Energy Bill Still Misses Point

It would be nice if we could simply order up a round of applause for the Senate for drafting a new energy bill (search) that trimmed $17 billion out of the $31.1 billion legislation the two houses of Congress agreed to last year.

But one look at the new bill makes it clear: The Senate will have to wait for its standing ovation.

The new bill may cost a lot less, but it still includes a subsidy for ethanol, almost all of which will go to huge agribusinesses (search). A $2 billion subsidy for the coal industry remains. And the bill still includes an array of studies, programs and grants that could and should be jettisoned, such as $6.2 million to study ways to convert auto trips to bike trips and $50 million for a five-year transit bus demonstration program.

In other words, as supporters of the new legislation say, it "achieves the same goals the old bill did." Which is precisely the point. Like its predecessor, the new bill fails to address the key challenge, which is to provide Americans with a secure source of affordable, reliable energy.

In fact, replacing one misguided multibillion-dollar bill with a cheaper version only makes things worse. Energy use will grow faster than consumption in the United States at least through 2025. As a result, by then, we'll have to turn to the rest of the world for 36 percent of our total energy needs in 2025—up from 26 percent in 2002. Are we to assume the world will be safer then, that it will be easier to meet our energy needs from abroad?

What's worse, look where the money goes. The $5.4 billion increase in direct spending over the 2004-2013 period would fund such projects as research on ultra-deep wells (search), coastal restoration along the Gulf Coast and development of rural electric projects in distressed communities in Alaska.

Then there are the generous handouts to special interests-tax credits, tax deductions and other tweaks to the tax code designed to keep these constituencies on board. There is the "production tax credit" for "favored fuels," including wind and poultry facilities. The new bill would expand this to include all biomass, geothermal energy (search), solar energy, small irrigation power (search), municipal solid waste, biosolids and sludge.

The new bill also would create an artificial market for four vehicles so far rejected by the marketplace—among them electric/gas hybrid cars (search), alternative-fuel vehicles and lean-burn diesel cars (search). The bill would subsidize not only these vehicles but the exotic fuels—also not accepted by the marketplace—needed to run them. Cost: $4 billion over 10 years.

It allocates $2 billion to encourage energy-efficient homes and appliances; $7 billion more to subsidize oil and gas production from marginal wells (those that produce fewer than 15 barrels of oil per day or its equivalent); and $4.3 billion so oil and gas producers can depreciate some of their equipment more quickly.

Some of these may be worthwhile projects. Mismanagement of the Mississippi River by the Army Corps of Engineers largely created the need for coastal restoration, and no one opposes more efficient homes or appliances, but they don't belong in this bill.

What does belong in this bill are measures that increase the supply of affordable, secure energy. Such as:

—Access to domestic energy supplies now off-limits, such as in the Rocky Mountains and off the coasts of California and Florida.

—Enhanced electric reliability standards to ensure transmission grid viability.

—Limited "backstop authority" so the Federal Energy Regulatory Agency (search) can issue permits for interstate electricity lines in bottleneck areas.

—Repeal of the Public Utility Holding Company Act.

—Reform of the convoluted federal lands permitting process.

It's not simply that the emphasis of the bill should change from rewarding lobbyists to building energy independence. It's that the tax code should be made simpler and not used to modify economic behavior. Let the people choose which energy-saving devices are worthwhile through their purchases. And let government assure that we have the energy to have the prosperity to make those purchases.

Charli Coon is an energy and environment analyst at  The Heritage Foundation, a Washington-based public policy research institute.