17 May 2001

Text: National Energy Policy -- Overview

The Bush administration's National Energy Policy Report -- emphasizing that America faces the most serious energy shortage since the oil embargoes of the 1970s -- calls for greater energy efficiency, a modernized energy infrastructure, and increased energy supplies.

An overview to the report, released May 17, says the new National Energy Policy is a long-term, comprehensive strategy that will advance new, environmentally friendly technologies to increase energy supplies and encourage cleaner, more efficient energy use.

While emphasizing that the United States has made impressive gains in energy efficiency -- the U.S. economy has grown by 126 percent since 1973, while energy use has increased by only 30 percent -- the report calls for further improvements in the productive and efficient use of energy. The report recommends, for example, that federal agencies take actions to conserve energy use in their facilities, and increase funding for renewable energy and energy efficiency research and development programs.

The findings of a high-level task force involving Vice President Cheney and cabinet members, the report also recommends that the nation's network of generating facilities, transmission lines, pipelines and refineries be modernized and expanded to ensure that energy supplies can be reliably and affordably transported to homes and businesses.

The report calls for increasing U.S. energy supplies, emphasizing that enormous advances in technology have made oil and gas exploration and production more efficient and environmentally sound, and that research in clean coal technologies may increase the attractiveness of coal as a source for new power plants.

The report recommends opening a small fraction of the Arctic National Wildlife Refuge to environmentally regulated exploration and production using leading-edge technology.

The report also recommends increased use of nuclear power, noting that nuclear facilities currently generate 20 percent of all electricity in America, but that the number of nuclear plants is projected to decline in coming years.

To ensure energy security and to lessen the impact of energy price volatility and supply uncertainty on Americans, the report says the United States must look beyond its borders and restore America's credibility with overseas suppliers. For example, it recommends support for a North American Energy Framework to expand and accelerate cross-border energy investment, oil and gas pipelines, and electricity grid connections by expediting permitting procedures with Mexico and Canada.

Following is the text of the National Energy Policy overview:

NATIONAL ENERGY POLICY

Report of the National Energy Policy Development Group

Overview

Reliable, Affordable, and Environmentally Sound Energy for America's Future

In his second week in office, President George W. Bush established the National Energy Policy Development Group, directing it to "develop a national energy policy designed to help the private sector, and, as necessary and appropriate, State and local governments, promote dependable, affordable, and environmentally sound production and distribution of energy for the future." This Overview sets forth the National Energy Policy Development (NEPD) Group's findings and key recommendations for a National Energy Policy.

America in the year 2001 faces the most serious energy shortage since the oil embargoes of the 1970s. The effects are already being felt nationwide. Many families face energy bills two to three times higher than they were a year ago. Millions of Americans find themselves dealing with rolling blackouts or brownouts; some employers must lay off workers or curtail production to absorb the rising cost of energy. Drivers across America are paying higher and higher gasoline prices.

Californians have felt these problems most acutely. California actually began the 1990s with a surplus of electricity generating capacity. Yet despite an economic boom, a rapidly growing population, and a corresponding increase in energy needs, California did not add a single new major electric power plant during the 1990s. The result is a demand for electricity that greatly succeeds the amount available.

A fundamental imbalance between supply and demand defines our nation's energy crisis. If energy production increases at the same rate as during the last decade our projected energy needs will far outstrip expected levels of production.

This imbalance, if allowed to continue, will inevitably undermine our economy, our standard of living, and our national security. But it is not beyond our power to correct. America leads the world in scientific achievement, technical skill, and entrepreneurial drive. Within our country are abundant natural resources, unrivaled technology, and unlimited human creativity. With forward-looking leadership and sensible policies, we can meet our future energy demands and promote energy conservation, and do so in environmentally responsible ways that set a standard for the world.

The Challenge

America's energy challenge begins with our expanding economy, growing population, and rising standard of living. Our prosperity and way of life are sustained by energy use. America has the technological know-how and environmentally sound 21st century technologies needed to meet the principal energy challenges we face: promoting energy conservation, repairing and modernizing our energy infrastructure, and increasing our energy supplies in ways that protect and improve the environment. Meeting each of these challenges is critical to expanding our economy, meeting the needs of a growing population, and raising the American standard of living.

We are already working to meet the first challenge: using energy more wisely. Dramatic technological advances in energy efficiency have enabled us to make great strides in conservation, from the operation of farms and factories to the construction of buildings and automobiles. New technology allows us to go about our lives and work with less cost, less effort, and less burden on the natural environment. While such advances cannot alone solve America's energy problems, they can and will continue to play an important role in our energy future.

