Order Code RL31720
CRS Report for Congress
Received through the CRS Web
Energy Policy: Historical Overview,
Conceptual Framework, and Continuing Issues
Updated December 21, 2004
Robert Bamberger
Specialist in Energy Policy
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

Energy Policy: Historical Overview,
Conceptual Framework, and Continuing Issues
Summary
The persistent attention being given to energy policy has its roots in an
unexpected jump in oil prices that began in the late spring of 1999, following a
production cut by the Organization of Petroleum Exporting Countries (OPEC). This
supply change affecting fuel prices was the fourth significant episode since 1973 to
jog American awareness of the extent to which the U.S. economy and lifestyle
depends on inexpensive and plentiful energy. When the United States experiences a
period marked by sharp increases in the price for energy and concern about the
adequacy of essential supplies, there is widespread concern that the nation has no
energy policy. The nation has, in fact, adopted several distinct policy approaches
over the years, many of the debates turning around the question of the appropriate
extent of the federal government’s role in energy.
The fashioning of national energy policy is complicated by the fact that a review
of the years since the time of the Arab oil embargo and first oil price shock in 1973
reveals that it is more accurate to see this 30-year period as one of general price and
supply stability that is periodically broken by shorter episodes of supply disruption
and price volatility. It isn’t so much that energy policy has failed to be responsive to
crises; rather, during lengthy periods of stability and declining prices for conventional
fuels, it has proven difficult to sustain certain policy courses that might help shield
the nation from the occasional episodes of instability. Awareness has also grown
about the complexity of constructing a balanced energy policy that will not
undermine other competing and equally legitimate policy goals.
Traditionally, the energy debate has been the most vigorous over the balance to
be struck between increasing supply and encouraging conservation. However, when
markets are unstable, debate turns on another axis as well, that of short-term versus
long-term policies. There are other alternatives. For example, tax policy can affect
energy price directly to the extent that excise taxes on fuel products can be raised or
lowered. Programs such as the Low Income Home Energy Assistance Program
(LIHEAP) can provide direct assistance to families whose quality of life is especially
burdened by high energy prices. Lastly, Congress always has the option to require
study and analysis of a problem before settling on a policy course.
Energy policy issues of continuing interest include whether or not to open up the
Arctic National Wildlife Refuge (ANWR) for leasing; settlement upon a pipeline
route to allow production of Alaskan natural gas; access to public lands for energy
exploration and development; restructuring of the electric utility industry to
encourage competition and consumer choice; raising corporate average fuel economy
(CAFE) standards for motor vehicles; seeking effective means to promote energy
conservation using currently available technologies; and development of new
technologies and alternative fuels.
This report has been prepared at the outset of the 109th Congress to provide
background context, and will not be updated.

