Spencer Abraham

"Do we have an energy policy and a regulatory structure...," Mr. Abraham asks rhetorically?

Right now, an estimated 40 percent of potential gas resources in the United States are on federal lands that are either closed to exploration or covered by severe restrictions. The last lease sale in the Gulf of Mexico was more than a decade ago. New discoveries of natural gas in the United States have fallen for three straight years, creating increasing pressure for more imports.

"Americans will consume 62 percent more natural gas than we do today. More than 9 cut out of 10 of the announced new electric generating plants will be fired by natural gas," Mr. Abraham projected.

"Even if we find the supplies, moving that gas to market will require an additional 38,000 miles of transmission pipeline and 255,000 miles of distribution lines - at an estimated cost of $120-150 billion."

Today's pipeline system can hardly handle the supplies we know exist. Alaska's Prudhoe Bay, for example, produces about 8 billion cubic feet of natural gas a day--about 3 percent of America's daily consumption. But that gas never reaches the market. Instead, it is just pumped back into the ground, waiting until a pipeline is built to connect Alaskan fields to the U.S./Canada distribution system.

We also face a real challenge in generating enough electricity. Over the next 20 years, DOE estimates that electricity demand in the United States will increase by 45 percent. That rising growth rate will require the construction of 1,300 new power plants - about 65 every year.

This could turn out to be a conservative estimate. Some experts calculate that the demands of the Internet already consume some 8-13 percent of electricity. If demand grows at just the same pace during the last decade, we'll need nearly 1,900 new plants by 2020 - or more than 90 every year - just to keep pace.

America's demand for oil is projected to increase by 33 percent. Yet as consumption surges, US production continues to drop precipitously. We now produce 39 percent less oil than we did in 1970, losing nearly 4 million barrels a day in the process. The widening gap between demand and domestic supply will make us increasingly dependent upon foreign imports. America imported 36 percent of oil in '73. Today, we import 54 percent.

The number of American refineries has been cut in half. There hasn't been a new refinery built in the United State in over 25 years. New regulatory interpretations limit the ability of existing refineries to expand capacity. Add to that regulations that require the production of more than 15 different types of gasoline - and you have a refining industry strained to capacity, leaving us dangerously vulnerable to regional supply disruptions and price spikes.

Coal generators have already been called upon to make broad reductions in emissions. The Bush Administration supports those efforts - and we back it up with greater incentives for investment in clean coal technology.

But the administration will not regulate coal out of existence, and we will not support measures that threaten electricity supplies and significantly raise electricity prices. If America is to have reliable electricity over the next 20 years, coal must continue to play a major role, Mr. Abraham said.

But, coal is not the only energy source facing an uncertain future. There hasn't been a new nuclear power plant permit granted since 1979. Many of the 103 existing nuclear plants are not even expected to file for a renewal of their licenses as they expire over the next 15 years.

Even hydroelectric power generation is expected to fall sharply. Relicensing a hydro facility can take a decade or more and cost millions. And now, even though consumers are faced with potential blackouts and chronic electricity shortages in the West, activists and some political leaders want to breach more of the four federal dams on the Snake River to help young salmon, on their trek to the sea.

"I wish I could say that the energy crisis now sweeping the nation has shocked the political system into action. But like other political discussions the debate over energy seems as deeply polarized as ever, "Mr. Abraham admitted.

The two extremes in our energy debate are founded on several enduring myths--myths that today conspire to block any true advance toward a rational and stable energy policy in the United States.

Myth Number 1: It is impossible to balance energy exploration and environmental protection.
Today, satellites and computers are the tools of choice in the exploration business. Oil and gas exploration with cutting-edge technology means fewer rigs, fewer roads and fewer pipelines. Drilling operations that required 65 acres in the 1970s need only 10 acres today.

