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View related content: Environmental and Energy Economics
For the past 30 years, America has grown increasingly dependent upon foreign
sources of energy, sending American dollars to countries that are hostile to
American interests and leaving us vulnerable to wild fluctuations in energy
This energy crisis has not gone unnoticed in Washington. Every U.S. president
since Richard Nixon has spoken about the need to make America more
energy-independent. Despite their strong words, no rational strategy has been
implemented for achieving that goal. In fact, where government has acted, it has
usually made the problem worse.
Let’s be clear: our energy crisis is not due to a lack of American energy
resources. We have more coal than any other country in the world. There are 86
billion barrels of oil and 420 trillion cubic feet of natural gas lying
undeveloped offshore. Shale-oil reservoirs in parts of Colorado and Utah could
hold upwards of 1 trillion barrels of oil–more than three times the proven
reserves in Saudi Arabia. Nuclear power is a clean source of energy that
produces zero carbon emissions. It generates 20 percent of America’s electric
power today, and with the right investment could generate far more.
Instead, America is suffering from an artificial energy crisis, one that is
the product of our government’s policies, not despite them. For example, until
September 2008, Congress had made it illegal to drill for oil and natural gas in
most areas off our coasts. Congress still forbids the development of the vast
shale-oil reserves in the Rocky Mountains even though there are promising
technologies that could make extracting oil from shale economically competitive.
In addition, laws passed in the 1970s banning the recycling of spent nuclear
fuel forced nuclear-power plants to invest in techniques to dispose of the fuel;
the long-running feud over where to store the spent fuel has helped prevent the
construction of more plants.
And now, in 2009, instead of making energy cheaper–which would help create
jobs and save Americans money–President Obama wants to impose a cap-and-trade
regime. Such a plan would have the effect of an across-the-board energy tax on
every American. That will make our artificial energy crisis even worse–and
raising taxes during a deep economic recession will only accelerate American job
The Obama administration’s own budget director is on record predicting an
increase of about $1,300 in the price of energy for the average American from
this type of energy tax. As a candidate, Obama himself recognized the pain this
would cause every American: “Under my plan … electricity rates would necessarily
What America needs is a rational energy policy that utilizes all our
homegrown energy resources while protecting the environment. For instance, in
addition to opening up the Arctic National Wildlife Reserve and the shale-oil
deposits in Colorado and Utah for drilling, we should change our federal law to
give all states with offshore oil and gas the same share of federal royalties
that other states get for land-based resources. Revenue generated from these
royalties could help many cash-strapped states address their budget problems, in
addition to funding alternative- and renewable-energy research. In addition, we
should allow companies to write off 100 percent of their expenses in the first
year if their refineries considerably expand America’s oil-refining
The federal government should also develop a package of incentives to
encourage clean-energy innovation. This should include a series of tax-free
prizes to accelerate innovation in developing clean-coal technologies, as well
as a $1 billion tax-free prize for the first hydrogen car that can be
mass-produced at a reasonable price. We should make the wind- and solar-power
tax credits permanent to provide long-term stability to these growing industries
and develop long-distance transmission lines to move the massive amounts of wind
power in the Great Plains to urban areas. We should also pass an open-fuel
standard for 95 percent of the new cars sold in the United States, allowing the
construction of flex-fuel vehicles (FFVs) that can run on a variety of fuels,
including ethanol. Finally, America should implement a loser-pays rule for
lawsuits against any energy company. This would guarantee that any lawsuit
brought against an energy developer was not done solely to slow down the process
through the courts.
These are the beginning steps of a rational strategy that fully utilizes our
vast energy reserves to lower the cost of energy for every American and help
create cleaner and renewable energy sources. It’s time for America to end its
artificial energy crisis.
Newt Gingrich is a senior fellow at AEI.
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