Energy in 2001: Crisis Again?

Energy in 2001: Crisis Again?

Order Code RL31049
CRS Report for Congress
Received through the CRS Web
Energy in 2001:
Crisis Again?
Updated July 31, 2001
Carl E. Behrens
Specialist in Energy Policy
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

Energy in 2001: Crisis Again?
Summary
For most of the 1990s energy was not a prominent issue, at least for the
consuming public; supplies were ample and prices were perceived as reasonable. In
1999, however, cracks appeared in the smooth surface of the energy market, and by
2001 energy problems had reached crisis proportions. Gasoline prices were sharply
higher, as were natural gas prices, and California’s electricity shortages led to
concerns that other localities might have similar problems. Now the crisis has abated
somewhat, but many of the issues it raised remain.
This report deals with changes in the national energy picture since the early
1990s, when Congress last dealt at length with energy policy. It reviews the problem
areas and discusses differing views on how to deal with the energy situation in the
long run. A summary of some current legislative initiatives is also given.
In the case of petroleum, world proved reserves continued to grow faster than
production, though not at the rate of the previous two decades. In the United States,
however, proved reserves continued to decline as consumption increased, forcing a
growing dependence on imported oil. Product prices declined steadily, then
precipitously toward the end of the decade. In response, the OPEC cartel nations cut
back production. The volatile oil market reacted sharply, with the price of crude
more than doubling and product prices following suit.
Unlike oil, only a small proportion of natural gas is imported, almost all of it by
pipeline from Canada. Prices remained low through the 1990s, and producers
responded with reduced investments in supply. After 1986, the number of gas wells
drilled per year fell sharply and remained low until tightening supply caused a sharp
run-up in prices in 2000, which has resulted in increased drilling.
The sudden and unprecedented surge in gas prices surely was an important factor
in the continuing crisis in California’s electricity supply, but a large number of factors
also contributed. Some of those other factors exist elsewhere. Among the most
troubling is that electric industry restructuring may leave consumers more vulnerable
to market volatility than formerly. Another potential problem is that, nationwide, the
power transmission system appears stretched to capacity.
Approaches to dealing with energy problems vary. In one view, there is a need
to stimulate and facilitate supply of more domestic energy resources, with due regard
for environmental quality, and with a major focus on using energy efficiently. The
assumption is that all these goals are compatible, and that if carried out there will be
a return to the ample energy supplies and low prices of the prosperous 1990s.
Some critics of that view argue that it may not be possible to meet environmental
goals without strenuous efforts that are not compatible with low energy prices. They
propose much more vigorous measures to mitigate the environmental effects that
abundant cheap energy may be expected to have. At the same time, they question
whether economic growth can only be achieved through dramatically expanding
domestic energy supply.