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Energy Policy Since the 1973-74 Arab Embargo . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Period of Oil Price Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Early Effects of a Market-Oriented Energy Policy . . . . . . . . . . . . . . . . . 2
Other Responses to the Disruptions of the 1970s and 1980s . . . . . . . . . . . . . 3
The Challenge Faced by Policymakers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
An Energy Policy Schematic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Current Context: What’s Now Different? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Major Unresolved Energy Issues
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Petroleum and Natural Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Clean Air Standards and Gasoline Supply and Distribution . . . . . . . . . 8
Drilling in ANWR and on Other Federal Lands . . . . . . . . . . . . . . . . . . 8
Natural Gas Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Electricity Regulation and Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Conservation and Energy Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
The Uncertain Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
List of Tables
Table 1. A Schematic of Energy Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Energy Policy: Historical Overview,
Conceptual Framework, and
Continuing Issues
Introduction
The persistent attention currently being given to energy policy has its roots in
an unexpected jump in oil prices that began in the late spring of 1999, following a
production cut by the Organization of Petroleum Exporting Countries (OPEC).
Expecting that oil prices would soon drop again, refiners drew down existing, lower-
cost inventories of refined products and crude oil rather than purchase higher-priced
new supplies. But instead of declining, prices rose even higher as OPEC
demonstrated a sustained level of discipline that had not been seen since the 1970s.
With crude and product inventories down during the winter of 1999-2000,
severe weather disrupted waterborne transport of home heating oil to New England,
leading to sharp price increases that spread to diesel fuel as well. Then, in the
summer of 2000, inadequate supplies of blending components used in the
manufacture of reformulated gasoline to meet clean-air objectives, among other
problems, led to shortages of gasoline in the Midwest and California with some
prices exceeding, for a time, $2.00/gallon. In the winter of 2000-2001, natural gas
prices spiked because of low inventories and strong demand, which exacerbated a
crisis in western electricity supplies. In early 2003, oil prices were reaching into the
mid-$30’s. Prices rose even higher during 2004 — exceeding $50 per barrel for a
brief period — owing to growing world demand both in the United States and the Far
East, inadequate refining capacity, and Hurricane Ivan, which reduced U.S.
production from the Gulf of Mexico for several months.
This continuing period of volatility in fuel supplies and prices has been the
fourth significant episode since 1973 to jog American awareness of the extent to
which the U.S. economy and lifestyle depends on inexpensive and plentiful energy.
When the United States experiences a period marked by sharp increases in the price
for energy and concern about the adequacy of essential supplies, there is widespread
concern that the nation has no energy policy. However, not only does the nation have
an energy policy, it has adopted several distinct policy approaches over the years.
This report discusses those major policy approaches, provides a conceptual
framework for categorizing energy policy proposals, and briefly describes issues that
remain current in the debates over energy policy.

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Energy Policy Since the 1973-74 Arab Embargo
In the thirty years since the Arab oil embargo, the United States has pursued a
number of different energy policy courses. In the course of several episodes during
this period when oil price and supply became unstable, the U.S. moved from a set of
policies more reliant on the federal government, to policies more dependent upon
markets. This history is briefly summarized in the section to follow.

The Period of Oil Price Controls
In the aftermath of the Arab oil embargo in 1973, many looked to government
to solve the problem, for both the short- and long-term. By 1975, refiner acquisition
costs for imported crude oil had roughly tripled, rising from an average cost of
$4/barrel (bbl) in 1973 to $12.50/barrel in 1974. However, refiner acquisition costs
for domestic crude did not even double — from $4/bbl to $7/bbl — owing to a
system of federal price controls that kept the price of domestic production below the
market price. This discouraged domestic production and encouraged imports.
However, controls may have helped insulate consumers from some of the price
increase, which was the intended effect.
Automobile fuel economy standards were enacted during the late 1970’s to
reduce gasoline consumption in the transportation sector. At the same time, hopes
were invested in government-funded research and development of conservation
technologies and alternative fuels.
A second supply interruption was triggered in1979 by the fall of the Shah of Iran
and the loss of Iranian oil to world markets for several months. A phased
deregulation of oil prices, enacted in 1975 in the Energy Policy and Conservation Act
(EPCA, P.L. 94-163), was designed to enable prices to become more responsive to
market conditions. But, the pace of the deregulation was conceived to be gradual. At
the time of the Iranian revolution, product prices in the United States were still
subject to some control. The result was long lines at U.S. gas pumps.
The Early Effects of a Market-Oriented Energy Policy
Letting the market set prices, supporters of deregulation had argued in the 1975
debate, would encourage the development of additional domestic supplies of oil as
well as the development of alternative energy sources. Shortly after assuming office
in 1981, President Reagan accelerated the EPCA schedule for price decontrol.
Energy policy, in general, became more market-oriented, and the government role
was lessened.
Sustained high crude oil prices contributed to a reduction in U.S. petroleum
consumption from 18.8 to 15.2 million barrels per day (mbd) from 1978 to 1982;
there was more substitution of other fuels for oil, more efficient consumption of oil,
and price-induced conservation. Higher prices resulted in new oil production from
non-OPEC nations, allowing the United States and other consuming nations to
diversify their sources of supply. Faced with a loss of market share and revenue,
OPEC increased its own production in the mid-1980s, thereby lowering the price for

