Washington (Platts)--22Jan2008

Though persistently high energy prices will be a major contributor in
2008's grim economic outlook, US Congressional Budget Office Director Peter
Orszag told the Senate Finance Committee Tuesday that it would not be
effective to add new incentives for alternative energy projects or new
energy-related public projects to an upcoming stimulus bill.

Orszag told the panel that the US will likely experience at least some
slow growth in 2008, and recommended a temporary package of benefits and
rebates for low-income people, and other measures that might boost the economy
in the short term.

In his testimony, Orszag concluded that funneling money toward new energy
production, like ethanol facilities, would "tend not to generate much
short-term demand" because of the long lead time such projects require.

The office recommended that Congress instead invest in incentives aimed
at accelerating already-planned investment that can be brought online more
quickly.

Likewise, Orszag discouraged investment in grant-funded initiatives to
develop alternative energy sources, saying such projects are "totally
impractical for countercyclical policy, regardless of whatever other merits
they may have."

"In general, many if not most of these projects could end up making the
economic situation worse because they would stimulate the economy at the time
that expansion was already well under way," Orszag said in his testimony.

Asked whether increased investment in the Low-Income Home Energy
Assistance Program might be helpful for poor households struggling to pay
elevated heating costs, Orszag said that it would be difficult to distribute
more than a few billion dollars to LIHEAP recipients in time to offset heating
costs this winter.

--Jean Chemnick, jean_chemnick@platts.com