Contents
Petroleum: Developments in the 1990s . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Natural Gas: The Bubble Gone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Electricity Woes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Policy Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
The Bush Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Alternative Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Contrasting Perspectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Energy Consumption and GDP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
A Third Viewpoint . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Legislative Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Administration Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
House Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Senate Bills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
List of Figures
Figure 1. World Crude Oil Reserves, 1973-2000
(billions of barrels) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Figure 2. U.S. Crude Reserves
(billion bbl) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Figure 3. OPEC and World Crude Oil Production, 1990-2000
(mbd) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Figure 4. Price of Crude and U.S. Petroleum Consumption,
1990-2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Figure 5. Gasoline and Heating Oil Prices, 1990-2000
(1982-84 cents/gallon) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Figure 6. Natural Gas Consumption and Imports
(TCF) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Figure 7. Gas Prices to Utilities, 1990-2000
(cents/million BTU’s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Figure 8. Gas Wells Drilled, 1973-2000
(thousands per year) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Figure 9. Electricity Generation by Region
(billion kwh) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Figure 10. Generating Capacity by Region
(gigawatts) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Figure 11. Capacity Additions, 1990-1999
(gigawatts) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Figure 12. Oil and Gas Consumption Per Dollar of GDP
(1000 BTU per 1996 dollar) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Figure 13. Change in Annual Oil & Gas Consumption &
Growth in GDP
(percent) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Energy in 2001: Crisis Again?
About a decade ago, in the wake of the Persian Gulf war, Congress passed the
massive Energy Policy Act of 1992. After 2 years of debate, the bill covered a broad
range of energy issues, from the flow rate of shower heads to the privatization of
uranium enrichment for nuclear powerplants. Two initiatives that had been widely
supported, and as widely opposed, at the beginning of the debate, did not survive.
One was the leasing of part of the Arctic National Wildlife Refuge (ANWR) for oil
and gas exploration, and the other was tightening of Corporate Average Fuel
Economy standards for automobiles.
For most of the 1990s energy was not a prominent issue, at least for the
consuming public; supplies were ample and prices were low. In 1999, however,
cracks appeared in the smooth surface of the energy market, with shortages of
gasoline in the Midwest and heating oil in the Northeast causing price surges. An
electricity price spike in the Midwest caused further disquiet. By 2001, energy
problems had reached critical proportions on three fronts. Nationally, gasoline prices
were sharply higher. Consumption of natural gas, the fuel of choice for uses other
than transportation, abruptly reached the limit of short term supply and more than
doubled in price. And in California, wholesale electric power costs spiraled and
shortages became apparent, the result of a combination of circumstances including
natural gas prices, hydropower shortages, years of regulatory uncertainty, and the
state’s electric industry restructuring program.
Not surprisingly, the price spikes have caused changes in production and
consumption of energy that have blunted some of the most egregious problems. But
events suggest that a changing energy picture may be emerging from the current
decade. This report is concerned with the question: what has changed in the national
energy picture since the last time the Congress dealt at length with energy policy? It
will review each of the three problem areas in sequence with that question in mind.
Following this factual description is a discussion of differing views held by the Bush
Administration and by some Democratic Members on how to deal with the energy
situation in the long run. A summary of current legislative initiatives is also given.
Petroleum: Developments in the 1990s
One of the basic discoveries of the late 1980s was that, contrary to widespread
belief a decade earlier, the world was not on the verge of running out of oil. The high
prices of the 1970s and early 1980s, aided by improved exploration and production
technology, stimulated a global search for, and discovery of, large amounts of new
crude oil reserves, which actually increased by about 50% from 1973 to 1990. Some
of the increase was in the Western Hemisphere, mostly in Mexico, but most was
located in the region that already dominated the world oil market, the Middle East.
CRS-1

Figure 1. World Crude Oil Reserves, 1973-2000
(billions of barrels)
Source: CRS; Energy Information Administration (EIA), International Energy Annual, 1990, 1999.
With prices moderating in the 1990s, the search for oil slowed, but additions to
reserves during the decade exceeded the amount of oil pumped out of the ground, as
shown in Figure 1.
In the United States, however, crude oil reserves continued to decline as they
had since the early 1970s. From 33.5 billion barrels in 1977, they were down to 26.3
billion in 1991 and 21.8 billion in 2000, as illustrated in Figure 2.
CRS-2

Figure 2. U.S. Crude Reserves
(billion bbl)
Source: Energy Information Administration (EIA), International Energy Annual, 1990, 1999.
Meanwhile, world crude production during the 1990s increased steadily, with the
exception of a single year, 1999. That was the year that the members of the
Organization of Petroleum Exporting Countries (OPEC), in a rare display of
unanimity and resolve, agreed to cut back production quotas and subsequently did so
without breaking ranks, as shown in Figure 3.
CRS-3

Figure 3. OPEC and World Crude Oil Production, 1990-2000
(mbd)
Source: EIA, Monthly Energy Review, May 2001, Table 10.
U.S. consumption of petroleum products also increased steadily during the
1990s, from 17 million barrels per day (mbd) in 1990 to 19.5 mbd in 2000. But the
price of crude oil was anything but steady. (See Figure 4.) Even without the
interruptions in supply that characterized the 1970s (the Persian Gulf war in 1991
resulted in no reduction in total world production) crude prices showed the volatility
typical of large-volume commodities in which short-term demand is only slightly
affected by price and small variations in supply sometimes can cause large speculative
market shifts in price for brief periods. Overall, however, despite brief spikes, there
was a steady decline in gasoline and heating oil prices, until 1999 (Figure 5), when
OPEC’s policy of production cutbacks finally had an effect on consumer supplies and
prices.
CRS-4