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crude oil. In the course of the year from 1985 to 1986, world oil prices plunged. In
the United States, refiner acquisition cost for imported oil fell from $27/barrel to
$14/barrel.
Prices remained depressed until a fresh round of spikes in oil prices occurred in
1990-91 following Iraq’s invasion of Kuwait in early August 1990. That resulted in
a cut-off of 4.3 million barrels per day (mbd) from world markets. The price of oil,
which had averaged $16/bbl at the end of July 1990, exceeded $28 by late August
and reached $36/bbl in September 1990.
Responding to the Iraqi threat, Western and Middle Eastern nations found
common ground that would have been unimaginable a decade earlier. By the late
1980s, recognition had grown of the interdependence of oil-producing and oil-
consuming nations; the OPEC nations had come to recognize that long-term demand
for their oil was jeopardized by any prolonged period of high oil prices. Most did not
wish to repeat the cycle of the early- to mid-1980s and boosted their production to
make up for some of the lost supply. Consuming nations also coordinated the release
of strategic stocks of crude and products. Prices began to fall in mid-October 1990
when the United Nations approved the use of force against Iraq. Prices fell more
sharply after the United States and a consortium of nations began conducting air
strikes on Iraq in mid-January 1991.
Other Responses to the Disruptions of the 1970s and 1980s
During all of these episodes, importance was placed on conservation, more
efficient use of energy, and development of alternative energy sources. The oil shocks
of the mid- and late-1970s spurred considerable spending on alternative fuels —
including solar, geothermal, wind, clean coal, synthetic fuels, alcohol-based fuels —
and technologies to improve the efficiency of energy use. Regulations were
developed to improve the efficiency of home appliances and to incorporate more
energy-efficient designs in buildings. In the early 1980s, states and utilities promoted
energy efficiency as one form of “demand-side management” to reduce the need for
construction of new power plants. Many industries re-engineered their processes to
save energy. Conservation and efficiency were championed by some as a lower-cost
and more environmentally appealing way to achieve greater energy security than
policies to boost supply. However, largely because of the generally lower prices over
time for fossil fuels — as is noted below — these energy programs have shown
mixed results.
The Challenge Faced by Policymakers
As suggested earlier, each episode of short supply and higher prices spurs
concern that the nation lacks an energy policy and has ignored past lessons.
However, it is apparent from a review of the years since the time of the Arab oil
embargo and first oil price shock in 1973 that it is more accurate to see this 30-year
period as one of general price and supply stability that is periodically broken by
shorter episodes of supply disruption and price volatility. It isn’t so much that energy
policy has failed to be responsive to crises; rather, during lengthy periods of stability
and declining prices for conventional fuels, it has proven difficult to sustain certain

