In his 2007 State of the Union address, President Bush made several energy-related proposals. Among them were decreasing U.S. gas use by 20 percent in 10 years, increasing energy independence through technology, increasing fuel efficiency and doubling the country's Strategic Petroleum Reserve. Will these proposals affect the types of legislation Democrats introduce over the next two years, and does the budget and infrastructure exist to put these proposals into play? During today's OnPoint, E&E Daily senior reporters Darren Samuelsohn and Ben Geman address these questions and discuss the details of the president's energy proposals.
Monica Trauzzi: Welcome to OnPoint. I'm Monica Trauzzi. Joining me today for a reporter's roundtable on the State of the Union address are E&E Daily senior reporters Darren Samuelsohn and Ben Geman. Thanks for joining me.
Darren Samuelsohn: Yup.
Ben Geman: Sure.
Monica Trauzzi: In the days leading up to the speech we heard from the White House that there would be major talk on energy. They were saying that there would be headlines above the fold. Did the speech live up to expectations and speculation?
Darren Samuelsohn: Well, my socks are still on. I think some people's socks, as Al Hubbard said, may have been knocked off. I mean it was above the fold in the Wall Street Journal the day afterwards in terms of the energy. That was their lead paragraph. Obviously it was our lead story. It wasn't a major change in terms of climate change policy, which we kind of knew going in, that President Bush was not going to change his position on mandatory caps on greenhouse gas emissions. There was increasing speculation that this was going to happen. Some people were reporting with anonymous sources, saying that there was going to be a U-turn. There were people quoting the British prime minister's office saying that there would be a major U-turn. Ultimately there wasn't and I think that might have been the thing that would have had a banner headline maybe across the fold.
Ben Geman: Right, but absent that carbon piece, there was, nonetheless, an element of the speech that was fairly dramatic. And that was, of course, this proposal to just radically and dramatically scale up the amount of renewable and alternative fuels used in the nation's gasoline pool or to displace gasoline. And that got a lot of attention. It's also raising a lot of questions. I mean, look, what he's proposing to do is basically increase by an order of five the amount of renewable fuels. And so that immediately has people wondering, A, will there be enough funding for that? Will there be enough cropland for that? There's a huge number of questions surrounding that one.
Monica Trauzzi: And, specifically, did the fact that there is now a Democratic majority put pressure on the president to focus in on these issues?
Darren Samuelsohn: I would say definitely, I mean this is the first time he's ever addressed Democrats in control of the Senate and the House. So he's recognizing that Democrats have been laying out their energy independence agenda, their global warming agenda, you know, even before they were sworn into office in January. So he had some time to prepare. He had some time to put some things together to raise expectations that he was going to extend an olive branch so to speak. And even just by mentioning the words global climate change it did have people thinking, wow, President Bush is acknowledging that it's happening now. You know, the White House, yesterday, was careful to say, and was insistent that President Bush, since 2001, acknowledged that climate change was an issue and they spent all this money, they've done all these programs and what have you. You know, the question still arises, and there's been news reports about this as well, that there's been questions of censorship, allegations that the White House has not put out everything that needs to be on the table about global warming. So here he is saying global warming in his speech and he's putting forward the proposals that Ben described. So you do get a sense that he's at least trying to start a dialogue with Democrats. And, of course, the Democrats want to push much further than what President Bush wants.
Monica Trauzzi: And do you think the legislation that the Democrats are putting forth on emissions caps is going to be affected by what was said in the speech?