The second challenge is to repair and expand our energy infrastructure. Our current, outdated network of electric generators, transmission lines, pipelines, and refineries that convert raw materials into usable fuel has been allowed to deteriorate. Oil pipelines and refining capacity are in need of repair and expansion. Not a single major oil refinery has been built in the United States in nearly a generation, causing the kind of bottlenecks that lead to sudden spikes in the price of gasoline. Natural gas distribution, likewise, is hindered by an aging and inadequate network of pipelines. To match supply and demand will require some 38,000 miles of new gas pipelines, along with 255,000 miles of distribution lines. Similarly, an antiquated and inadequate transmission grid prevents us from routing electricity over long distances and thereby avoiding regional blackouts, such as California's.

Increasing energy supplies while protecting the environment is the third challenge. Even with successful conservation efforts, America will need more energy.

Renewable and alternative fuels offer hope for America's energy future. But they supply only a small fraction of present energy needs. The day they fulfill the bulk of our needs is still years away. Until that day comes, we must continue meeting the nation's energy requirements by the means available to us.

Estimates indicate that over the next 20 years, U. S. oil consumption will increase by 33 percent, natural gas consumption by well over 50 percent, and demand for electricity will rise by 45 percent. If America's energy production grows at the same rate as it did in the 1990s we will face an ever-increasing gap.

Increases on this scale will require preparation and action today. Yet America has not been bringing on line the necessary supplies and infrastructure.

Extraordinary advances in technology have transformed energy exploration and production. Yet we produce 39 percent less oil today than we did in 1970, leaving us ever more reliant on foreign suppliers. On our present course, America 20 years from now will import nearly two of every three barrels of oil -- a condition of increased dependency on foreign powers that do not always have America's interests at heart. Our increasing demand for natural gas -- one of the cleanest forms of energy -- far exceeds the current rate of production. We should reconsider any regulatory restrictions that do not take technological advances into account.

We have a similar opportunity to increase our supplies of electricity. To meet projected demand over the next two decades, America must have in place between 1,300 and 1,900 new electric plants. Much of this new generation will be fueled by natural gas. However, existing and new technologies offer us the opportunity to expand nuclear generation as well. Nuclear power today accounts for 20 percent of our country's electricity. This power source, which causes no greenhouse gas emissions, can play an expanding part in our energy future.

The recommendations of this report address the energy challenges facing America. Taken together, they offer the thorough and responsible energy plan our nation has long needed.

Components of the National Energy Policy

The National Energy Policy we propose follows three basic principles:

• The Policy is a long-term, comprehensive strategy. Our energy crisis has been years in the making, and will take years to put fully behind us.

• The Policy will advance new, environmentally friendly technologies to increase energy supplies and encourage cleaner, more efficient energy use.

• The Policy seeks to raise the living standards of the American people, recognizing that to do so our country must fully integrate its energy, environmental, and economic policies.

Modernize Conservation

Americans share the goal of energy conservation. The best way of meeting this goal is to increase energy efficiency by applying new technology -- raising productivity, reducing waste, and trimming costs. In addition, it holds out great hope for improving the quality of the environment. American families, communities, and businesses all depend upon reliable and affordable energy services for their well-being and safety. From transportation to communication, from air conditioning to lighting, energy is critical to nearly everything we do in life and work. Public policy can and should encourage energy conservation.

Over the past three decades, America has made impressive gains in energy efficiency. Today's automobiles, for example, use about 60 percent of the gasoline they did in 1972, while new refrigerators require just one-third the electricity they did 30 years ago. As a result, since 1973, the U. S. economy has grown by 126 percent, while energy use has increased by only 30 percent. In the 1990s alone, manufacturing output expanded by 41 percent, while industrial electricity consumption grew by only 11 percent. We must build on this progress and strengthen America's commitment to energy efficiency and conservation.

The National Energy Policy builds on our nation's successful track record and will promote further improvements in the productive and efficient use of energy. This report includes recommendations to:

• Direct federal agencies to take appropriate actions to responsibly conserve energy use at their facilities, especially during periods of peak demand in regions where electricity shortages are possible, and to report to the President on actions taken.

• Increase funding for renewable energy and energy efficiency research and development programs that are performance-based and cost-shared.

• Create an income tax credit for the purchase of hybrid and fuel cell vehicles to promote fuel-efficient vehicles.

• Extend the Department of Energy's "Energy Star" efficiency program to include schools, retail buildings, health care facilities, and homes and extend the "Energy Star" labeling program to additional products and appliances.

• Fund the federal government's Intelligent Transportation Systems program, the fuel cell powered transit bus program, and the Clean Buses program.

• Provide a tax incentive and streamline permitting to accelerate the development of clean Combined Heat and Power technology.

• Direct the Secretary of Transportation to review and provide recommendations on establishing Corporate Average Fuel Economy (CAFE) standards with due consideration to the National Academy of Sciences study of CAFE standards to be released in July 2001.