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policy courses that might help shield the nation from the occasional episodes of
instability.
An energy policy that would most effectively shield the nation and the economy
from the worst effects of supply shortages would be a policy that might well deny the
nation the full benefits of cheap and plentiful energy when markets are stable. The
periods of relative calm and stability result in a markedly uncertain environment for
investment in alternative fuels, energy efficiency technologies, and boosting the
production of conventional fuels in regions where production costs are significantly
higher than in the Middle East. State and local regulations and codes further cloud
the climate for investment. Local opposition to new on- and off-shore production
projects, power plants, electric transmission lines, refineries, and pipelines is often
most effective during periods of price and supply stability, but sometimes eases only
after shortages have actually occurred.
An Energy Policy Schematic
Constructing a balanced energy policy that will not undermine other competing
and equally legitimate policy goals is a complex problem. How to boost energy
supply without exacting an unacceptable toll on the environment? How, then, to
reduce gasoline consumption, a commodity central to the nation’s economy and
lifestyle, when raising its price to achieve a meaningful reduction in demand could
be economically disruptive and politically unappealing? Should federal policy
encourage the use of more expensive alternative fuels and technologies that heighten
efficiency, when OPEC has generally demonstrated a capability to adjust the price
of oil to keep it far cheaper than its substitutes?
Debate over energy policy has produced an enormous range of proposals, many
of which have been adopted at one point or another over the years. In general, it is
helpful to recognize the broad categories into which most proposals fall: Most energy
policies are designed to affect either the supply of or the demand for energy products,
and they are, at the same time, designed to have an effect either in the near term or
the longer term.
Traditionally, the energy debate has been the most vigorous over the balance to
be struck between increasing supply and encouraging conservation. However, energy
policy turns on the additional axis of short- and long-term policies. In the midst of
high prices during the spring of 2001, policymakers were pressed to come up with
immediate policy responses that would afford consumers price relief. However, at
that time President Bush was advising Congress and Americans that the
Administration’s soon to be released energy policy plan would focus on long-term
remedies for the nation’s energy problems and that there would be no immediate
relief for consumers paying higher prices for gasoline, electricity, and other fuels.
The President and his supporters suggested that by setting out an action-oriented and
actionable comprehensive policy, markets and consumers should feel some short-
term reassurance. This did not quell all the demands for more immediate action to

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reduce energy prices. Nor were they completely quelled during the protracted debate
over omnibus energy legislation during 2003 and 2004.1
It is useful to clarify the differences between short-term and long-term policy
initiatives. For example, a drawdown of oil from the Strategic Petroleum Reserve
(SPR) affects crude oil supply in the near term. However, enactment of tax
incentives for investment in new oil drilling technologies might add to domestic
crude supply further in the future. Proponents of drilling in the Arctic National
Wildlife Refuge (ANWR) argue it might add anywhere from 300,000 b/d (barrels per
day) to 1.4 mbd to U.S. domestic supply, but this, too, is a longer-term policy
initiative.
Turning to the consumption side of the ledger, boosting the federal gasoline tax
by $1.00/gallon might be expected to reduce gasoline consumption in the near term,
but increasing the corporate average fuel economy (CAFE) standards on new motor
vehicles would not take full effect until older vehicles were largely replaced, a
process that could take more than a decade.
The table below suggests a way in which many energy policies may be
visualized along these lines:
Table 1. A Schematic of Energy Policies
Affecting Supply
Affecting Demand
Short- to Mid-term
Strategic Petroleum
High energy prices due to
Reserve (SPR)
unfettered market forces
or taxation
Allowing high prices to
allocate and price scarce
Policies promoting
energy
conservation and more
energy-efficient choices
Mid- to Long-term
Tax incentives to promote
Corporate Average Fuel
production
Economy Standards
(CAFE)
Open new areas to leasing
and exploration
Tax incentives to
encourage less, or more-
Research and development
efficient consumption
Market pricing of energy
Efficiency standards
Efficiency labeling
Research and development
in efficiency technologies
1 For a detailed discussion of the debate in the 108th Congress over omnibus energy
legislation, see CRS Issue Brief IB10116, Energy Policy: The Continuing Debate and
Omnibus Energy Legislation
.