Darren Samuelsohn: Not really. I think the president didn't talk about emission caps. I think it gives a sense of, he didn't say he was going to veto emissions caps was one thing I was thinking about after the speech. I mean sometimes the president will say, "Absolutely not. I don't want this." So he didn't say he's going to veto it. And that will be the ultimate question. There's a lot of questions. You know, will the Senate get 60 votes on any sort of bill? Will they lose Democrats? Will they lose environmentalists? Over in the house, what's John Dingell going to do? What's Nancy Pelosi thinking right now in terms of this select committee? I know yesterday John Shimkus, a pretty senior Republican in the Energy and Commerce Committee, said that he thought maybe Pelosi, even though she's insisting, you know, she's giving assurances that she's not going to usurp the Energy and Commerce Committee, maybe, based on some of the Democratic precedent, maybe she will, ultimately, if she doesn't like what she sees in Dingell's committee, markup legislation straight out of the select committee and move it to straight to the floor. I mean there maybe is a level of paranoia right now.
Ben Geman: You know, I also think what the speech does show is that this issue of energy security and concern about the level of import reliance, I mean it's really reaching a bit of a fever pitch. And you've had these Senate Democrats and actually a lot of Republicans too, really increasingly strongly emphasizing this as a theme. And so I think that some of the goals that he was talking about in the speech are largely sort of a recognition of that.
Monica Trauzzi: And let's talk specifically about some of those proposals that he made. As you mentioned earlier, he'd like to decrease gas use by 20 percent over the next 10 years. But many Democrats I was speaking to after the speech were saying how do we do this? They were hoping for more specific language in the speech. So is this something that's feasible based on the country's growth and economy?
Ben Geman: Well, that's a very good question and that's something that people are grappling with right. I mean, again, this was a major, major increase in the proposed use of renewable fuels. I mean on the one hand it was very smart politics by the administration because biofuels are extremely popular. I mean, for example, you had Senator Tom Harkin of Iowa, the chair of the Agriculture Committee, saying some very, very positive things as soon as the speech sort of hit the streets. And then going further and saying, but, you know, it's very important that the President's proposed budget allows funding for these things. And he said we're going to need a lot of funding because people are talking about things like loan guarantees and incentives for farmers to eventually switch land into areas that would be used for the growth of crops for cellulosic ethanol. And that's really key because right now the nation produces its ethanol from corn and we're already at over five billion gallons a year. And there's a lot of questions looming about how high that can ultimately go. I mean you'll hear some folks in the corn industry and the ethanol lobby say, well, maybe we could get up in the neighborhood of 15 billion gallons. But, again, the President's talking about an alternative fuel standard on the order of 35 billion gallons, so there are ...
Monica Trauzzi: So these numbers don't necessarily match what our capacity is at the moment?
Ben Geman: Certainly they don't match with the current capacity is and that's kind of the big issue. I mean another really interesting thing to note here is that if you look at what the proposal does it replaces this existing renewable fuels standard, which is essentially ethanol, turning it into what's an "alternative fuels standard." And that paves the way for some interesting things. The White House has acknowledged that, and I don't think they're ashamed of it or anything, but they're saying, look, this alternative fuel standard could also encompass fuel made from liquefying coal. And that just stirred up a big hornets nest as soon as the speech came out because you've got the coal industry that's really pushing to use what are basically almost inexhaustible, massive domestic reserves of coal to create transportation fuels with it. But that immediately started to get some push back from environmentalists who said, wait a minute, this is very dangerous. We're very worried about the carbon profile if the technology doesn't coincide, the technology to capture and then sequester carbon wasn't going to coincide with the buildup of the plants. And they'd also rather see fuels that are cleaner burning in terms of carbon profile at the tail pipe as well.
Darren Samuelsohn: They're throwing out there as well. I mean if you're ramping up your ethanol production as well, I mean that has questions about how much greenhouse gas emissions that could come just from the energy production that goes into making ethanol. So they're saying, you know, that there might be some negatives here. I mean President Bush is calling for and he says that there's going to be some greenhouse gas reductions from the things that he put forward. But there's also questions about the coal to liquid in terms of how much emissions could ultimately come out of that. And then the ethanol side of the equation too. And then ultimately I think emissions are on track to still rise even with these two proposals put forward.
Monica Trauzzi: He also spoke about fuel efficiency and we spoke with Senator Cantwell following the speech and she said he didn't go far enough. Was it a significant change for the president though to get to that point, to mention fuel efficiency and say that he wants an increase?