Figure 4. Price of Crude and U.S. Petroleum Consumption,
1990-2000
Source: EIA, Monthly Energy Review, May 2001, Tables 3,9.
The historical review above indicates that, in the case of petroleum, not much
has changed in the decade since the Persian Gulf war. World proved reserves
continued to grow, though not at the rate of the previous two decades, when high
prices led to a 50% increase from 1973 to 1990. In the United States, however,
proved reserves continued to decline as consumption increased, forcing a growing
dependence on imported oil. World production of crude increased from 60 mbd to
nearly 70 mbd, and U.S. consumption of petroleum products went from 17 mbd to
19.5 mbd. Product prices declined steadily, then precipitously toward the end of the
decade. In response, the OPEC cartel nations agreed among themselves to cut back
production and showed unexpected discipline in adhering to the agreement. The
reduction was relatively small, but the volatile oil market reacted sharply, with the
price of crude more than doubling and product prices following suit.
CRS-5

Figure 5. Gasoline and Heating Oil Prices, 1990-2000
(1982-84 cents/gallon)
Source: EIA, Monthly Energy Review, May 2001, Table 1.3.
Natural Gas: The Bubble Gone
After the Natural Gas Policy Act of 1978 began to remove the price restrictions
that had been discouraging production, supply increased rapidly. Industry analysts
began speaking of a temporary gas “bubble” or excess of supply over demand as
production and consumption gradually responded to deregulated prices. The
“bubble” lasted close to 20 years, however, with surplus production capacity
continuing and prices remaining low through most of the 1990s.
Producers responded to low prices with reduced investments in supply. After
natural gas prices followed oil prices down in 1986, the number of gas wells drilled
per year fell sharply and remained low until the sharp run-up in prices stimulated an
increase in 2000.
The story with natural gas was thus somewhat different from that of oil, in part
because only a small proportion of natural gas is imported, almost all of it by pipeline
from Canada. Unlike oil, natural gas is carried to market in large amounts only by
relatively inflexible pipeline systems, meaning that changes in supply take place rather
slowly, and price tends to be influenced not only by supply but also by the price of oil,
its primary competitor. However, natural gas is still subject to the kind of extreme
price volatility that is typical of large commodity markets, particularly when supplies
begin to appear uncertain.
CRS-6

Natural gas was subject to a broad variety of regulations of price and supply
during the 1970s, and consumption declined from 22 TCF in 1973 to about 16 TCF
in 1986. But with the market largely deregulated and the price low, consumption
increased steadily until it rose above 22 TCF in 2000. At that point, the sluggish rate
of supply increases led to shortages which drove prices sharply upward.
Figure 6. Natural Gas Consumption and Imports
(TCF)
Source: EIA, Monthly Energy Review, May 2001, Table 4.1.
CRS-7

Figure 7. Gas Prices to Utilities, 1990-2000
(cents/million BTU’s)
Source: EIA, Monthly Energy Review, Table 9.11.
Figure 8. Gas Wells Drilled, 1973-2000
(thousands per year)
Source: EIA, Monthly Energy Review, May 2001, Table 5.2.
CRS-8

Electricity Woes
Many factors contributed to the continuing crisis in California’s electricity
supply, but the sudden and unprecedented surge in gas prices surely was an important
one. Some of the other factors are discussed in this section.
It has been suggested that growth in electricity demand combined with a lack of
new capacity additions contributed to the crisis. Electricity consumption did not
appear to grow at an unusual rate in the Pacific region compared to the rest of the
country, and capacity additions were not greatly less than elsewhere, as the following
figures show. However, California itself was in a different situation. Over 80% of
electricity consumed is generated within the state, and no significant capacity had been
added in the previous 10 years. The radical restructuring of the state’s power system
that was still in transition, transmission constraints, a weather-related downturn in
available power from out-of-state hydro facilities, and the sudden run-up of natural
gas prices combined to create a distinctive crisis that would have been difficult to
predict.
Figure 9. Electricity Generation by Region
(billion kwh)
Source: EIA, Electric Power Annual, 1990, 1999
CRS-9

Figure 10. Generating Capacity by Region
(gigawatts)
Source: EIA, Inventory of Electric Power Plants, 1990, 1999.
Another feature of the national power system that added vulnerability was that
additions to capacity since the mid-1990s have been almost exclusively natural gas-
fired.
Figure 11. Capacity Additions, 1990-1999
(gigawatts)
Source: EIA, Inventory of Electric Power Plants, 1990, 1999.
CRS-10