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The axis of long-term/short-term, supply/demand does not capture all policy
options. For example, one of the major issues in energy policy is the price for fuels.
Energy policy generally is designed to affect price indirectly — by having price
follow, or reflect, current demand or supply for energy. There are a few exceptions.
Tax policy may address energy price directly to the extent that excise taxes on fuel
products can be raised or lowered (recognizing that these tax boosts or cuts may not
be reflected penny-for-penny in the “pump” price for fuels).
Short-term policies to affect supply, such as potential use of strategic reserves,
have been sometimes very controversial because, in the absence of a very clear-cut
and widely acknowledged physical shortage, such initiatives are perceived to be
thinly disguised efforts to grant price relief.2 Some suggest at times that high prices
— left uninterfered with — are the best policy of all, encouraging markets to provide
more supply in due course, and that federal policy should address only those most
adversely affected by sharply higher prices. The Low Income Home Energy
Assistance Program (LIHEAP) is one such effort to provide direct assistance to
families whose quality of life is especially burdened by high energy prices. LIHEAP
is a short-term policy for addressing the impact of high prices for energy.
Supply and demand may also be affected by external events, including political
and diplomatic dynamics between or among the producing nations. Weather,
seasonal or otherwise, will affect supply and demand; policy cannot affect the
weather, only its consequences. Lastly, Congress always has the option to require
study and analysis of a problem before settling on a policy course. Requirements for
such studies are regularly included in appropriations bills and other legislation.
The Current Context: What’s Now Different?
In every energy debate, one question is a constant: How extensive a federal role
is appropriate in energy policy? But even prior to the terrorist attacks upon the nation
on September 11, 2001, the context for the current energy debate was distinctly
different from previous episodes.
! U.S. energy policy has been primarily market-based for roughly 20
years, but policy makers have been weighing whether problems in
some sectors and with some fuels are attributable to distribution or
regulatory inefficiencies interfering with markets, or whether
government intervention may be necessary to protect consumers and
the economy from problems to which markets cannot flexibly
respond.
2 The Energy Policy and Conservation Act (P.L. 94-163, EPCA) authorizes drawdown of
the Strategic Petroleum Reserve upon a finding by the President that there is a “severe
energy supply interruption,” or in the event of a circumstance that “constitutes, or is likely
to become, a domestic or international energy supply shortage of significant scope or
duration” and where “action taken ... would assist directly and significantly in preventing
or reducing the adverse impact of such shortage.”

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! Strong economic growth during the mid- and late 1990s at a time of
declining real energy prices resulted in growth in consumption even
though efficiency of energy use is dramatically better than during the
1970s and 1980s. Growth in petroleum consumption in the United
States as domestic production declines has meant a commensurate
increase in oil imports. During the second half of 2004, growth in
demand as well from the Far East pressured spare oil production
capacity. In the midst of continuing instability in Iraq and a
temporary but critical reduction in U.S. production of oil from the
Gulf of Mexico due to Hurricane Ivan, increased OPEC production
— for the first time — appeared unable to exert its historical effect
of moderating crude oil prices.
! There is recognition of the interdependence of producing and
consuming nations; however, the political balance among the OPEC
nations is delicate and can influence oil production decisions and
whether OPEC is able to exert market control at all.
! There is growing recognition that the recent shortages and price
spikes in some regions of the country have been compounded by
insufficiencies in the nation’s energy infrastructure — refining
capacity, gas and oil pipelines, transmission lines, and electric
generating facilities.
! Problems with gasoline supply and home heating oil stocks since
2000 imply some need to develop additional refining capacity and
transport systems that will add both capacity and flexibility to
distribution. However, national and local environmental regulation
and requirements, and local community sentiment, affect the speed
and ease of siting and building such facilities. Because high prices
tend to eventually depress demand, the industry is sometimes wary
of making investment in capacity that would provide a return during
possibly short-term periods of peak demand or price volatility.
Uncertainty about the course of the economy may also contribute to
questions about the profitability of these investments. Concerns
about greenhouse gas emissions add an additional measure of
uncertainty.
! The experience with deregulation of electricity in California and
elsewhere has added uncertainty to the policy debate over national
restructuring of the industry.
Major Unresolved Energy Issues

The shift to a more market-oriented energy policy, additional lessons some have
taken from experiences during the 1980s and 1990s, geopolitical developments, and
developments such as those outlined above, are likely to play a part in any resolution

