Congress Talking About Need for New Energy Bill

"Hurricane Katrina exposed the harsh reality that we have been ... skating on thin ice".

Published: 08-Sep-2005

WASHINGTON (Dow Jones)--Pointing out that Hurricane Katrina has highlighted vulnerabilities in the U.S. energy system, key senators on a U.S. Senate energy panel Tuesday suggested the need for new energy legislation that would immediately address escalating gasoline and natural gas prices.

Congress recently passed a massive, wide-ranging energy bill enacted into law in early August, but lawmakers agreed that while the new policy will set the country on a path towards oil independence in the long-run, steps need to be taken to bring down prices in the near-term. During a Senate hearing on escalating energy prices that lasted over three hours Tuesday, they agreed that there are still some issues, like the need for more refining capacity and higher vehicle fuel efficiency standards, that still need to be addressed through new legislation.

"I believe we must take another look at the CAFE (corporate average fuel economy) standards," said Committee Chairman Sen. Pete Domenici, R-N.M.,
naming one of the many issues he thinks needs to be addressed through new energy legislation. "Hurricane Katrina exposed the harsh reality that we have been ... skating on thin ice."


Specifically, Domenici said there's still need for some kind of gasoline and oil act, or what he dubbed the "Go Act."

"I hope we can pull together on a few more issues," he said.

The Go Act, he said, should encourage citizens to conserve, increase fuel efficiency standards, develop more domestic supplies like the Outer Continental Shelf, increase refinery capacity, and eliminate the proliferation of so-called boutique fuels.

He also said Congress may need to look into whether the Federal Trade Commission has the proper tools to investigate alleged price gouging. He noted that about 20 states have price-gouging laws and, in the wake of the hurricane, other states are looking to enact them. If there's a way for the U.S. government to help, "we should look at it," said Domenici.

Sen. Larry Craig, R-Idaho, agreed that the recently-passed energy bill "is not a cure-all."

"Increasing domestic supplies, such as drilling in (Alaska's Arctic National Wildlife Refuge) must be a part of the equation," he said.

Sen. Jeff Bingaman of New Mexico, the top Democrat on the Senate energy panel, also said that Congress needs to look into more ways to increase and diversify refining capacity and that vehicle fuel efficiency "is an issue we could revisit."

Although the issue came up earlier this year during debate on the recently enacted Energy Policy Act of 2005, Democrats - who made the issue a top priority for the legislation - were unable to garner enough votes to include a provision increasing fuel efficiency standards in the comprehensive energy bill.


Meanwhile, several other lawmakers offered up ways Congress should address high energy prices.

Sen. Byron Dorgan, D-N.D., for instance, said he plans to introduce a bill called the "windfall profits rebate act" Wednesday that would impose an excise tax on crude oil priced over a certain level. Dorgan said the revenues collected would be sent back to consumers in the form of a rebate and there would be exemptions for companies that invest in additional production or refining capacity.

"I think this Congress has to stand up for the interest of the American consumer," said Dorgan. "This is about as far from a free market as anything I know."

Sen. Lamar Alexander, R-Tenn., said the administration should move to allow drilling off the coast of Alabama while Sen. George Allen, R-Va., suggested that there's a need to permanently waive regulations on gasoline blends aimed at meeting air quality laws.

AAA President and CEO Robert Darbelnet, who testified before the panel, agreed that "too many gasoline blends, an outdated fuel economy test and too many large vehicles, have contributed to making the nations gasoline supply vulnerable in the aftermath of Hurricane Katrina."

Darblenet said Congress should require improvements in fuel economy standards and urged lawmakers to create a uniform federal standard for clean gasoline to eliminate "the current patchwork of multiple fuel blend requirements throughout the nation." So-called "boutique fuels," he said, have led to price volatility and regional supply disruptions.

John Dowd, a senior research analyst at Sanford C. Bernstein & Co., told the panel that improving the average fuel efficiency of the entire U.S. vehicle fleet by just 2 miles per gallon would reduce total U.S. gasoline demand by about 1 million barrels per day. He also said that simply obeying speed limits "would probably conserve more fuel than will be lost by the refinery outages." Driving 60 miles per hour instead of 70 miles per hour improves fuel efficiency by 15%, he said.

"If Americans want to know what they can do to limit gasoline price inflation, the answer is simple: slow down," he said.

Meanwhile, Sen. Richard Burr, R-N.C. asked Guy Caruso, chief of the Energy Information Administration, if it would make sense for the U.S. to have a strategic refined products reserve that would hold an emergency stockpile of products like gasoline. That would be "`a very expensive proposition," but "it's something worth looking at," said Caruso, another witness.

Sen. Maria Cantwell, D-Wash., said she plans to introduce legislation later this week that would give the president authority to declare an energy emergency and halt price gouging.

"We need to make sure we have every tool in the toolbox to prohibit oil profiteers from taking advantage of this tragedy," said Cantwell. Cantwell said her bill would also require full disclosure of wholesale gas pricing policies and give stronger enforcement authority to the Federal Trade Commission, U.S. Department of Energy, and the U.S. Department of Justice. It would also encourage an investigation into zone pricing and enable the president to control costs during emergency situations, she said.


Asked by the government officials testifying before the committee what would have an immediate impact on escalating energy prices, they pointed to conservation.

"Conservation is the best short-term initiative we can take," said Caruso of EIA. He also said making the nation's emergency oil stockpile available until offshore production can be restored would help as well as would efforts supporting electric utilities, which are working to restore power, which the refineries would need to start operations back up.

Rebecca Watson, assistant secretary for land and minerals management at the U.S. Department of Interior's Minerals Management Service, agreed that conservation is important. She also added, however, that "we need to develop" energy supplies in Alaska, offshore, and on continental lands.

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February 28,2006 address to National Governor's Ethanol Coalition.


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