Ben Geman: Well, yes and no. I mean the president has already sought authority to allow the Transportation Department to revamp what's called the CAFE program for passenger cars along the lines of what they already did for SUVs. And that's to sort of, instead of having this one specific standard to sort of segment vehicles perhaps by the dimension of the vehicles. And so in that sense that wasn't entirely new, but he really did say he wants to go up in efficiency at a level of 4 percent per year. And that did draw some praise. On the other hand, that wades right back into a battle that's been sort of thing going back and forth for a while. And what that battle is, is you've got Senate Democrats, such as Cantwell, and some Republicans saying, look, we think that the Congress should set a very specific and much higher number for cars and SUVs. And the administration doesn't want to see that. So in that sense I'd be curious to see, in these coming weeks, months, maybe years, if Congress would ever go along with sort of approving a CAFE program that took away their power to set a specific standard.
Monica Trauzzi: He also spoke about the Strategic Petroleum Reserve and he would like to double the reserves by 2027. How does he plan to do this? And does the money exist to do this?
Ben Geman: That's a good question. I mean this, again, falls under this general sort of energy security theme. That's right, but they said that they want to bring the strategic petroleum reserve up to about 1.5 billion barrels. You know, this would take place over a couple of decades. And the energy secretary said, actually before the speech, that this would provide the equivalent of about almost 100 days of imports in the event of a major supply disruption. You know, the Energy Department was very quick to say, in rolling this out, that we're going to do this in a way that doesn't affect consumers, that doesn't affect consumer's gasoline prices. On the other hand the price of oil jumped, basically on the news of this announcement, a little bit. So they've said they're going to take some money that they got from the sale of oil from the reserve after hurricane Katrina, do some buys, pause and then continue using what's called the royalty in kind program, which is, not to get too far in the weeds, but that's a program under which oil companies pay the government. Instead of royalties, they basically give them product or oil or gas which they then turn around and sell and put in the reserve. So from there, how they fill this over the next couple of decades is going to be a question. I mean, again, they're really stressing that they'd like to try and do it in a way that doesn't affect prices, but we'll see.
Monica Trauzzi: Generally speaking, will the proposals that the president made last night have an effect on the legislation that we see for the next two years?
Darren Samuelsohn: I'd say that the Democrats are going to do what they want to do and they're going to use the president's offers, you know, maybe to give some bipartisan victories to both sides early on. That's one thing to think about. If they really do, if the Democrats want to show some accomplishments going into 2008 this is an opportunity. Again, on the ethanol stuff, you can't help but wonder, I mean, you know that's one of the first states in the primary process will be Iowa. So the Democratic presidential contenders, the Republican presidential contenders, and I think there's like eight or 10 of them, you know who were at the speech yesterday from Capitol Hill, I'm sure are going to want to make the people in Iowa happy. So that's something to think about as well. President Bush is, again, thinking about legacy issues and this energy stuff that he's been talking about for three years. I think you could see some bipartisanship, but, again, I think the Democrats are still not going to give up on the climate issue and that's going to carry forward into '07-'08.
Ben Geman: Yeah, I would very much agree. I mean, you know, by reaching out on biofuels specifically the president has, of course, touched on an issue that does have the potential for a lot of sort of bipartisan cooperation. I mean I think a lot of the questions are really going to fall in the next coming periods about the feasibility of what he's talking about. Will cellulosic ethanol arrive soon enough? Is there sufficient money in the budget? Will there be sufficient money in the budget? I mean what he's proposed is, again, such a big increase that I think lawmakers have some work to do to determine whether or not it's going to be feasible. I mean that said, you know, you've also already had pieces of legislation introduced in this Congress that would go out a little further in time, but even beyond what he's proposed. So we'll have to see.
Monica Trauzzi: We'll end it on that note guys. Thanks Ben and Darren. This is OnPoint. I'm Monica Trauzzi. Thanks for watching.
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