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of energy issues still pending and of interest to many policymakers. Some of these
issues are broadly reviewed below.
Petroleum and Natural Gas
Demand for petroleum products in the United States ranges between 19-20 mbd.
Increases in demand, as well as declining domestic production, have been offset by
increased crude and product imports, which now approach an average of 10 mbd.
Cuts in world crude production in March 1999 by OPEC sent domestic refiner
acquisition costs for crude oil on a sharp ascent from less than $11/bbl in February
1999 to $24.50/bbl by December of the same year. Responding, in part, to intense
lobbying by the United States, the OPEC oil ministers boosted crude production and
settled upon $22-$28 per barrel (bbl) as a desirable “price band.” But, the price band
grew increasingly out-of-touch and irrelevant as prices renewed their increase, and
surged during 2004.
The ability of the OPEC cartel to exert influence upon oil prices at critical times
underscores that — with respect to petroleum — the problem is less that the world
supply of oil is tight than that so much of it is concentrated in other parts of the
globe, principally the Middle East. U.S. dependence upon imported oil is now about
60% of total consumption. Absent some elusive technical “fix,” there are limited
prospects for significantly reducing that figure without incurring economic hardship
and lifestyle compromises. However, relatively modest increases in worldwide
production or reductions in demand by consuming nations can substantially reduce
the magnitude of oil price spikes.
Clean Air Standards and Gasoline Supply and Distribution. Attention
has focused on the Clean Air Act standards that regulate the oxygen content,
volatility, benzene and the sulfur content of gasoline. Refineries face state and local
standards on how to achieve compliance with federal requirements. The result is a
multiplicity of gasoline formulations, some using methyl tertiary butyl ether (MTBE)
as an oxygenate and octane booster, while other regions require ethanol.
One consequence of these regional variations is that gasoline supply has lost
some of its fungibility; one region experiencing a shortage may no longer be able to
secure additional supply from a nearby locality with a different blend of gasoline.
Distribution becomes more complicated because different blends sharing the same
pipeline must be carefully batched to avoid contamination. Additionally, foreign
refineries that supply the most general U.S. gasoline market do not make the regional
formulations.
Some have urged a rationalization of Clean Air Act standards that would permit
a “harmonization” of U.S. gasoline standards. This would introduce flexibility into
the gasoline manufacture and distribution system that might bring prices down.
Opponents of harmonization argue that it might compromise air quality, and lead to
further compromise of clean air objectives in the future. Harmonization might also
raise prices for fuel in regions that did not require the more exacting formulations.
Drilling in ANWR and on Other Federal Lands. The greater the nation’s
ability to produce its own fuels, the less vulnerable it is to unanticipated international

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developments that can reduce or threaten supply. But the policy options on the
supply side, such as opening up the Arctic National Wildlife Refuge (ANWR) for
exploration, are mostly long-term. Alaskan oil production, which once touched 2
mbd, has now fallen below 1 mbd and, without new production, will continue to
decline.3 This could lead to low production, raising transport tariffs on the Trans-
Alaska Pipeline, with further adverse impacts on North Slope production.
Proponents of exploring ANWR point to advances in exploration and drilling
technology and methods that have significantly reduced the extent of surface
disturbance. While opponents concede this may be so, they argue that these advances
are limited to exploration and extraction, and that considerable risk to the
environment remains during the production and transportation phases. Opponents
also suggest that the risks are not worth bearing, especially if the resources in ANWR
turn out to be at the lower range of estimates, providing only an additional 300,000
b/d of supply. Some respond to this argument by noting that the nation has
experienced periods of tight supply when even an additional few hundred thousand
barrels of crude oil per day would have significantly reduced gasoline and heating oil
prices. For some opponents, any weighing of risks and benefits are pointless because,
citing the area’s pristine character, they argue that its ecology and habitat should not
be disturbed under any circumstances. (For additional information and background,
see CRS Report RL31278, Arctic National Wildlife Refuge: Background and Issues.)
The broader issue raised by ANWR — that of access to public lands for energy
exploration and development — is a significant component of the national energy
debate. There is considerable disagreement about the potential resources on federal
lands — particularly the amount of oil and gas that may be “locked up” by land-use
restrictions and other regulatory factors. The Bush Administration’s energy policy
report recommended an examination of “land status and lease stipulation
impediments” and that policymakers “consider modifications where appropriate.”
(For additional information and background, see CRS Report RS20902, National
Monument Issues
.) A report by the Department of Interior, on the other hand,
indicates this may not be the problem some have alleged.4
Natural Gas Supply. For the past decade in the United States, natural gas
consumption was encouraged, particularly for gas-fired combined-cycle power plants
that could provide incremental electric supply to the nation’s power grid at highly
competitive prices and with few environmental constraints. Plentiful supplies, and
relatively low prices for several years, discouraged additions to natural gas reserves
3 There are other prospects for oil development in northern Alaska, including two fields
scheduled for development just outside the National Petroleum Reserve — Alaska (NPR-A).
The press has reported oil industry interest in the potential of NPR-A. See Petroleum
Intelligence Weekly
, Nov. 22, 2004. (For earlier background and history on NPR-A, see also
CRS Report RL31573, National Petroleum Reserve — Alaska (NPR-A).)
4 Scientific Inventory of Onshore Federal Lands’ Oil and Gas Resources and Reserves and
the Extent and Nature of Restrictions or Impediments to the Development. January 2003.
See [http://momentum.doi.gov/epca/ExecSum.pdf].