Myth Number 2: All our current problems are due to an energy industry that is engaged in a massive conspiracy.
This myth has been punctuated by calls for investigations into everything from last summer's Midwest gasoline price spikes, to recent allegations that power generators in the West have been withholding electricity. We have a fair and objective process for judging these claims--and action will be taken when it is merited. The Federal Energy Regulatory Commission ordered power companies to rebate some $124 million to California utilities. Meanwhile, the Federal Trade Commission recently cleared gasoline suppliers of all charges relating to last summer's price increases.

Earlier this year, one company proposed building a $400 million power plant in California that would have provided enough additional electricity to light 600,000 homes in energy-starved Silicon Valley. The company pledged to plant 800 new trees to beautify the area. They proposed cloaking the power station in a brick facade to make it essentially indistinguishable from a high-rent office complex. They even promised to help maintain the local habitat for the endangered bay checkerspoon butterfly.

Their environmentally-sensitive plans won the support of the Sierra Club, the American Lung Association and the NAACP. But city officials voted unanimously -- 11-0 -- to reject the plan. In an editorial, the local paper called this move "Dumb and Dumber."

Myth Number 3: The Bush energy plan is focused almost exclusively on opening the Arctic National Wildlife Refuge (ANWR) to exploration--a move that would buy us only about 6 months worth of American consumption while destroying a pristine natural wilderness, not to mention disrupting the breeding ground of the Porcupine Caribou.
Let's separate fact from fiction when it comes to ANWR. First, according to estimates by the US Geological Survey, ANWR holds between 5.7 to 16 billion barrels of recoverable reserves--with a mean estimate of 10.4 billion barrels. And based on December 2000 figures, it would free us from about 54 years of oil imports from Saddam Hussein and Iraq.

Second, exploration would impact only about 2,000 acres out of more than 19 million. To put that in perspective, the massive Arctic National Wildlife Refuge is about the same size as the entire State of South Carolina; the two thousand acres that would be affected is less than half the size of Dulles airport.

And as for the caribou, the herd in the Prudhoe Bay area grew more than 9-fold over the past 20 years to an estimated 28,000 in 2000--seemingly irrefutable evidence that caribou mating and oil exploration can peacefully coexist.

Myth Number 4: Government subsidies and tax breaks are the best way to encourage new exploration and production of energy.
This administration will continue to support funding for energy research and development initiatives. But capital is best allocated to its highest uses through the workings of the free market, not manipulations of the tax code.

Government regulatory policy should not be aimed at picking winners and losers in any market, including energy. Neither should tax policy.

Myth Number 5: We can forego traditional sources and instead meet rising energy demand by harnessing wind, geothermal, solar and other forms of renewable power.
Excluding hydro-power, renewable sources currently generate about 2 percent of America's electricity. Billions have been invested in developing renewable energy--and will continue to be invested under the Bush Administration. But renewables have yet to overcome the economic advantages of conventional energy sources.

Even with promising advances in research and development, renewables will only provide, according to Energy Information Administration estimates, about 6 percent of our total electricity consumption by 2020. Even if renewables exceed our most optimistic expectations, they would still supply only a fraction of our needs over the next 20 years.

Myth Number 6: Price controls are the answer to today's energy crisis.
Memories are short, aren't they. So let me remind everyone. America imposed price controls on oil and gas in the 1970s. They were an utter failure. They led to shortages and rationing and the idea that America was gripped by malaise.

The Bush Administration does not support price controls. Price controls on electricity will lead to more blackouts. Price controls on gasoline will lead to gas lines. Price controls will deepen America's energy crisis, because they won't reduce demand, but they will cripple incentives for desperately needed new investments in energy supply.

"The challenges are formidable---the warning signs are obvious---but I am optimistic because I know this administration's commitment is equal to the task.

Our national energy policy will be comprehensive. Our national energy policy will be hemispheric. Our national energy policy will stress the need to diversify America's energy supply. It will be founded on the understanding that diversity of supply means security of supply...and that a broad mix of supply options...from coal to windmills, nuclear to natural gas--will help protect consumers against price spikes and supply disruptions. And our national energy policy will be balanced," Mr. Abraham concluded.