Modernize Our Energy Infrastructure

The energy we use passes through a vast nationwide network of generating facilities, transmission lines, pipelines, and refineries that converts raw resources into usable fuel and power. That system is deteriorating, and is now strained to capacity.

One reason for this is government regulation, often excessive and redundant. Regulation is needed in such a complex field, but it has become overly burdensome. Regulatory hurdles, delays in issuing permits, and economic uncertainty are limiting investment in new facilities, making our energy markets more vulnerable to transmission bottlenecks, price spikes and supply disruptions. America needs more environmentally sound energy projects to connect supply sources to growing markets and to deliver energy to homes and business.

To reduce the incidence of electricity blackouts, we must greatly enhance our ability to transmit electric power between geographic regions, that is, sending power to where it is needed from where it is produced. Most of America's transmission lines, substations, and transformers were built when utilities were tightly regulated and provided service only within their assigned regions. The system is simply unequipped for large-scale swapping of power in the highly competitive market of the 21st century.

The National Energy Policy will modernize and expand our energy infrastructure in order to ensure that energy supplies can be safely, reliably, and affordably transported to homes and businesses. This report includes recommendations to:

• Direct agencies to improve pipeline safety and expedite pipeline permitting.

• Issue an Executive Order directing federal agencies to expedite permits and coordinate federal, state, and local actions necessary for energy-related project approvals on a national basis in an environmentally sound manner, and establish an interagency task force chaired by the Council on Environmental Quality. The task force will ensure that federal agencies set up appropriate mechanisms to coordinate federal, state and local permitting activity in particular regions where increased activity is expected.

• Grant authority to obtain rights-of-way for electricity transmission lines with the goal of creating a reliable national transmission grid. Similar authority already exists for natural gas pipelines and highways.

• Enact comprehensive electricity legislation that promotes competition, encourages new generation, protects consumers, enhances reliability, and promotes renewable energy.

• Implement administrative and regulatory changes to improve the reliability of the interstate transmission system and enact legislation to provide for enforcement of electricity reliability standards.

• Expand the Energy Department's research and development on transmission reliability and superconductivity.

Increase Energy Supplies

A primary goal of the National Energy Policy is to add supply from diverse sources. This means domestic oil, gas, and coal. It also means hydropower and nuclear power. And it means making greater use of non-hydro renewable sources now available.

One aspect of the present crisis is an increased dependence, not only on foreign oil, but on a narrow range of energy options. For example, about 90 percent of all new electricity plants currently under construction will be fueled by natural gas. While natural gas has many advantages, an over-reliance on any one fuel source leaves consumers vulnerable to price spikes and supply disruptions. There are several other fuel sources available that can help meet our needs.

Currently, the U. S. has enough coal to last for another 250 years. Yet very few coal-powered electric plants are now under construction. Research into clean coal technologies may increase the attractiveness of coal as a source for new generation plants.

Nuclear power plants serve millions of American homes and businesses, have a dependable record for safety and efficiency, and discharge no greenhouse gases into the atmosphere. As noted earlier, these facilities currently generate 20 percent of all electricity in America, and more than 40 percent of electricity generated in 10 states in the Northeast, South, and Midwest. Other nations, such as Japan and France, generate a much higher percentage of their electricity from nuclear power. Yet the number of nuclear plants in America is actually projected to decline in coming years, as old plants close and none are built to replace them.

Enormous advances in technology have made oil and natural gas exploration and production both more efficient and more environmentally sound. Better technology means fewer rigs, more accurate drilling, greater resource recovery and environmentally friendly exploration. Drilling pads are 80 percent smaller than a generation ago. High-tech drilling allows us to access supplies five to six miles away from a single compact drilling site, leaving sensitive wetlands and wildlife habitats undisturbed. Yet the current regulatory structure fails to take sufficient account of these extraordinary advances, excessively restricting the environmentally safe production of energy from many known sources.

Our policy will increase and diversify our nation's sources of traditional and alternative fuels in order to furnish families and businesses with reliable and affordable energy, to enhance national security, and to improve the environment. This report includes recommendations to:

• Issue an Executive Order directing all federal agencies to include in any regulatory action that could significantly and adversely affect energy supplies a detailed statement on the energy impact of the proposed action.

• Open a small fraction of the Arctic National Wildlife Refuge to environmentally regulated exploration and production using leading-edge technology. Examine the potential for the regulated increase in oil and natural gas development on other federal lands.

• Earmark $1.2 billion of bid bonuses from the environmentally responsible leasing of ANWR to fund research into alternative and renewable energy resources
• including wind, solar, biomass, and geo-thermal.

• Enact legislation to expand existing alternative fuels tax incentives to include landfills that capture methane gas emissions for electricity generation and to electricity produced from wind and biomass. Extend the number of eligible biomass sources to include forest-related sources, agricultural sources, and certain urban sources.