In particular, the Pacific region was vulnerable to the gas price run-up because
the generation mix is dependent largely on gas and hydropower. Gas dependence is
not significantly different from the country as a whole, but the role of hydropower is
exclusive to the region. By chance, availability of hydropower, dependent on the
weather, was significantly less in 2000 than average. In addition, in California in
particular, the restructuring plan required utilities to obtain power on the day-ahead,
hour-ahead market, and prohibited them from entering into new long-term contracts.
They were thus immediately affected by the current high gas prices. In other regions,
even where there was heavy dependence on gas, as in the West South Central region,
long-term contracts probably shielded consumers from the effects of the suddenly
higher prices.
In summary, a combination of circumstances, unlikely to be duplicated in other
regions, appears to have been the source of the extremely severe crisis in California.
Nevertheless, a number of factors that contributed to the California crisis do exist
elsewhere, and may cause difficulty of varying degree. Among these trouble
indicators are the following:
! Restructuring of the electric power industry to bring unregulated power
generators into the market may lead to lower costs in the long run, but in the
process a long-standing commitment to provide reliable supplies of power to
all customers on the part of regulated utilities has been lost. Without that
commitment, power consumers are much more vulnerable to volatile energy
commodity markets, since utilities no longer need to assure that they have
adequate generating capacity to meet their needs. The California experience
demonstrated that unregulated electricity markets can be just as volatile as oil
or gas; indeed, they may be more volatile, since they depend not only on their
own inflexible supply constraints but those of the other energy markets as well.
Additionally, most restructured electric power systems have shifted into a
highly sophisticated market of fast moving supply and demand exchanges.
! Nationwide, the transmission infrastructure appears to be stretched to capacity.
As with generating capacity, utilities have been relieved of the necessity of
providing assured transmission capability to all their customers.
The problems facing a rapidly changing electric power industry are extremely
complex, with many factors that are beyond the scope of this paper to discuss. For
more detailed analysis, CRS maintains an Electronic Briefing Book on Electric Utility
Restructuring, accessible at the CRS home page, [http://www.crs.gov/].
Policy Implications
The conjunction of three energy problems – surges in heating oil and gasoline
prices, tight natural gas supply accompanied by a sudden jump in the price, and the
crisis in electricity price and supply in California – has stimulated a renewed interest
in energy policy, as well as a number of broad legislative initiatives. These proposals
go beyond short-term efforts to deal with current emergencies, such as proposed
federal caps on wholesale electricity sales in California, to deal with all aspects of
energy supply and utilization.
CRS-11

The Bush Proposal. One such comprehensive review is by the Bush
Administration’s National Energy Policy Development (NEPD) Group, chaired by
Vice President Cheney, which issued a report, “National Energy Policy,” in May
2001. In the view of the Cheney report, there is a need to stimulate and facilitate
construction of electric power generating capacity, to stimulate domestic production
of oil and gas and encourage the use of coal and uranium, and to carry out these
activities with due regard for environmental quality, and with a major focus on using
energy efficiently. Among the recommendations accompanying the exposition of this
scenario is a recommendation to study the possibility of imposing higher corporate
average fuel economy (CAFE) standards on automobiles without damaging the
domestic auto industry, and one recommending opening of the Arctic National
Wildlife Refuge to oil and gas development. Implicit in the report is an assumption
that all these goals are compatible, and that if carried out there will be a return to the
ample energy supplies and low prices that characterized the prosperous 1990s.
Alternative Approach. Some congressional critics of the Cheney report
argue that it may not be possible to meet environmental goals, particularly with regard
to reducing emissions of greenhouse gases, without strenuous efforts that are not
compatible with low energy prices. A number of initiatives from Democratic
Members propose much more vigorous environmental quality and energy efficiency
measures in order to mitigate the environmental effects that abundant cheap energy
may be expected to have.
Contrasting Perspectives. The differing views described above share some
common ground. All recognize that energy is an important ingredient of economic
growth; all cite protection of the environment as a major goal; all view energy
conservation and efficiency as practical and effective measures that can contribute to
economic growth and reduce environmental pressure at the same time.
However, there is a significant difference between the two views. In one, an
adequate supply of affordable energy is the central goal of energy policy, to be
achieved in the most environmentally responsible manner and with due support for
conservation and efficiency measures. The other places a higher priority on
conservation and efficiency, both as worthwhile policy goals in themselves, and as
essential for insuring that energy supply increases occur with minimal effect.
Central to these contrasting views is the degree to which economic growth
depends on expanding energy supply. In this regard, analysis of historical data
relating energy consumption and economic growth leaves an uncertain picture.
Energy Consumption and GDP. A frequent point of concern in formulating
energy policy is the relationship between economic growth and energy use. It seems
obvious that greater economic activity would bring with it increased energy
consumption, but many other factors affecting consumption make the short term
relationship highly variable. It has also been proposed that by applying energy
efficiency measures, consumption and economic growth can be “decoupled” over the
long run.
CRS-12

