recoverable oil in these 3 states than there is in all the Middle East. In fact, the U.S. Department of Energy estimates that recoverable oil shale in the western United States exceeds 1 trillion barrels, but it is not counted among world reserves, because it is not yet commercially developed. If anyone is wondering what the significance is of that number, he or she should know that the world's oil reserves stand at just about 1.6 trillion barrels. That means we have almost as much unconventional oil in Utah, Colorado, and Wyoming as the rest of the world's conventional oil combined.
Companies have been waiting for the Federal government to recognize the potential of this resource and allow access to it. My legislation, S. 1111, the Oil Shale and Tar Sands Development Act, will do just that, and more.
Some have been understandably hesitant to develop this resource. During the 1970s, there was a very large and expensive effort in western Colorado to develop oil shale there. When the price of oil dropped dramatically, though, the market for oil shale went bust and the region suffered an economic disaster.
We need to remember that our past failure in this area was not necessarily a failure of technology, but was due to a dramatic slump in gas prices. We now have a different scenario. Today, the world is reaching peak oil production of conventional oil, and cheap oil prices are nowhere in sight.
We have already seen that a shift in focus to unconventional fuels such as tar sands produce mind-boggling results. Only a few years ago, Alberta, Canada recognized the potential of its own tar sands deposits and set forth a policy to promote their development. As a result, Canada has increased its oil reserves by more than a factor of 10, going from a reserve of about 14 billion barrels to its current reserve of more than 176 billion barrels in a very short period. And just think--we are sitting on a similar resource of oil shale and tar sands in the United States.
It is frustrating to learn that Utah imports about one-fourth of its oil from Canadian tar sands, even though we have our own very large resource of tar sands in our own state sitting undeveloped. I look forward to the day in the not-too-distant future, when Utah's oil shale and tar sands are developed to their potential. If it happens, and I believe that it will, Utah will become a world leader in oil production.
But even if we do solve the oil importation issue, we still have another problem. Our Nation is so lacking in refining capacity for crude, that we are forced to import 10 percent of our refined fuel. We could produce all the domestic oil in the world, but until we can refine it, we cannot use it.
It is clear that one of the reasons we currently have sharply higher gasoline prices is that we simply do not have enough refining capacity in this country. This is both a short-term and a longer-term concern for our economy and national security.
Regrettably, gasoline, diesel, jet fuel and home heating oil supplies are simply too tight in America today. There is not a lot that can be done in the very near term to address the higher cost of fuel that is attributable to refining bottlenecks. However, ensuring the long-term viability of the U.S. refining industry should be at the very heart of a smart national energy policy.
One of the major problems with our refining capacity is that industry profitability has been poor over the past several decades. This has contributed to the steady decline in the number of operating refineries in America from more than 300 in 1980 to less than 150 today. I am told the last major refinery to be built in America came on line in the 1970s.
Earlier this year, the National Petroleum Council reported that U.S. refining capacity growth was not keeping pace with demand growth, that poor historic returns in the refining sector was impeding further investment, and that major expenditures in new regulations were limiting the funds available for capacity expansions. This was bad news crying out for a solution.
Another problem mentioned in the report is that the 10-year depreciation schedule prescribed by the current tax law for refining assets is much longer than the write-off periods for similar process equipment in other manufacturing industries. Also, the tax code does not contain any incentives to encourage new investment in refining capacity, which is an endeavor that carries high costs and risks.
With these facts in mind, I introduced S. 1039, the Gas Price Reduction Through Increased Refinery Capacity Act of 2005. S. 1039 would adjust the depreciation period for assets used in refining from 10 years to 5 and would allow an immediate write-off of these assets if companies made an early and firm commitment to invest in new capacity within a relatively short time.
I thank Senator Grassley for including the temporary refinery expensing provisions of S. 1039 in the Chairman's mark of the tax title to the Energy bill. This provision passed the Senate as part of the energy tax package. I am pleased the Conference Committee accepted this provision even though cost constraints forced us to limit the incentive to 50 percent expensing.
This is the first provision passed by Congress in the past half century that gives the U.S. refining industry a specific tax incentive designed to spur investment in increased refining capacity. The National Petrochemical & Refiners Association, which represents virtually all U.S. refineries, has indicated this measure will help stimulate facility expansions and output. It is the only provision in the entire Energy bill that encourages refining capacity growth and increased gasoline, diesel and jet fuel supply for consumers. This provision alone should make a significant difference in fuel supplies.
Utah is a major gas producer. But most of Utah's natural gas lies under our vast public lands. Utah has a large supply, but as you might guess, Federal red tape is the number one obstacle to supplying the country with the natural gas it demands.
One example is the natural gas found within Utah's tar sands. Historically, extracting natural gas from tar sands has required a dual application requiring both a permit for gas extraction and mineral extraction. I introduced a bill that amends the Mineral Leasing Act to allow a company only going after the gas to forgo the permitting for mineral extraction, while fully leaving in place every relevant environmental law and regulation. This legislation, S. 53, was included in the energy bill.
In another effort to create a lose-lose situation, the Department of the Interior recently published a rule that would tack on a new and expensive fee on new Applications for Permit to Drill (APDs) for natural gas development. As members of the Conference Committee, Senator Craig Thomas and I joined forces to put an end to this fee for at least 10 years.
We do not need another hurdle to obtaining gas from our public lands. The Federal government receives about $1.6 billion every year in royalties from gas production on public lands. With every new well in Utah, gas companies pay a generous royalty to Federal and State governments. It is simple math--in the long run, Utah and the Nation loses money when wells are stopped because of fees. We also suffer from the resulting slow down in the supply of natural gas.
Finally, I was a proponent of an item in the Energy bill that reduces the depreciable lives of natural gas gathering and distribution lines. By being able to depreciate their equipment more quickly, companies are better able to invest in future production activity. This provision should help spur investment in more exploration and production of this clean and important fuel.
As I mentioned at the beginning of my remarks, the Energy Policy Act will have a very large impact on Utah,
not only in positive economic growth and jobs, but also in the benefits of cheaper and cleaner energy costs for families and businesses. Again, I thank the leaders in the Senate who have brought us to this point, along with their counterparts in the House of Representatives. I think we have proven today, that Congress can respond to the needs of the nation and our citizens when we work together with that goal in mind.