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during the 1990s.5 With surges in demand for electricity and a colder winter in 2000-
2001, residential and other consumers of natural gas suddenly faced sharply higher
prices as competition grew for gas supplies. At the wellhead, gas prices rose from
$2.16 per thousand cubic feet (mcf) in 1999 to $4.00 per mcf in 2001. But they
reached the $8.00 level for a few months during this period and prices continued to
rise during 2003 and 2004.6 The volatility of gas prices from month to month
underscores the difficulty in crafting policy when sharp fluctuations in supply,
demand, and price can occur suddenly between seasons.
A major potential source of additional gas is tanker-borne imports in the form
of liquefied natural gas (LNG). Expansion and refurbishment of facilities to
accommodate LNG imports continues. Additionally, there are a number of proposals
for new facilities that have received certification from the Federal Energy Regulatory
Commission (FERC); these facilities would receive LNG produced abroad for
consumption in the United States. The Alaska North Slope holds large proven
reserves of natural gas. Shortly before adjournment, the 108th Congress approved an
$18 billion loan guarantee for the construction of this pipeline (P.L. 108-357), and
a proposal to build the project was made at the end of 2004 by the major holders of
North Slope gas reserves.
Electricity Regulation and Supply
A reliable electric system depends on adequate transmission capacity. The
blackout of 2003 in the Northeast, Midwest, and Canada highlighted the need for
infrastructure improvements and standard operating rules. The regulatory regime has
shifted in the electricity industry to encourage competition in the generation sector,
but investment in transmission infrastructure has not kept up with increases in bulk
power transfers and electricity demand. Additionally, transmission lines are
congested in several regions of the United States. Difficulty in siting the lines and
regulatory uncertainty have dampened interest in investing in the transmission
system. FERC has approved three Regional Transmission Organizations (RTOs) and
is in the process of evaluating others.7
Some have argued that transmission and wholesale power markets cannot be
competitive without additional market transparency, or access to market information.
Proposals have been made to require FERC to issue rules establishing an electronic
information system to provide information about the availability and price of
wholesale electric energy and transmission services to FERC, state commissions,
buyers and sellers of wholesale electric energy, users of transmission services, and
the public. However, concerns have been raised that such a system would take away
too much authority from the states.
Concern over electricity supply has also led to some reassessment of the relative
roles that natural gas, coal, renewables, and nuclear energy may have in future
5 See [http://www.eia.doe.gov/emeu/aer/txt/ptb0410.html].
6 EIA, Monthly Energy Review, Table 9.11.
7 For details, see [http://www.ferc.gov/industries/electric/indus-act/rto.asp].