Figure 12. Oil and Gas Consumption Per Dollar of GDP
(1000 BTU per 1996 dollar)
Source: EIA, Monthly Energy Review, May 2001, Table 1.9.
Historical statistics show a mixed picture of the relationship. During the 1973-
1985 period of high energy prices and interrupted supply, the amount of petroleum
and natural gas consumed per dollar of gross domestic product (GDP) declined
sharply, but the ratio leveled off after world oil prices collapsed in 1986.
During the period 1986 to 1999, oil and gas consumption increased by about
23%, while GDP increased 51%. This has led to the suggestion that energy
consumption must increase about half as rapidly as GDP. However, this suggestion
ignores the fact that during the earlier period oil and gas consumption actually
declined 15% while GDP was increasing by 44%. (See Figure 13.)
One response is that the high prices and uncertainty of supply during the earlier
period effectively “decoupled” energy consumption from economic growth, and that
the return to low prices and ample supplies restored the connection. This argument,
however, is countered by referring to a third relevant factor: during the early period,
strenuous efforts were made to encourage energy efficiency and conservation,
including fuel economy standards for automobiles. The relative effect of these
measures, compared to the action of market forces, in reducing consumption, is
subject to debate, but they were largely abandoned once the price of oil and gas
moderated and supply was no longer a problem.
CRS-13

Figure 13. Change in Annual Oil & Gas Consumption &
Growth in GDP
(percent)
Source: EIA, Monthly Energy Review, May 2001, Table 1.9.
Further complicating the interplay of these various factors is the question of
timing. It is frequently suggested that the major advances in energy conservation and
efficiency in the 1970s were possible because the preceding period had seen rapid
growth in consumption with little attention to efficiency or saving. According to this
argument, relatively simple and low-cost measures at that time achieved large savings,
but further advances would be more difficult and expensive. On the other hand, the
history of technology development shows that many advances occur that abruptly
make it possible to improve performance and reduce costs beyond anything imagined
previously. The effect such advances may have in any one period is largely
unmeasurable and completely unpredictable.
In summary, the basic questions remain: Can energy consumption be decoupled
from economic growth without the painfully high prices and supply interruptions of
the 1970s? How much of the economic boom of the 1990s is attributable to the anti-
inflationary effect of declining energy costs? Can a carefully balanced combination
of regulation and research reduce energy consumption to environmentally acceptable
levels and still maintain vigorous economic growth? Historical analysis of available
data offers no conclusive answers to these questions.
A Third Viewpoint. Another view of energy policy emphasizes the volatility
of the world oil market, and the influence of the OPEC cartel on production. In this
view, consuming nations must realize that restrictions by oil producing governments
distort the market in ways that are not always in the interest of consumers. After oil
prices were deregulated and the world price of crude collapsed in 1986, the once-
CRS-14

