The top priority of the NAM for the past decade has been to advocate a pro- growth, pro-manufacturing and pro-worker policy agenda. Durable economic growth is the only guarantor of rising living standards for Americans. The NAM has long recognized that a skilled workforce, high technology and innovation are important underpinnings of prosperity - but so, too, are adequate energy supplies.
Overall, U.S. manufacturers continue to strive for improved efficiency in the competitive world marketplace, including increasingly efficient uses of energy. For example, although manufacturing output has increased by 41 percent since 1990, industrial electricity consumption has increased by only 11 percent. (Overall US electricity use has increased 22 percent during the same period). A recent NAM poll of its members revealed that, over the past five years alone, 85 percent of U.S. manufacturers have upgraded and improved the energy efficiency of their U.S.-based plants and offices.
Despite continuing efforts to increase energy efficiency, increasing the supply of traditional energy sources and developing alternative energy sources remain critical for sustained economic growth. [See Appendix 1: U.S. Energy Profile). Unfortunately, harbingers of energy supply problems are increasingly evident in the United States. Last summer, electricity supply shortages occurred in the Midwest and Northeast. This summer, California has suffered power interruptions and the first-ever rotating blackout in the San Francisco area. One step that must be taken to address the uncertainties accompanying a patchwork of state restructuring laws regarding electric utility regulation is passage of federal legislation. The NAM supports federal legislation that would facilitate wholesale and retail competition and strengthen reliability and efficiency of supply as soon as possible.
However, the energy-policy warning signs are not just flashing because of regional electricity disruptions. Also this year, the U.S. has already experienced tight supplies on natural gas and transportation fuels. and the Department of Energy has just issued a warning of higher natural gas and potentially higher heating oil prices this coming winter due to insufficient supplies. The warning signs are here that the need for adequate energy supplies has been neglected for too long.
The current Administration has created an unbalanced national energy policy by focusing on energy efficiency, natural gas and non-traditional energy sources. while undermining the use of other energy sources. A policy that is narrowly focused on certain fuels to the exclusion of others, such as by promoting switching from coal to natural gas for electricity generation, is a recipe for disaster. Historically, the federal government has caused enormous economic waste when it tries to pick "winners and losers" in the energy marketplace. It has also caused waste when its energy policies are not coordinated with other policy objectives or considered in the context of economic growth.
Of particular concern for the NAM is the apparent policy disconnect between favoring natural gas use and discouraging natural gas production. The National Petroleum Council (NPC), the Energy Information Administration and others are projecting dramatic increases in natural gas use in the next 10-20 years -- especially in electricity generation. However, the NPC warns that not enough natural gas supplies are being developed to meet the NPC's estimated 7 Tcf (34 percent) increase in natural gas use over the next decade, which is more than twice the percentage growth in gas use from the 1980s to 1998. The NPC identifies as a critical barrier to meeting future demand projections for natural gas the fact that access to over 200 Tcf of natural gas reserves is being restricted on multiple-use federal lands and the OCS. Currently, natural gas and oil exploration and production are off limits or significantly restricted in 40 percent of the Rocky Mountain region and in the OCS off of the entire East Coast, the entire West Coast and more than 50 percent of the Eastern Gulf of Mexico. Access to new coal deposits is also being systematically denied. (See Appendix 2. Administration Restrictions On Resource Access.)
Denial of access to resources on multiple-use federal lands is not the only policy of this Administration that discourages the use of traditional fuels. Since first entering office in 1993, this Administration has assaulted virtually every domestic energy source (except "non-hydro renewables," which account for only about 2 percent of total electricity generated) -- particularly coal use. After failing in its attempt to secure a Btu tax on fossil fuels, mandated centralized inspections for automobiles and forced van pooling, the Administration focused its efforts on more indirect means by denying access to fossil resources to cut off supplies and by using environmental restrictions to reduce production and use. (See Appendix 3. EPA Restrictions on Energy Production and Use.) The Administration has even tried to use international pressure to force domestic energy- use reductions by signing the ill-advised Kyoto Protocol in 1997. If ratified, this Protocol would arbitrarily impose quotas on carbon dioxide emissions equivalent to a reduction in fossil-fuel use by more than 30 percent from projected levels in 2010.
An energy policy that emphasizes only some energy sources and priorities -- without regard for their negative impacts on energy markets -- threatens the sustainability of the national economy and the welfare of the American people. When such a policy also undermines the development of domestic oil, gas, nuclear. coal and hydroelectric power, then these 'supply-side" disincentives add up to what is essentially a policy of planned energy dependence by the United States on foreign sources.
