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How we can fix U.S. energy policy


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May 04, 2008 | comments
As the political finger pointing begins in Washington, D.C., Congress would serve itself well by looking in the mirror. Traveling around Wisconsin's 1st Congressional District, I routinely hear about how high gas prices are reducing people's paychecks.

Well, last week in Janesville, more than 750 people found they soon will lose their entire paychecks. Why? General Motors announced that due to high fuel prices and sluggish sales, Janesville's GM plant is eliminating its second shift of production of its large SUVs.

As a fifth-generation native of Janesville, I grew up learning the old saying, "As GM goes, so goes Janesville." These layoffs are a devastating blow to our town and a harsh reminder of the consequences of our incoherent national energy policy.

There are five clear examples of how the federal government has exacerbated this problem and how Congress could alleviate the mess it helped create:

One: Drill for oil
As demand outpaces supply, energy prices continue to soar. Congress is wasting its time asking Saudi Arabia, Venezuela, Iran and others to boost their energy supplies for our consumption. Members of Congress should instead be pursuing initiatives that would boost supply here at home. For example, the U.S. Energy Information Administration has reported that more than 10.4 billion barrels of oil could be recovered from beneath the Arctic National Wildlife Refuge (ANWR). Technological advancements, such as directional drilling, would allow for responsible exploration and leave a minimal environmental footprint, affecting only 2,000 acres (out of ANWR's nearly 20 million acres). Full use of this field alone would boost our domestic production by an estimated 20%. Congress also should pass legislation that would allow efforts to explore oil and natural gas resources in the outer continental shelf. In the last session of Congress, the House passed legislation that would have allowed this, but these efforts died in the Senate by a filibuster. Unfortunately, the new leadership in Congress refuses to even allow these measures to be considered.

Two: Build more refineries
Congress can take additional steps to put downward pressure on prices by streamlining the process for building new refineries. In the past three decades, there has not been a single refinery built in the United States. As a result, we have relied on an increasingly larger share of imported refined product. Rather than making use of refineries here at home, we have dramatically increased our reliance on refined product from abroad. The Refinery Permit Process Schedule Act of 2006 would have cut down the bureaucratic red tape that stood in the way of building new refineries, and allows for building refineries on abandoned military installations. After passage in the House with my support, this legislation languished in the Senate and the new leadership has not allowed this to be taken up in this session of Congress as well. Congress' failure to clear a path for new refineries has made us increasingly dependent on foreign sources of refined petroleum, directly resulting in higher gas prices.

Three: Streamline fuel blends
Congress should end its mandates for specialized "boutique" fuels for different regions of the country and different seasons of the year. I have been active on advancing legislation that would cap the required number of reformulated gasoline blends throughout the nation and allow for fuel waivers in the case of supply emergencies. Unfortunately, strong opposition has come from the oil industry, which has helped kill a number of our efforts to remove these distortions and reform our fuel distribution system. This provides a straightforward opportunity for Congress to take action and end the fragmentation of our gasoline supply.

Four: Don't rely on food for fuel
This Congress has passed an energy bill. It quintupled the ethanol mandate. In a classic case of unintended consequences, this overreaching ethanol mandate has led to serious problems for families in Wisconsin and around the world. By converting food to fuel, prices for both have risen. The U.S. Department of Agriculture has recently reported that the monthly grocery bill for the average American family is $70 higher today than it was just a year ago. The ethanol industry was not ready to take this kind of supply shock, and federal efforts to pick the winners and losers in the marketplace have had devastating consequences in food market. Worse yet, this situation is igniting a counterproductive backlash against agriculture. Congress can promote a more reasonable path to alternative energy by investing in the basic research to develop the ideas of tomorrow, such as using corn stalks and switch grass, rather than food, for energy.

Five: Stop stoking inflation
Additional responsibility for our current state of affairs rests with the Federal Reserve, whose dramatic interest rate cuts since last fall have pushed crude oil prices to new heights and stoked inflation. Inflation erodes the value of American's paychecks and savings, and adds to the burdens of a rising cost of living. Congress is in a position to put our monetary policy on solid economic footing by reviewing the dual - and often contradictory - mandate, which directs to the Fed to focus on both long-term price stability and short-term economic growth. This past week, I have proposed the Price Stability Act of 2008, which will make the Fed's overriding policy goal to control inflation. For a real economic stimulus package, Congress should commit to sound money policies.

The flaws and failures of Congress have done much to contribute to our current energy crisis. There are concrete steps that Congress can take that will move us toward a coherent approach to a sustainable energy policy and put immediate downward pressure on energy prices. The American people have rejected gas price pandering and finger-pointing; you deserve responsible leadership and must demand it.


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