powerful OPEC cartel was viewed as having lost its ability to influence the price in
any significant way. However, the effect of relatively minor cutbacks in production
in a tight world market in 1999 demonstrated that OPEC continues to be a major
influence, and its success in driving up the price of crude so dramatically may tempt
its members to extend their activity further.
In the view of these critics, energy policy should be aimed at reducing the power
of OPEC to direct the world oil market, or at least to force it to recognize that high
oil prices have drawbacks for producers as well as consumers. Encouraging
production by non-OPEC members, financing development of alternative fuels and
energy sources which may be competitive with high-priced oil, conservation and
energy efficiency, and other programs that signal an attack on OPEC dominance and
influence, could be compatible with the goals of either the Administration’s policy or
the previously mentioned alternatives, or both.
Legislative Proposals
While a number of narrowly focused bills have been introduced in the 107th
Congress, there is also a movement toward an omnibus energy bill. A comprehensive
proposal backed by several Senate Republicans, the National Energy Security Act of
2001 (S. 388), was introduced on February 26, 2001, as was a companion measure,
which also included energy tax provisions (S. 389). A Democratic measure, the
Comprehensive and Balanced Energy Policy Act of 2001 (S. 597), was introduced on
March 22. The accompanying tax measure is titled the Energy Security and Tax
Incentive Policy Act of 2001 (S. 596).
On the House side, four bills were reported out by the Energy and Commerce,
Resources, Ways and Means, and Science Committees, and the House Rules
Committee combined them into a single bill, H.R. 4, the Securing America’s Future
Energy (SAFE) Act. The House Republican leadership plans to bring it to the House
floor before the August recess.
Administration Proposal. As noted above, the Bush Administration has not
submitted a formal legislative energy package, but a number of the NEPD report
recommendations would require legislation. Among them are:
! Increase funding of the Low Income Home Energy Assistance Program
(LIHEAP), using some oil and gas royalty payments to fund the program.
! Double funding of DOE’s Weatherization Assistance Program, with an
increase of $1.2 billion over 10 years.
! Reduce and cap emissions of sulfur dioxide, nitrogen oxides, and mercury from
electric power generators.
! Establish a “Royalties Conservation Fund” to earmark royalties from oil and
gas production in the ANWR for land conservation efforts. (See below.)
! Establish investment tax credits or shortened depreciation life for combined
heat and power (CHP) projects.
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! Mandate the Secretary of Transportation to review recommending legislation
for CAFE Standards.
! Develop possible legislation to promote congestion mitigation technologies
and strategies.
! Establish tax credit for fuel-efficient vehicles, including temporary credit for
new hybrid or fuel-cell vehicles.
! Authorize exploration and development of the 1002 Area of ANWR.
! Develop legislation to restructure the electric power industry, repeal the Public
Utility Holding Company Act (PUHCA) and reform the Public Utility
Regulatory Policies Act (PURPA).
! Fund clean coal technology programs at $2 billion over 10 years.
! Extend permanently the existing research and development tax credit.
! Reform hydropower licensing statutes.
! Review funding and performance of renewable and alternative energy
programs and fund at appropriate level.
! Establish tax credits for landfill methane.
! Extend and expand tax credits for wind and biomass.
! Establish new 15% tax credit for residential solar energy property.
! Use bid bonuses on ANWR for alternative and renewable energy R&D.
! Continue ethanol excise tax exemption.
House Bills. The quartet of energy bills reported out of committee the week
of July 16 contain some provisions recommended by the NEPD Group, but in some
cases go further or differ in details. On July 27 the House Rules Committee combined
the four bills, with some changes and additions, into H.R. 4. The main provisions of
the bills as reported are described below.
Energy Advancement and Conservation Act (H.R. 2587; Divisions
A and E of H.R. 4). Among the provisions in the bill reported by the Energy and
Commerce Committee are:
! Establish fuel economy standards for sport-utility vehicles and light trucks
between 2004 and 2010 that would save 5 billion gallons of gasoline compared
to 2002 standards. (Sec. 201 of H.R. 4.)
CRS-16