Conclusion
Adequate supplies of reliable and competitive energy and an overall energy strategy must become a priority for the next Administration. The NAM strongly believes that America must make progress in all of its energy options in order to meet the challenges of a growing population while increasing prosperity, national security and environmental protection.
Action
The NAM will work actively with this Administration and Congress in the time remaining, and with the presidential and congressional candidates to urge them to turn their attention to the seriousness of this problem and the need for prompt action to meet these concerns.
Appendix 1: U.S. Energy Profile
-- During the 1990s, US electricity generation grew by 22 percent. Although the use of non-hydro renewable energy for electricity generation has increased by a third during this decade, it still represents only about a little over 2 percent of total net generation.
-- Hydroelectric power produces about 12 percent of total electricity generation. However, it has been declining sharply in recent years. Delays in federal relicensing (eight-year schedule) burdens applicants with endangered-species and other environmental studies and pre-conditions, exacerbating the delays and the costs. This Administration has even torn down hydroelectric dams. Nuclear energy has increased 26 percent in the past 10 years, and now supplies 20 percent of total generation. However, no new plants are scheduled to begin operating. This Administration has steadfastly opposed, and recently vetoed, legislation that would ensure timely construction of a desperately needed federal storage facility for spent nuclear fuel. In the meantime, the Administration has breached its contractual obligation to begin removing spent fuel from the nation's nuclear reactors, despite receiving $ 17 billion in pre-payments from the consumers of electricity. Finally, virtually all nuclear operating licenses are up for renewal by 2015. NRC has indicated it expects no more than 85 of the 103 units will file for renewals. Coal - which currently provides more than 50 percent of total net generation - has increased almost 19 percent in the past 10 years, despite growing hurdles created by administrative agencies. However, no major coal-fired electricity generating stations are being built, despite the fact that coal represents 90 percent of US recoverable fossil energy reserves. Oil use in electricity has dropped dramatically since the 1973-74 Arab oil embargo, off 30 percent in the past 10 years to 3 percent of total generation. Petroleum is still a vital transportation fuel, however, and is the energy source for which we are most dependent on foreign sources - nearly 60 percent of our needs. As a result, petroleum accounts for one-third of our total trade deficit. Meanwhile, domestic crude oil production has fallen almost 20 percent over the past 10 years, as vast areas of onshore and offshore United States have been put off-limits to energy leasing. Worse, value-added refining is moving overseas, with 36 U.S. oil refineries having closed in just the past eight years. No new major refineries have been built in this country in the past quarter-century, and regulatory hurdles complicate making refinery investments needed to produce adequate supplies of lower-sulfur transportation fuels being required by EPA. America consumed 21.4 Tcf of natural gas last year, about 15 percent of which was used by utilities for electricity production. Domestic natural gas production declined from the early 1970's peak of over 21.7 Tcf a year to 1986's low point of 16.06 Tcf. Production increased to 18.82 by 1994. and has remained relatively stable for the past six years, (in 1999 it was 18.71 Tcf). Canadian imports have increased more than 130 percent over the past 10 years (to over 3 Tcf) to meet the increased U.S. demand. The National Petroleum Council (NPC) and the American Association of Petroleum Geologists (AAPG) predict a severe gas supply shortage in the next 10-15 years
unless multiple-use federal lands onshore and offshore - and the more than 200 Tcf in natural gas reserves inside them - are opened to exploration and production.
Appendix 2:
Administration Restrictions on Resource Access
Administration policies and/or regulatory actions that impede or prevent the development
of domestic fossil-fuel resources include the following:
-- Multi-year moratoria on Outer Continental Shelf leasing and drilling off of the entire Atlantic and Pacific coasts and portions of Alaska and the Eastern Gulf off of Florida. Army Corps of Engineers elimination of Nationwide Wetlands Permits - 100-year Flood Plain Exclusion (50 million acres).
-- Forest Service moratorium on new road construction (40 million to 60 million acres).
-- Bureau of Land Management has proposed regulations - a "plain language" rewrite of onshore oil and gas activities, that impose additional requirements that provide no benefits yet cause further delays.
BLM permitting delays in critical areas like Wyoming (coal-bed methane).
-- OCS permitting delays by the EPA and NOAA prevent a valid federal lease (with 1 Tcf of natural gas) off of Florida, acquired in the mid-1980s, from going forward.
