Energy Legislation Falls Short of Expectations

Strategic Insights -

The newly proposed energy legislation, set to be signed into law by President George W. Bush, aims to tap more domestic energy resources. However, the White House and lawmakers concede that the bill will not bring about a significant shift in US supply or demand. The legislation has removed key provisions that would have boosted US supply and reduced demand, including drilling in the Arctic National Wildlife Refuge and offshore areas. As a result, the transportation sector, which accounts for two-thirds of total US oil consumption, remains unchanged. The Alliance to Save Energy warns that the legislation's failure to curtail oil demand is alarming.

Key Takeaways:

  • The energy legislation does not include provisions to drill in the Arctic National Wildlife Refuge or offshore areas, which would have increased US oil supply.
  • A proposal to curtail US oil consumption by 1 million barrels per day by 2015 was rejected, leaving the transportation sector unchanged.
  • The legislation grants the federal government more authority to decide where liquefied natural gas (LNG) terminals are sited, making it easier to develop natural gas supply.
  • The bill provides $2.6 billion in tax breaks to the oil and gas industry over 10 years, with $1.56 billion allocated to boosting production and investment in refining capacity.
  • The legislation removes the prescriptive mandate to use oxygenates in reformulated gasoline and directs the federal government to not approve new gasoline specifications.
  • Refiners will not receive liability protection from lawsuits related to contamination of groundwater and drinking water sources by methyl tertiary butyl ether.
  • The bill requires refiners to use 7.5 billion gallons of biofuels like ethanol by 2012 and provides a tax break for hybrid and alternative fuel vehicles.
  • The legislation emphasizes the transition to a hydrogen economy and provides research and development funding, including $550 million for deep drilling.

Statistics:

  • The US accounts for about 25% of global oil consumption, with two-thirds of this total coming from the transportation sector.
  • The US has only 3% of global oil reserves, making it unlikely to increase supply substantially to meet growing demand.
  • The energy legislation provides a $2.6 billion tax break package over 10 years.
  • $1.56 billion of this will go to boost production and encourage additional investment in refining capacity.
  • The legislation requires refiners to use 7.5 billion gallons of biofuels by 2012.

Sources:

  • "President Bush to Sign Energy Legislation."
  • "White House Compromises on Energy Bill."
  • Alliance to Save Energy. "Statement on Energy Legislation."
  • "Reformulated Gasoline: A Guide for Industry."
  • "Liquefied Natural Gas: Opportunities and Challenges."