An Easy-to-Follow Energy Road Map

Posted on Tue 03/08/2011 by

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By Nicolas Loris

Faced with increasing electricity prices (as well as brownouts in some areas) and higher prices at the pump, Americans are calling for solutions that would result in affordable electricity and gas prices. The easiest way to do that is to increase supply to offset rising demand. The federal government’s role should be not to pick winners and losers among energy technologies but set the rules in place to allow companies to produce energy if it’s in their interest to do so. Rep. Devin Nunes (R–CA) released new legislation that provides an efficient path forward to increase energy supply, create jobs, and grow America’s economy while preventing the Environmental Protection Agency (EPA) from stifling economic growth with senseless regulations.

Nunes’s legislation would open access to domestic oil and gas exploration both onshore and offshore, streamline the process to permit new nuclear power plants, and attempt to remove the special-interest politicking behind renewable energy subsidies. The bill would also prohibit the EPA from regulating greenhouse gas emissions under the Clean Air Act (CAA).

Offshore Access

Many of America’s offshore areas are off-limits to energy production. Beginning in 1982, Congress restricted more and more offshore areas through annual Department of the Interior (DOI) appropriations, denying funding to conduct lease sales. Nunes’s bill would improve access to America’s resources in the Outer Continental Shelf (OCS) by removing unnecessary and restrictive delays in the implementation of the Draft Proposed OCS Oil and Gas Leasing Program 2010–2015, which was put forth by the Bush Administration. The bill would require the Secretary of the Interior to conduct a lease sale 30 days after the bill’s enactment and every 270 days after that in each OCS planning region where a commercial interest exists to purchase the lease.

Some 86 billion barrels of oil and 420 trillion cubic feet of natural gas are beneath America’s waters, and while those resources wouldn’t immediately be available, we should move forward to access those resources.

Opening Alaska’s Arctic National Wildlife Refuge

For the past few decades, the federal government has been a hindrance rather than a help in expanding America’s domestic energy supply. Alaska’s Arctic National Wildlife Refuge (ANWR) is likely the most infamous case. ANWR is the largest single untapped source of American oil. The U.S. Geological Survey estimates that it contains 5.7–16 billion barrels of recoverable crude oil. Assuming the middle of this range, ANWR could provide nearly a million barrels per day, every day it is in operation, for several decades.
This drilling would occur on only 2,000 acres of ANWR’s 19 million-acre expanse and only during the time of year when the ground is frozen. Wildlife migration typically occurs during warmer periods, so drilling would not be disruptive to animals, most notably caribou. Only an act of Congress can open up ANWR to leasing for oil and gas production.

Stopping EPA’s Global Warming Regulations

The EPA’s endangerment finding gives the EPA justification to regulate greenhouse gas emissions, most notably carbon dioxide (CO2), under the CAA. The EPA already began targeting motor vehicles last year and will start regulating emissions from new power plants and major expansions of large greenhouse-gas-emitting-plants this year.

Reining in the EPA’s regulatory excesses with respect to carbon dioxide and other greenhouse gas emissions is long overdue and is a critically important title in the Nunes legislation. The American people made it clear last year that they had no appetite for cap-and-trade legislation that would inflict serious economic damage while providing no environmental benefit. The EPA’s CO2 regulations would do no less.

Moving Forward with Nuclear Energy

Of critical importance, the Nunes bill creates a pathway to determine whether or not Yucca is suitable as a repository and puts forth a plan to find an alternative site if one is necessary. It also directs the Department of Energy (DOE) to report back to Congress on the feasibility of establishing an organization outside of the DOE to manage the Yucca repository and removing the fee that ratepayers pay to the federal government to used-fuel-management services. Removing the fee would allow a market-based system to emerge for used-fuel management.

The proposal also would reform how new reactors are potentially permitted. The current permitting process to build new reactors is a product of a streamlining effort established by the Energy Policy Act of 1992, but it is still proving to be slow and unpredictable. The Nunes legislation would create a second permitting track that would allow for a permit to be issued in approximately two years.

To be eligible, applicants must:

  • Construct a reactor in which the design has already been certified by the Nuclear Regulatory Commission (NRC);
  • Build the new reactor on or adjacent to a site where reactors already operate;
  • Not be subject to any NRC actions to revoke operating permits; and
  • Have submitted a completed combined construction and operating license permit application that has been docketed by the NRC.

The expedited process would entail the issuance of a draft Environmental Impact Statement (EIS) within 12 months of the application being docketed and the final EIS within 18 months. Further, hearings over contested application issues would begin once the draft EIS is issued rather than after the final EIS. This would allow the NRC and applicant to resolve contested licensing issues within 24 months of the application being docketed. The bill also calls for the Safety Evaluation Report—NRC’s application technical review report—to be completed within 18 months of the application being docketed. While such timeframes would be tight, with close coordination between the applicant and the NRC, it should allow for a significantly shortened process.

The bill also begins to break down one of the primary obstacles that new reactor technologies have in entering the marketplace: a lack of regulatory support. The current NRC does an outstanding job of regulating large light-water reactors, 104 of which operate in the U.S. today, but it performs inadequately in developing regulations that would allow new technologies into the marketplace.

Without this regulation, new technologies are effectively banned because customers are hesitant to buy reactors that the NRC will not regulate, and the NRC does not want to put its resources toward a reactor technology that has no customers. The result is that new nuclear technologies are at a severe disadvantage.

To begin changing this, the Nunes bill would direct the NRC to develop a set of guidelines for technology-neutral nuclear plant designs. Instead of mandating that a specific nuclear technology be wedded to a specific plant design, the new guidelines would allow for other nuclear reactor technologies to be used in a nuclear power plant, creating a significant step toward building a more diverse and competitive nuclear industry.

Finally, the proposal allows for the provisional certification of new reactor designs. While the provision does not eliminate or reduce any requirements for reactor design approval, it would allow for a reactor plant permit applicant to move forward with the permitting process. To get provisional certification, the legislation would direct the NRC to consider such factors as whether a design is commercially viable in other markets or if it has been certified in other countries.

Reverse Auction for Renewable Energy Subsidies

The goal of Congress should be to allow all energy sources to compete subsidy-free in an open market. Such an approach would yield innovation and cost reductions and maximize energy supplies. The massive infrastructure of subsidies, set-asides, restrictions, preferences and mandates that currently plague America’s energy policy is at the heart of most of America’s energy policy problems. Part of that is because special interests, lobbyists, and parochial agendas have largely determined how energy subsidies and preferences are distributed.

Nunes’s bill introduces a better way to distribute energy subsidies by creating a system where renewable energy producers would bid on subsidies. Those with the lowest costs would get the subsidy. While The Heritage Foundation remains committed to its position that all energy subsidies should be abolished, we do recognize that the Nunes idea for distributing subsidies through a reverse auction is a better mechanism than is currently in place. It could be improved even further if, instead of using royalty funds from new gas and oil exploration, it took funding from current subsidy payments.

Co-authored by Heritage Research Fellow Jack Spencer.

Nicolas Loris is a Research Assistant at The Heritage Foundation’s Roe Institute for Economic Policy Studies. Loris studies energy, environment and regulation issues such as the economic impacts of climate change legislation, a free market approach to nuclear energy and the effects of environmental policy on energy prices and the economy.

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