-- (Monuments designation initiatives under Antiquities Act (millions of acres in at least seven Western states); already declared Escalante Staircase a monument' abrogating valid oil and gas leases and ending plans for a large low-sulfur coal mine. Expansive interpretations by Commerce Department of Essential Fish Habitat regulations threatening oil and gas activity in Gulf of Mexico Expansive interpretations of Endangered Species Act by BLM, Forest Service, Fish and Wildlife Service causing sometimes indefinite permitting delays BLM's designation of areas as Wilderness Study Areas, which has become de facto prohibitions of multiple use while BLM studies whether to ask Congress to list the area as wilderness EPA Interim Guidance reinterpreting CERCLA release to require daily reports of air emissions from hundreds of thousands of small rural engines would affect oil and gas production and transportation - especially marginal wells Department of Labor reinterpretation of Process Safety Management Regulations to require unnecessary and expensive regulations of remote unoccupied exploration and production facilities
-- EPA reluctance to support legislation to clarify that hydraulic fracturing of gas- bearing formations should not treated as "underground injection" under the Safe Drinking Water Act. As many as 60 percent of future gas wells may need to employ fracturing technology Lack of cooperation and coordination between BLM, U.S. Forest Service, EPA and other agencies in implementing National Environmental Policy Act requirements for permitting and leasing processes causing significant delays The Interior Department's Bureau of Land Management State Office in New Mexico this month announced that it would soon begin using new guidelines for approval of San Juan basin drilling permits that could severely affect gas production in the second-largest gas field in the nation. Activity in this mature producing area (that
accounts for some 6 percent to 7 percent of the country's gas production. more than half of which goes to California) is within projections of the BLM Resource Management Plan However. while the state office does a new EIS that may lead to improvements in the RMP, BLM is proposing new permitting guidelines that hold the potential to prevent drilling enough wells to even maintain current production levels Redundant NOAA Coastal Zone Management Act consistency regulations that impede OCS exploration and production activities without any additional environmental benefits Proposed DOI (Minerals Management Service and BLM) "plain language rewrite of oil and gas lease forms imposing new requirements and additional administrative burdens will encourage litigation, making it more difficult to drill and produce hydrocarbons on federal lands
Appendix 3:
EPA Restrictions on Energy Production and Use:
-- NOx SIP Call: The EPA's 1998 final rule to reduce nitrogen oxide emissions by 85 percent throughout the eastern United States will result in estimated utility costs of $14.1 billion in capital investments, and an increased annualized cost of $2.7 billion for power plants and other major sources. The rule required the emission-reduction measures to be in place by May 1, 2003. The EPA's refusal to provide flexibility to states in setting their ozone attainment strategy, along with threats to impose a Federal Implementation Plan (FIP) if states did not comply with the State Implementation Plan (SIP) call, placed immense pressure on coal combustion. States have until October 2000 to submit their plans. New Source Performance Standards: In 1998, the EPA issued revised nitrogen oxide (NOx) New Source Performance Standards (NSPS) for all new and modified ("reconstructed") utility and industrial boilers. A new "guidance" is expected to be issued by OECA before the end of this year that will lower the threshold of what is a "reconstruction," thereby forcing many additional existing power generators to install expensive retro-fit equipment or become subject to enforcement actions. Particulate Matter: The costs of compliance for coal-fired power plants would greatly increase if the EPA's final rule setting new "fine" PM2.5 standards and revising the "coarse" PM10 standards are found to be valid by the U.S. Supreme Court. New Source Review (NSR): The Clean Air Act requires a pre-construction permit before building or making modifications to facilities that would result in significant new emissions. The Act explicitly allows companies to do routine maintenance and repair, but the EPA wants to force older facilities - particularly coal-burning ones - to install expensive air-pollution control equipment. In addition, the EPA's threats of litigation and heavy-handed enforcement significantly contribute to cost burdens for these plants. For example, in November 1999, the EPA filed lawsuits against several coal-burning utilities, alleging violations of the New Source Review (NSR) rule, claiming that the utilities made major modifications to their facilities and, in doing so, failed to apply for NSR permits. In addition, the EPA is currently preparing to issue a final rule on NSR while also coercing existing sources to meet "best available control technology" (BACT) by a certain deadline.
-- Ozone Non-attainment Areas: The EPA efforts to force states to designate areas that are not in "attainment" with the agency's revised "Eight-Hour Ozone Standard" (promulgated in 1997, and in litigation in the Supreme Court) is an attempt to circumvent a possible rejection of the rule by the Court, while chilling economic development and energy use in those designated areas. The EPA threatened to withhold federal highway funds to states to force state compliance.