! Move expenditures from the $10 billion Nuclear Waste Fund off-budget (Sec.
301 of H.R. 4).
! Authorize of accelerated Clean Coal Technology programs (Division E of H.R.
4).
! Establish mandatory efficiency requirements for federal buildings (Subtitle B
of Title I of Division A of H.R. 4).
! Expand DOE’s Weatherization program (Sec. 133 of H.R. 4).
! Expand authorization of LIHEAP (Section 134 of H.R. 4).
Energy Security Act (H.R. 2436; Division F of H.R. 4). The major
feature of the Resource Committee’s bill is a provision to open the 1002 Area of
ANWR (Title V of Division F of H.R. 4). Other features include:
! Establish financial incentives for offshore drilling in central and western Gulf
of Mexico (Sec. 6202 of H.R. 4).
! Mandate greater flexibility for royalty-in-kind (RIK) federal royalty payments
in oil rather than in cash (Sec. 6232 of H.R. 4).
! Mandate an inventory of coal, geothermal, wind and solar power potential on
all federal lands except parks and wilderness areas (Sec. 6102 of H.R. 4).
Energy Tax Policy Act (H.R. 2511; Division C of H.R. 4). Major
provisions included in the bill reported out by the Ways and Means Committee are
listed below. At press time it was not possible to determine whether all had survived
intact in H.R. 4.
! $3.3 billion tax credits for clean coal technology.
! $2.8 billion tax credits for non-traditional sources, including shale, tar sands
and biomass.
! $2.1 billion tax credits for fuel cell, hybrid and other low-emission vehicles.
! $1.6 billion tax credits for energy-efficient home improvements.
! $992 million to phase out excise tax on diesel fuel used in trains and barges.
! $958 million deductions for oil and gas exploration expenses.
! $292 million tax credits for manufacturers of energy-efficient refrigerators and
clothes washers.
! $125 million tax credits for solar energy homeowner purchases, excluding solar
swimming pools.
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Comprehensive Energy Research and Technology Act (H.R. 2460;
Division B of H.R. 4). This bill would authorize numerous energy programs,
including several recommended in the Bush energy plan. Major authorizations in the
bill as reported by the Science Committee are listed below. At press time it was not
possible to determine whether all had survived intact in H.R. 4.
! $2.1 billion authorization for FY2002-2004 for energy conservation.
! $2.5 billion authorization for fY2002-FY2011 for clean coal technology.
! $490 million for FY2002-FY2004 for global climate change programs.
! $1.68 billion for FY2002-FY2004 for renewable energy.
! $691 million for FY2002-FY2004 for nuclear energy, including a new DOE
Office of Spent Fuel Research.
Senate Bills. Several comprehensive energy bills have been introduced in the
Senate, and hearings have been held by the Energy and Natural Resources Committee.
S. 388/S. 389 (Murkowski) National Energy Security Act of 2001.
Among the major provisions of this bill are:
! Prescribe leasing guidelines for oil and gas exploration, development and
production in ANWR’s Arctic Coastal Plain.
! Establish federal grant programs for local government use of alternative fuel
vehicles, and for residential renewable energy.
! Direct FERC to approve an Electric Reliability Organization to develop
standards for bulk power reliability.
! Repeal PUHCA and amend PURPA.
! Establish tax incentives and credits for oil and gas production, advanced coal
technologies, electric power, energy efficiency, alternative fuels, and renewable
energy (S. 389).
S. 596 (Bingaman) Energy Security and Tax Incentive Policy Act of
2001. This bill would provide tax incentives for energy efficient property used in
business, residential energy systems, electricity facilities and production, commercial
applications of advanced clean coal technologies, heating fuels and storage and oil and
gas production and petroleum products.
S. 597 (Bingaman) Comprehensive and Balanced Energy Policy Act
of 2001. Major provisions of this bill are:
! Establish incentives to expedite construction of a pipeline to bring natural gas
from the North Slope of Alaska (not ANWR) to the lower 48 states.
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! Mandate the Department of Transportation to develop regulations to increase
fuel efficiency of all light duty vehicles, provides more flexibility, but stronger
standards than corporate average fuel efficiency, or CAFE.
! Establish an Electricity Reliability Organization.
! Prescribe guidelines governing renewable energy resources, distributed
generation facilities, and hydroelectric relicensing.
References
Detailed analysis of many of the proposals and initiatives in current energy
legislation can be found in other CRS products, all of which are available from the
CRS home page.
The Arctic National Wildlife Refuge: the next chapter. CRS Issue Brief IB10073.
Automobile and light truck fuel economy: is CAFE up to standards? CRS Issue
Brief IB90122.
The Clean Coal Technology Program: current prospects. CRS Report RS20877.
Electricity: the road toward restructuring. CRS Issue Brief IB10006.
Electric utility restructuring. Electronic Briefing Book.
[http://www.congress.gov/brbk/html/ebele1.html]
Energy efficiency: budget, oil conservation, and electricity conservation issues. CRS
Issue Brief IB10020
Energy policy: setting the stage for the current debate. CRS Issue Brief IB10080.
Energy tax policy. CRS Issue Brief IB10054.
The Low-Income Home Energy Assistance Program (LIHEAP). CRS Report 94-211.
Nuclear energy policy. CRS Issue Brief IB8890.
Renewable energy: tax credit, budget, and electricity production issues. CRS Issue
Brief IB10041.
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