Congress Set to Make Energy More Expensive

DALLAS, July 31, 2007 /PRNewswire-USNewswire

Hoping to get a vote before they set off for a month long vacation, House leaders filed a massive energy bill late last night that they say will boost the renewable fuels infrastructure and increase energy efficiency, among other "green initiatives." Yet this proposal is bad news for consumers smarting from high prices at the pump, according to H. Sterling Burnett, a senior fellow with the National Center for Policy Analysis (NCPA).

"Leave it to Congress to push a bill they purport will help consumers but will do the exact opposite," said Burnett. "This plan will discourage new production -- the only fix for high prices -- and will actually raise prices via new taxes."

In light of high prices and declining domestic production in 2005, Congress sought to encourage new production by expediting the leasing of new oil and gas wells on public lands and off-shore by giving new funding and fast-track authority to the Bureau of Land Management and the Minerals Management Service. They also reduced the bureaucratic paperwork requirements in order to ensure that proposals for new production were assessed, and contracts written, in a timely fashion.

In addition, in order to encourage companies to build expensive, new platforms in high risk areas in the hurricane prone Gulf of Mexico, where dry wells are not uncommon, Congress decided to treat oil and gas companies on the same par as renewable energy firms, allowing them to write off or accelerate the depreciation on capital equipment for new investments in production in the Gulf of Mexico. Now Congress wants to take all of this away.

"In order to fund their green priorities -- none of which will bring much energy online and therefore help consumers -- Congress plans to end the accelerated depreciation, extend the time federal agencies have to consider new leases and increase the paperwork hurdles," said Burnett. "Each of these steps will discourage or slow development of new oil and gas projects and thus slow or even halt in some cases, delivery of new oil and gas resources to the marketplace.

Further, during the 1990s when oil prices were low, in order to encourage continued exploration, the Clinton Administration wrote off-shore leases that did not require companies to pay royalties. Now that prices are high, Congress wants to force companies to break their contract, and pay royalties on oil produced in the past.

"Under this deal, unless they accede to this extortion, qualified companies will not be able to get new leases, which means there will be less competition and reduced production (or higher priced production). Only Congress could think this will help our energy situation. Worst of all, these policies will be most damaging to the poorest of the poor. They amount to a hidden tax on the most vulnerable among us."

The NCPA is an internationally known nonprofit, nonpartisan research institute with offices in Dallas and Washington, D. C. that advocates private solutions to public policy problems. We depend on the contributions of individuals, corporations and foundations that share our mission. The NCPA accepts no government grants.

SOURCE National Center for Policy Analysis

News Provided By