Opening Access, Not Subsidies, The Key to America’s Energy Future

Posted on Wed 07/20/2011 by


By Nicolas Loris

Over the years our federal government has implemented a number of bad policies to reduce dependence on foreign oil. The latest flavor-of-the-month policy is the New Alternative Transportation to Give Americans Solutions (NAT GAS) Act, which would give targeted tax credits to produce natural gas vehicles and heavy-duty trucks.

The problem with these plans is that the government picks winners and losers in the marketplace, wastes taxpayer dollars, diverts resources away from more productive use, and does little to reduce dependence on foreign oil.

As Heritage’s David Kreutzer points this out, the NAT GAS Act is much of the same:

In the proponents’ dreams, the act will save 1.5 million barrels of oil per day … by 2035. Though 1.5 million barrels is nothing to sniff at, 1.5 million either way won’t scare any dictators, especially when the impact is spread out over a 25-year period.

These hypothetical savings would cut world demand by only 1.5 percent in 2035. If this is Anti-terror Plan A, let’s move on to Plan B, because the threat of cutting revenues by a couple of percent 25 years from now will do nothing to affect behavior in Iran, Venezuela or anywhere else. If the bill’s supporters seriously want to reduce America’s dependence on foreign oil, a great place to start is to allow access to our domestic reserves. Opening access and streamlining permits would generate royalties and bonus-bids, creating additional income and government revenue instead of boosting the debt to cover the subsidies.

A good place to start allowing access to our reserves is out west. A new report entitled “The Blueprint for Western Energy Prosperity” from the Western Energy Alliance highlights the important potential of oil and natural gas production, noting that the region is projected to generate 1.3 billion barrels by 2020. The increased supply would create jobs and bring in revenue to federal and state governments and can be accessed without subsidies and targeted tax credits.

What we need, the report correctly argues, is a “moratorium on new and expanded layers of regulation” that would add to the already onerous regulatory regime. Furthermore, we need an end to frivolous lawsuits that needlessly tie up these projects in years of litigation. Environmental activists have a remarkably successful track record of delaying new energy projects—not just for oil and gas but all energy projects—by filing endless administrative appeals and lawsuits.

Instead of restricting access, policies should focus on opening markets. Politicians should worry less about catchy sound clips when talking about energy independence and center more on sound economic policies that grant Americans access to affordable energy. Our policies should not promote protectionism and isolationism, both of which are in opposition to America’s long-term interests. If oil is cheaper to import, we should do that, and the resources in the United States could be put to more efficient use.

That being said, there are plenty of opportunities to produce oil onshore and offshore here at home at its current price (and well below it), and it should be a priority for our government to allow companies to explore and drill for oil and natural gas.

Nicolas Loris is a Research Assistant at The Heritage Foundation .  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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