-- Regional Haze Rules: New rules call for states to establish goals for improving visibility in Class I areas (national parks and wilderness areas) and to develop long- term strategies for reducing emissions of air pollutants that cause visibility impairment. Strict EPA visibility regulations could cost the refining industry $0.4 billion to $1.0 billion- above and beyond the costs incurred for complying with other requirements of the Clean Air Act, such as NAAQS. In addition. oil and gas producers might need to invest between $0.2 billion and $2.5 billion over the next several years, to comply with the proposed rule. Future exploration and development in the United States is likely to be hampered or curtailed, with potentially serious consequences for the nation. Since most new development in the United States is near Class I areas, the efforts of states and federal land managers to comply with regional haze requirements are likely to preclude timely and efficient development of oil and gas resources.
TMDL Rules: On July 11, 2000, the EPA issued the controversial Total Maximum Daily Loads (TMDL) rule, even though on June 30, 2000, Congress sent to the White House legislation that would have required the EPA to take a closer look at the 30,000 comments received and to rewrite the rule. The EPA delayed the effective . date for the rule until October 2001, after a congressionally imposed prohibition expires. Most electric-utility operations will be affected if a water segment they are located on or near is listed as impaired. The stringent TMDL standards will likely necessitate regulation of air deposition of pollutants into water bodies, thus opening another back door to air-emission regulation.
Btu Tax on Fossil Fuels: The Administration's early advocacy of a Btu tax on fossil fuels would have discouraged use of fossil resources and reduced manufacturers' competitiveness. New Source Review Revisions: The EPA in 1996 issued a proposed rule for a revised NSR program. The EPA is currently preparing to issue the final rule. and has been conducting discussions with the regulated community on an alternative ("off-ramp") to the new NSR rule. The off-ramp, as proposed, would work as follows: Coal- burning utilities will be able to obtain relief from stringent new NSR rule if they, in return, agree to a suite of emission reductions to be achieved by a certain deadline. EPA has discussed the inclusion of CO2 within the bundle of emissions to be "voluntarily" regulated.
CO2 Regulation: The EPA issued a memorandum in April 1998, asserting the EPA's authority under the Clean Air Act to regulate CO2 as a pollutant. It did so in absence of any scientific evidence to suggest that the EPA will be able to make the showing that CO2 is harmful to human health and the environment, as is necessary to designate a compound as a criteria pollutant.
TRI Reporting: The toxics release inventory (TRI) (under the Emergency Planning Community Right-to-Know Act) was recently changed by the EPA to require electric utilities to report chemical-release data. Additionally, the level at which reporting is required for mercury was lowered by several orders of magnitude. In making these changes, the EPA presented no studies or supporting rationale for why communities should suddenly be concerned about these releases. These reporting requirements - without being based on actual health concerns - further discourage the siting of electricity generating stations.
Mercury: In November 1998, EPA issued a draft Mercury Action Plan to reduce overall mercury emissions. This plan has required expensive testing by coal-fired power plants and is likely to result in a regulatory determination by December that will lead lo costly Maximum Achievable Control Technology standards for coal-fired utilities.
Particulate Matter / Ozone rulemaking: The EPA proposed new NAAQS for Ozone and PM2.5 Particulate matter used to be the technical term for soot: however. the new regulatory size threshold set by the EPA (2.5 microns) is so small that it captures individual molecules of sulfates. In essence, this amounts to a back-door tightening of Title IV (acid rain) of the 1990 CAA.
MTBE: Against the advice of scientists, the EPA encouraged billions of dollars in investments to make methyl tertiary butyl ether (MTBE) additives to motor gasoline. Now the agency wants to keep the questionable oxygenate benefits by replacement chemicals that will raise the price of gasoline and require more crude oil to be used to make each gallon of "government gas." Prior to imposing oxygen substitutes, there should be a rigorous reevaluation of the need for an oxygen mandate in gasoline, in light of technological progress in engine manufacture and the increased overall compliance with attainment of the carbon-monoxide ambient air standards. Federally Permitted Releases: On Dec. 21, 1999, the EPA published an Interim Guidance on air emissions under the Comprehensive Environmental Response, Compensation and Liability Act and the Emergency Planning and Community Right- To-Know Act (collectively CERCLA). The Interim Guidance defines which air emissions must be reported under CERCLA and which are exempt from reporting as a federally permitted release (FPR). Identification of specific hazardous constituents at every emission point in a facility may not be technically feasible in many instances and may be prohibitively expensive. The Interim Guidance incorrectly requires speciation of emissions to qualify for the exemption, effectively eliminating the exemption.