Energy Bills Will Hit U.S. Competitiveness

As Congress breaks for its annual August recess, both the House and Senate have passed energy bills that supporters hail as reshaping America’s energy economy. If by reshaping they mean shrinking, sadly, their claims are true. If enacted into law, the bills will reduce access to domestic sources of energy, raise taxes on oil and gas production, and dramatically increase the cost of electricity.

American competitiveness will suffer yet another serious blow, and manufacturers in the United States will consider their options in the face of more expensive energy. Manufacturers consume one third of all the electricity in the country, and they cannot do without. Other things must give, whether it’s capital investment, expansions, R&D or employee benefits.

One other thing might also be sacrificed: a domestic presence. Rising energy costs have already contributed to the loss of three million U.S. manufacturing jobs since 2000. The chemical industry is migrating overseas to take advantage of affordable natural gas, and fertilizer manufacturers have shuttered American plants.

In their rush to encourage alternative fuels, Congress is undercutting the foundations of our economy — oil, natural gas, nuclear power and coal.  According to the 2007 Energy Outlook by the Energy Information Administration, energy demand is expected to climb 30 percent by 2030, even as the economy uses it more efficiently. Fossil fuels will continue to dominate the nation’s energy mix.

Yet Congress is punishing production. The House bill imposes $16 billion in additional taxes on the oil and gas industry and breaks contract terms over royalties paid on energy leases. Incentives built into the 2005 Energy Policy Act are rolling back, undermining an infrastructure- and investment-heavy industry that measures projects in terms of decades.

In addition, a requirement that utilities produce 15 percent of their power from renewable sources — given current technology, simply unfeasible — will increase electricity costs for consumers, most dramatically in southern states with little access to energy alternatives like wind power.

The Senate’s more modest energy effort still replaces realistic policy-making with anti-energy populism. Vague language against “price gouging” will disrupt market forces, discouraging the supply of gasoline and other fuels. The U.S. automobile industry also comes in for punishment, as the Senate passed extreme CAFE standards that will produce vehicles no one wants to buy.

The NAM strongly supports legislation to encourage energy conservation, efficiency and development of renewable fuels. We must also make full use of our domestic energy resources, including the fossil fuels that are responsible for the generation of the vast majority of U.S. electricity.

Congress needs to use the August recess to reconsider its energy legislation, to reconnect with the real-world, energy-dependent economy that employs America’s men and women. And if Congress wants to be serious about energy reforms, it’s time our elected officials acknowledge that our nation’s vast energy supplies are an economic strength, not an environmental liability.