More Energy Supplies, Not More Taxes and Regulations, Are What We Need

by Ben Lieberman

June 26, 2008

There are many energy bills currently pending before Congress, and they fall into two general categories: those that seek to increase domestic energy supplies and those that seek scapegoats and diversions instead. Last week, the President gave a speech in favor of the former, spelling out four useful ideas for expanding American energy:

   1. Removing restrictions on oil drilling in American waters;

   2. Opening up a small portion of Alaska's Arctic National Wildlife Refuge to drilling;

   3. Streamlining the regulations that hamper refinery capacity expansions; and

   4. Eliminating the federal barriers to development of oil shale.

All of these measures are embodied in one or more energy bills that deserve full consideration. Unfortunately, many in Congress would rather spend time on ideas more likely to increase prices than provide any relief at the pump, such as raising taxes and increasing regulations on companies exploring for oil in the U.S. These ideas are seriously misguided.

Drilling in America's Waters

Federal law currently prohibits energy exploration and drilling on 85 percent of America's Outer Continental Shelf (OCS)—virtually everywhere except the central and western Gulf of Mexico. The Department of the Interior (DOI) estimates there are 19 billion barrels of oil in these restricted areas, an amount equivalent to 30 years of imports from Saudi Arabia.

DOI has authority over energy production in the nation's territorial waters, but since 1982 Congress has denied the agency the funding to conduct energy leasing in new areas. Two current measures, the Deep Ocean Energy Resources Act (H.R. 6108) and the National Environment and Development Act (H.R. 2784), would remove the de facto offshore ban. Both measures would allow coastal states to decide whether to allow oil leases off their shores, and both also contain royalty-sharing agreements between the federal government and participating states. Either measure would lead to greater supplies of domestic oil as well as natural gas.

The Arctic National Wildlife Refuge

America's single greatest concentration of untapped oil—an estimated 10 billion barrels—lies near the edge of Alaska's 19.6 million acre Arctic National Wildlife Refuge (ANWR). As with deepwater drilling, advances in technology have greatly reduced the environmental impact and risk of spills, and drilling would be subject to the world's strictest standards. Nearby Alaskan drilling in Prudhoe Bay has had a minimal adverse impact on the environment and local wildlife, and was performed with decades-old technology far less environmentally safe than that which would be used in ANWR.

Legislation enacted in 1980 left open the possibility of developing the oil-rich part of ANWR, subject to future congressional approval. That approval is long overdue. Several bills, such as the American Energy Independence and Security Act (S. 2758) and the American Energy Independence and Price Reduction Act (H.R. 6107) would allow ANWR leasing to commence.

Refinery Expansions

Although the high price of oil is far and away the biggest reason for the increases at the pump, unnecessarily high refining costs are also a contributor. No new refinery has been built in the U.S. in over 30 years, and expansions at existing refineries have at times struggled to keep pace with rising demand. Part of the reason refinery expansion has halted is the extremely costly, complicated, and time-consuming maze of federal regulatory requirements affecting refineries.

Reasonable efforts to streamline and expedite the refinery expansion process are included in such bills as the Refinery Permit Process Schedule Act (H.R. 6139) and the American Energy Production Act (S. 2973). [Read More]