CHAPTER 14 NATURAL GAS ISSUES IN THE NEW ADMINISTRATION

• Jurisdiction: United States

Natural Gas Transportation and Marketing
(2001)
CHAPTER 14
NATURAL GAS ISSUES IN THE NEW ADMINISTRATION
Judy M. Johnson ¹
Vinson & Elkins, L.L.P.
Houston, Texas

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I. THE BUSH ADMINISTRATION ENERGY POLICY

A primary focus of the Bush Administration policy is security of supply to meet demand. Early on, President Bush emphasized a need to develop a comprehensive and long-term energy policy. The President announced in general terms a four-part strategy:

• To make energy security a priority of foreign policy, restoring American credibility with overseas suppliers and building strong relationships with energy-producing nations.

• To encourage environmentally friendly exploration and production of domestic energy sources.

• To promote the production of electricity to keep pace with demand.

• To support the development of cost-effective alternative energy sources.

To that end, President Bush designated a task force—the National Energy Policy Development Group—to assess energy throughout the United States and make recommendations to the President.

A. National Energy Policy Report

The members of the task force included:

• Vice President Dick Cheney

• Secretary of State Colin L. Powell

• Treasury Secretary Paul O'Neill

• Interior Secretary Gail Norton

• Agriculture Secretary Ann M. Veneman

• Energy Secretary Spencer Abraham

• Commerce Secretary Don Evans

• Transportation Secretary Norman Y. Mineta

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• Director of the Federal Emergency Management Agency Joe M. Allbaugh

• EPA Administrator Christine Todd Whitman

• Assistant to the President and Deputy Chief of Staff for Policy Joshua B. Bolten

• Director of the Office of Management and Budget Mitchell E. Daniels

• Assistant to the President for Economic Policy Lawrence B. Lindsey

• Deputy Assistant to the President and Director of Governmental Affairs Ruben Barrales

On May 16, 2001, Vice President Cheney delivered to President Bush a National Energy Policy Report containing recommendations developed by the National Energy Policy Development Group. The extensive report includes over 100 proposals to diversify and increase the supply of energy, to encourage conservation, and to ensure that energy is transported or transmitted from producer to consumer. As an overview, the report states that

America in the year 2001 faces the most serious energy shortage since the oil embargoes of the 1970s. The effects are already being felt nationwide. Many families face energy bills two to three times higher than they were a year ago. Millions of Americans find themselves dealing with rolling blackouts or brownouts; some employers must lay off workers or curtail production to absorb the rising cost of energy. Drivers across America are paying higher and higher gasoline prices. (National Energy Policy Report Overview at viii).

Citing to a "fundamental imbalance between supply and demand," the report describes several challenges to be met: To use energy more wisely, to repair and expand energy infrastructure (including electric generation, transmission lines, pipelines, and refineries), and to increase energy supplies while protecting the environment. (National Energy Policy Report Overview at ix-x).

In connection with supply and demand, the report states:

Estimates indicate that over the next 20 years, U.S. oil consumption will increase by 33 percent, natural gas consumption by well over 50 percent, and demand for electricity will rise by 45 percent. If America's energy production grows at the same rate as it did in the 1990s, we will face an ever increasing gap. (National Energy Policy Report Overview at x).

The report urges action to meet five specific national goals: modernizing conservation, modernizing energy infrastructure, increasing energy supplies, accelerating protection and improvement of the environment, and increasing energy security.

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With respect to modernizing conservation, the report includes recommendations to

• Direct federal agencies to take actions to responsibly conserve energy at their facilities, especially during peak demand periods where electricity shortages are possible.

• Increase funding for renewable energy and energy efficiency research and development programs that are performance based and cost-shared.

• Create an income tax credit for the purchase of hybrid and fuel cell vehicles to promote fuel-efficient vehicles.

• Extend the Department of Energy's "energy star" efficiency program to include schools, retail buildings, health care facilities and homes.

• Fund the Intelligent Transportation Systems program, the fuel cell powered transit bus program and the Clean Buses program.

• Provide a tax incentive and streamlining permitting to accelerate the development of combined heat and power technology.

• Direct the Secretary of Transportation to review and provide recommendations on establishing Corporate Average Fuel Economy Standards with due consideration to the National Academy of Sciences study (July 2001).

With respect to modernization of the energy infrastructure, the report includes recommendations to

• Direct agencies to improve pipeline safety and expedite pipeline permitting.

• Issue an Executive Order directing federal agencies to expedite permits and coordinate governmental actions for energy-related project approvals on a national basis in a way that is sound from an environmental perspective and establishing an interagency task force chaired by the Council on Environmental Quality to ensure that federal agencies set up appropriate mechanisms for coordination.

• Grant authority to obtain rights-or-way for electricity transmission lines with the goal of creating a reliable national transmission grid (noting that similar authority already exists for natural gas pipelines and highways).

• Enact comprehensive electricity legislation that promotes competition, encourages...