The Politics of Energy

Lead story from July-August issue of Centerpoint, the Center's newsletter

Jul 01, 2005

For the third consecutive Congress, the House and Senate are trying to negotiate a national energy policy. But despite public anger over high gasoline prices, it is uncertain the 109th Congress will be able to succeed where its two predecessor Congresses could not.

The energy issue has inspired several meetings at the Wilson Center in recent months, one of which was a Congress Project seminar on May 16 that compared recent legislative action with the congressional responses to the twin oil shocks of the 1970s.

Panelists agreed that getting the pieces of this complex energy puzzle to fit together is a challenging political feat, but some claimed Congress and the president were working with the wrong pieces of the puzzle. Representative Ed Markey (D-Mass), a member of the House energy and resources committees which share jurisdiction over the bill, said the bill the House passed would actually increase the price of gasoline by 3 to 8 cents a gallon because of the ethanol mandate.

Markey said the bill—-which the House passed in April by a 66 vote margin and the Senate was debating as of late June-—only further subsidizes traditional energy sources such as coal, oil, and natural gas, while doing little to encourage renewable energy or increased conservation and efficiency measures.
"Unless there is a substantial retreat reflected in what the [House and Senate] Republicans decide to put in the final bill," said Markey, "then we're heading for the same kind of gridlock that we had the last time."

Two Congresses ago, the energy bill died in House-Senate conference committee in October 2002 where it had been stalled for four months. In the last Congress, the conference report on the bill died of a Senate filibuster in November 2003.

Political scientist Bruce Oppenheimer compared the energy crisis and the successful congressional efforts of the 1970s to today's situation. He said today there is much less media, and thus public, attention to the problem, which he attributed to the lack of long gasoline lines today and people growing more accustomed to gas price fluctuations. He underscored the need for greater media coverage in order to pass something as controversial as energy legislation.

Oppenheimer also said Congress is much more partisan today, lessening the incentive for bipartisan cooperation. "In the 70s, you built coalitions in the middle, and it was the liberal and conservative extremes that tried to defeat the middle," Oppenheimer said. But today, he said, the policy is built from the middle of the majority party outward. In addition, today there are fewer Democrats in the energy-producing states and fewer Republicans in the energy-consuming states, reinforcing this split in party terms.

Washington Post reporter Dan Morgan said, "I agree the media has really neglected the story." He observed that this year's energy debate is looking much like what occurred in the last two Congresses and the same issues are the main sticking points that could defeat the final bill. Those issues include whether to drill in the Arctic National Wildlife Refuge (ANWR), and whether to extend liability protection to the manufacturers of MTBE (methyl tertiary-butyl ether), a gasoline additive designed to produce cleaner emissions, yet also responsible for groundwater contamination. The House version protects MTBE makers from liability suits without providing funds for local communities to pay for the cleanup.

In addition, Morgan said he believes Congress is lagging behind public opinion. As examples he cited General Electric's announcement to spend $2 billion on environmental investments and the popularity of hybrid cars. "That's a message that people are sending to Congress," he said, "and I don't think Congress is really hearing it." Investor-owned utilities are discussing a cap on carbon while 18 states and the District of Columbia are requiring utilities to utilize renewable fuels by a target date. But none of this is reflected in the energy legislation, Morgan said.

Alex Flint, the Senate Energy Committee's staff director, said unlike the House, which tends to be partisan, "in the Senate this year, there has been a process of inclusiveness," as committee chairman Senator Pete Domenici and his Democratic counterpart Senator Jeff Bingaman work toward a bipartisan compromise.

Flint said he worries about the future energy outlook, particularly the U.S. ability to meet emission standards. "If we cannot convert coal into a clean alternative, we are in deep trouble," Flint noted, since coal-fired plants generate so much of our electricity. He also expressed concern over Asia's growing demand for energy, especially China. This topic was the subject of another Wilson Center seminar later that month on the role of national oil companies in China's international energy policy.

China: A Growing Energy Consumer
China's rapidly rising requirements for imported energy have motivated China's state petroleum companies to explore overseas development opportunities. These companies are active or seeking prospects in about 50 countries.

The scale, geographic scope, and context of these projects have potential implications for global oil markets, for other petroleum companies, and for host governments. China's national oil companies (NOCs) are becoming more competitive—exhibiting willingness to invest in highly risky areas, such as in Sudan, and to overbid to secure profitable markets, such as in Venezuela.

While expending considerable effort in the international arena, the Chinese government has made little progress in developing regional energy cooperation in Northeast Asia. At the May 26 seminar, co-sponsored by the China Environment Forum and the Program on Science, Technology, America and the Global Economy, panelists noted that some existing regional institutions—such as the trilateral ministerial meetings among Japan, China, and South Korea; Tumen River Project, and the Korean Economic Development Organization—could provide forums for such energy dialogues.

The geographic juxtaposition of three major energy importing nations (China, Japan, and Korea) and a major energy-exporting nation (Russia) provides the opportunity for cooperation that could yield long-term benefits to all players. But progress has been constrained by the nature of their respective national energy policies and mutual distrust.

Canada: A Reliable Energy Supplier
The Canada Institute recently held its third U.S.-Canada Energy Forum with the Canadian Centre for Energy Information, sponsored by EnCana Corporation. More than 50 Canadian and U.S. representatives from government, the private sector, and associations gathered to discuss challenges to North America's natural gas supply.

Canada remains the United States' largest foreign energy supplier, having exported more than $30 billion worth of energy to the United States in 2002, according to Canada's Energy Information Administration. With 180 billion barrels of oil reserves—mostly in oil sands—Canada also possesses vast offshore and renewable energy resources. The United States imports 15 percent of its natural gas and 17 percent of its crude and refined oil products from Canada, more than from any other single country.

American Petroleum Institute President Red Cavaney said developing new domestic sources of natural gas will require increasing access to onshore reserves, streamlining the costs and procedures involved in obtaining required permits, lifting constraints on offshore areas, expanding access to world gas supply, and expanding the infrastructure that delivers natural gas to consumers.

Greg Stringham, vice president for markets and transportation of the Canadian Association of Petroleum Producers, asserted that Canada's natural gas production is increasing and advocated greater cross-border cooperation at the federal and provincial levels. Reiterating the reliability of Canada's natural gas resources was Graham Flack, associate assistant deputy minister for energy policy at Natural Resources Canada. He described the extent to which North America's gas system is integrated, with the continental pipeline system enabling the U.S.-Canada natural gas market to operate as a single, borderless economic space.

North America's natural gas industry owes much of its success to its market structure and culture of cooperation, said Skip Horvath, president of the Natural Gas Supply Association. But the gas industry should better educate the general public and government, while taking into account environmental concerns, said Canadian Gas Association President Michael Cleland. He emphasized promoting the attributes that make natural gas an attractive source of energy, particularly its environmental performance, inherent efficiency, and adaptability.

James Slutz, deputy assistant secretary for oil and natural gas at the U.S. Department of Energy, said, "Energy is the cornerstone of a strong U.S.-Canadian relationship." He highlighted the growing interdependence of the Canadian and U.S. economies and the need for further bilateral dialogue in meeting the continent's growing energy demands.

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