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electricity generation. In its energy policy report, the Bush Administration indicated
its objectives to remove barriers to the use of coal in electric power generation, with
a renewed emphasis on cleaner-burning coal technologies.
Supporters of renewable energy have urged the establishment of a national
“renewable portfolio standard,” which would require that a certain percentage of
electricity generation come from non-hydro renewable energy sources. Nuclear
energy supporters have long proposed that new nuclear generating capacity receive
incentives for helping to reduce air emissions.
(For additional information, including a summary of the debate during the 108th
Congress, see CRS Issue Brief IB10006, Electricity: The Road Toward
Restructuring
.)
Conservation and Energy Efficiency
As has been noted, the energy policy debate has turned partly on perceptions of
the balance between supply-oriented and conservation-oriented policies that make up
an appropriate energy policy to address the current matrix of energy problems. For
example, environmental groups often ask why ANWR should be opened to leasing
if a comparable amount of oil could be saved by raising motor vehicle fuel economy.
The Energy Policy and Conservation Act (P.L. 94-163) established new car
corporate average fuel economy (CAFE) standards, beginning with model year 1978.
Currently, the standards are 27.5 miles per gallon (mpg) for cars and 20.7 mpg for
light-duty trucks, including sport utility vehicles (SUVs). Proposals to raise the
CAFE standards have been controversial. Beginning with enactment of the FY1996
Department of Transportation Appropriations Act, Congress forbade the expenditure
of appropriated funds to make any change in the current CAFE requirements.
However, a study by the National Academy of Sciences (NAS), requested by
the 106th Congress, to recommend “appropriate” CAFE standards, was released at the
end of July 2001.8 While the report did not recommend a specific level for CAFE,
it did conclude that “significant” reductions in fuel consumption could be achieved
within 15 years utilizing existing technologies. Were increases in new car fuel
economy achieved by reducing vehicle weight or disproportionately encouraging the
sale of small vehicles, the study allowed that additional fatalities could result.
However, some members of the NAS panel dissented, suggesting that the analysis
of the relationship between fuel economy and vehicle safety is extremely complex.
Before the 107th Congress ended without enactment of comprehensive energy
legislation, the conferees had agreed to language in the House version of the bill that
would have required a savings of 5 billion gallons in gasoline consumption by SUVs
between model years 2006 and 2012. The omnibus energy legislation debated, but
not enacted, in the 108th Congress would have authorized $2 million annually during
FY2004-FY2008 for the National Highway Traffic Safety Administration (NHTSA)
to carry out fuel economy rulemakings. It would also have expanded the criteria that
8 See [http://www.nap.edu/books/0309076013/html/].

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the agency would be required to take into account in setting maximum feasible fuel
economy for cars and light trucks.
In the meantime, on May 7, 2003, the National Highway Traffic Safety
Administration (NHTSA) issued a final rule to boost the CAFE of light-duty trucks
by 1.5 mpg by 2007 to 22.2 mpg.
There is little question that the price hikes during past episodes of tight energy
supply spurred many improvements in energy efficiency. Some argue, however, that
the easiest and lowest-cost efficiency gains have been achieved, and that expectations
should be lowered about the additional efficiency gains that can be captured in the
present price framework for energy. When the Reagan Administration redirected
energy policy to a more market-oriented framework, it was argued that R&D needed
to be carefully focused on areas that were promising, but unlikely to be explored by
the private sector.
In its energy policy plan, the Bush Administration recommended a review of the
funding and performance of energy efficiency research and development for the
purpose of determining appropriate funding for performance-based research in
public-private partnerships.
The Uncertain Future
As apparent as it seems to many that the nation should do “something” about
energy, the preceding pages have outlined the layers of complexity that augur against
easy agreement to many of the policy options that have been proposed and debated
since the mid-1970s. A review of the history shows that every episode of instability
has had its own set of contributing factors — and that these may be geopolitical,
based in energy infrastructure, or triggered by extremes of heat or cold beyond
anyone’s control. Making policy decisions that will anticipate unpredictable future
developments, or settling on policies to mitigate the consequences when these events
are before us, will remain a challenge for policymakers as the energy debate
continues.