Lots of Heat, Little Light
The energy bill may emerge with a big business brand
As debate kicked off last week on a new direction for American energy policy, Majority Leader Harry Reid trumpeted the Democrats' commitment to change. "Time for bold steps and big ideas," he said. "Time for innovation." But as the week wore on, Reid's clarion call was rapidly drowned out by the cacophony of big business shouting to have its interests heard. What ultimately emerges, experts say, may not be a home run for energy independence. There are just too many special interests and too many agendas. Here's a primer on what's really going on with the energy legislation the Senate hopes to pass before its July 4 recess.
What's a renewable fuel, anyway?
It would seem to be a pretty simple matter to pass the renewable portfolio standard that has long been sought by Senate Energy Committee Chairman Jeff Bingaman, a New Mexico Democrat. After all, even the Republican-controlled Senate passed essentially the same measure two years ago, requiring that major electric utilities produce 15 percent of their power from wind and other clean energy sources like solar and geothermal by 2020. More than 20 states already have such laws, and a new analysis by the federal Energy Information Administration said it would raise energy prices less than 1 percent while dramatically increasing the use of solar energy and reducing greenhouse gas growth. But the proposal faces an effort by fellow New Mexican Pete Domenici, dean of the Republicans on energy matters, to have the standard include all "alternative" fuels, such as his longtime favorite, nuclear power, and "clean" coal technologies.
Better fuel economy for cars soon, or much later?
Arguably the most important element of the bill is a move to increase auto fuel economy standards for the first time in 18 years, bringing the Corporate Average Fuel Economy standard up to a 35-mile-per-gallon average by 2020. That would represent a 40 percent improvement over the current average. But Congress is moving too fast for the auto industry, which prefers the ponderous pace set by the current mileage arbiter, the National Highway Traffic Safety Administration. Expect a strong push to have authority stay with that agency—as opposed to Congress. Michigan Democrat Carl Levin has teamed up with Missouri Republican Kit Bond to take up the auto industry's cause, while supporting higher overall fuel standards of around 32.5 mpg by 2025, as long as NHTSA has authority to set lower standards if need be. "The good news is that everyone's for a CAFE increase," says Kevin Curtis, senior advocate for the Pew Campaign for Fuel Efficiency, which was fighting the automakers. "The bad news is that the details now really, really matter."
Why use oil when there's liquid gold in the form of coal?
Among the hundreds of amendments being pushed by interest groups is one to provide subsidies to spur a new U.S. industry of making diesel fuel out of coal. The technology works and had its heyday in Nazi Germany and in apartheid South Africa, two regimes that desperately needed alternative sources of fuels and didn't hesitate to produce them at a very high cost. Now, a well-funded coalition of coal interests is pushing for the United States to take up coal to liquids as a matter of national security. Such an effort would also happen to secure a new market for high-sulfur eastern coal, which has fallen out of favor for use in power plants that have found they can meet acid rain regulations easily by using low-sulfur coal from Wyoming.
But the impact of coal to liquids on water and carbon emissions has some environmentalists viewing this as the biggest threat in the bill. Kentucky Republican Jim Bunning and coal-state Democrats are pushing coal to liquids, but most eyes are on Illinois Sen. and presidential candidate Barack Obama, who earlier this year cosponsored a coal-to-liquids measure with Bunning. Last week, Obama sent environmental groups a statement pledging that he wouldn't support development of coal fuels unless climate concerns are addressed. However, since the final proposal is certain to address carbon emissions in one way or another, the clarification left unclear how Obama would ultimately vote.
Who's going to eat all that corn—cars or cattle?
Congress is on track to expand its love affair with ethanol by mandating a sevenfold increase—to 35 billion gallons—in the amount of biofuel that refiners must use by 2022. The plan is a favorite not only of the corn industry but also of the greatly expanded ethanol industry, which now includes major Silicon Valley venture capital firms. They've made a big bet on a market for the alcohol fuel alternative, even though it costs more, delivers worse mileage than gasoline, and has debatable environmental benefits. The oil refiners have reared up against the idea of expanding the mandate, and they are being joined by a host of food companies that have seen their costs skyrocket because of the new ethanol demand for the corn used to make livestock feed. Biofuels proponents will counter that ethanol could be made from sources other than corn, like the "cellulosic" material of fast-growing weedy plants such as switch grass. Could be. As soon as someone builds a factory that can do so. There will be a push for subsidies for that, as well.
How about punishing the gougers?
Who could quarrel with a move to clamp down on any oil supplier who charges an "unconscionably excessive price" after the president declares a national emergency due to a disaster or energy shortage? Well, the president could. President Bush has threatened a veto if the legislation contains this language, arguing that it could cause chaos in the market. Which means what is probably little more than a feel-good initiative could kill the entire bill.
No matter how the Senate resolves these issues, expect the same battles in the House to occur through the summer, even as vacationing motorists are reminded at every gas station that politicians haven't yet solved the nation's energy morass.
This story appears in the June 25, 2007 print edition of U.S. News & World Report.