• Provide $2 billion over 10 years to fund clean coal technology research and a new credit for electricity produced from biomass co-fired with coal.

• Direct federal agencies to streamline the hydropower relicensing process with proper regard given to environmental factors.

• Provide for the safe expansion of nuclear energy by establishing a national repository for nuclear waste, and by streamlining the licensing of nuclear power plants.

Accelerate Protection and Improvement of the Environment

America's commitment to environmental protection runs deep. We are all aware of past excesses in our use of the natural world and its resources. No one wishes to see them repeated. In the 21st century, the ethic of good stewardship is well established in American life and law.

We do not accept the false choice between environmental protection and energy production. An integrated approach to policy can yield a cleaner environment, a stronger economy, and a sufficient supply of energy for our future. The primary reason for that has been steady advances in the technology of locating, producing, and using energy. Since 1970, emissions of key air emissions are down 31 percent. Cars today emit 85 percent less carbon monoxide than 30 years ago. Lead emissions are down 90 percent. Lead levels in ambient air today are 98 percent lower than they were in 1970. America is using more, and polluting less.

One of the factors harming the environment today is the very lack of a comprehensive, long-term national energy policy. States confronting blackouts must take desperate measures, often at the expense of environmental standards, requesting waivers of environmental rules, and delaying the implementation of anti-pollution efforts. Shortfalls in electricity generating capacity and short-sighted policies have blocked construction of new, cleaner plants, leaving no choice but to rely on older, inefficient plants to meet demand. The increased use of emergency power sources, such as diesel generators, results in greater air pollution.

New anti-pollution technologies hold great promise for the environment. The same can be said of 21st century power generators that must soon replace older models; significant new resources for land conservation efforts; and continued research into renewable energy sources. All have a place in the National Energy Policy.

The National Energy Policy will build upon our nation's successful track record and will promote further improvements in the productive and efficient use of energy. This report includes recommendations to:

• Enact "multi-pollutant" legislation to establish a flexible, market-based program to significantly reduce and cap emissions of sulfur dioxide, nitrogen oxides, and mercury from electric power generators.

• Increase exports of environmentally friendly, market-ready U. S. technologies that generate a clean environment and increase energy efficiency.

• Establish a new "Royalties Conservation Fund" and earmark royalties from new, clean oil and gas exploration in ANWR to fund land conservation efforts.

• Implement new guidelines to reduce truck idling emissions at truck stops.

Increase Energy Security.

The National Energy Policy seeks to lessen the impact on Americans of energy price volatility and supply uncertainty. Such uncertainty increases as we reduce America's dependence on foreign sources of energy. At the same time, however, we recognize that a significant percentage of our resources will come from overseas. Energy security must be a priority of U. S. trade and foreign policy.

We must look beyond our borders and restore America's credibility with overseas suppliers. In addition, we must build strong relationships with energy-producing nations in our own hemisphere, improving the outlook for trade, investment, and reliable supplies.

Energy security also requires preparing our nation for supply emergencies, and assisting low-income Americans who are most vulnerable in times of supply disruption, price spikes, and extreme weather.

To ensure energy security for our nation and its families, our report includes these recommendations:

• Dedicate new funds to the Low Income Home Energy Assistance Program by funneling a portion of oil and gas royalty payments to LIHEAP when oil and natural gas prices exceed a certain amount.

• Double funding for the Department of Energy's Weatherization Assistance Program, increasing funding by $1.4 billion over 10 years.

• Direct the Federal Emergency Management Administration to prepare for potential energy-related emergencies.

• Support a North American Energy Framework to expand and accelerate cross-border energy investment, oil and gas pipelines, and electricity grid connections by streamlining and expediting permitting procedures with Mexico and Canada. Direct federal agencies to expedite necessary permits for a gas pipeline route from Alaska to the lower 48 states.

Looking Toward the Future

The President's goal of reliable, affordable, and environmentally sound energy supplies will not be reached overnight. It will call forth innovations in science, research, and engineering. It will require time and the best efforts of leaders in both political parties. It will require also that we deal with the facts as they are, meeting serious problems in a serious way. The complacency of the past decade must now give way to swift but well-considered action.

Present trends are not encouraging, but they are not immutable. They are among today's most urgent challenges, and well within our power to overcome. Our country has met many great tests. Some have imposed extreme hardship and sacrifice. Others have demanded only resolve, ingenuity, and clarity of purpose. Such is the case with energy today.

We submit these recommendations with optimism. We believe that the tasks ahead, while great, are achievable. The energy crisis is a call to put to good use the resources around us, and the talents within us. It summons the best of America, and offers the best of rewards -- in new jobs, a healthier environment, a stronger economy, and a brighter future for our people.

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