Energy

Talking Points

  • The United States should adopt a free-market energy policy that opens access to our resources, removes onerous and duplicative regulatory roadblocks, and removes subsidies for all energy sources and technologies. Allowing the market to determine our energy future will power America with affordable, reliable energy and be a tremendous boon to our nation’s economy.
  • Congress and the Administration should increase access to publicly held lands and federal waters, allow states to manage the environmental review and permitting on those lands, and position America to trade energy resources and technologies more freely with other nations.
  • Congress should also eliminate market-distorting grants, loans, loan guarantees, and preferential tax treatment and mandates and prevent any federal agency from imposing regulations on greenhouse gas emissions and other environmental regulations that come at a huge cost to American families and yield little if any environmental benefit.

The Issue

Energy developments in the United States over the past several years have provided a solid blueprint for what works and what does not work. An encouraging development is the expansion of oil and gas production on private lands as a result of horizontal drilling and hydraulic fracturing. Such success emerged from the private marketplace, not from any specific government policy to promote these technologies and processes. When free to do so, the private sector has driven energy production in the right direction, expanding supplies to put downward pressure on prices and creating jobs and economic growth all over the country.

Government micromanagement of the energy sector has driven this country in the opposite direction. Unnecessary federal regulations have artificially driven up the cost of energy while yielding little to no environmental benefit, have slowed or obstructed energy development on federal lands, and have wasted billions of taxpayer dollars funneling money to politically preferred technologies that cannot compete without taxpayer-funded handouts. With respect to nuclear energy, overbearing and dysfunctional policy in Washington has essentially halted the industry’s promising future.

Too often, politicians say that America needs a national energy policy and suggest a strategy that assumes even more intervention in the energy sector. While policy reforms are necessary, America’s energy policy should rely on market forces and the private sector’s ability to innovate and meet new challenges to provide Americans with affordable energy. Traditional supplies can be delivered and new supplies can be created through the private sector rather than through government-ordered mandates, regulations, and subsidies. It is important for the U.S. to keep the global marketplace for energy open and ensure private-sector innovation. Congress should focus on reducing ineffective and economically harmful regulations, opening access, and eliminating energy subsidies for all sources of energy.


Recommendations

  1. Stop the backdoor cap-and-trade policies. The Environmental Protection Agency (EPA) recently proposed its new rule for regulating greenhouse gas (GHG) emissions (most notably carbon dioxide) for newly constructed power plants. This rule would effectively eliminate the construction of new coal-fired power plants. The next target for the EPA is regulating GHGs from existing power plants. Along with a host of other regulations imposed by the EPA, these regulations will force power plants to close, driving up energy prices for American families and businesses and effectively eliminating our ability to use an abundant natural resource. To make matters worse, the regulations will have no significant climate impact as GHG emissions in China, India, and the rest of the developing world are rapidly increasing as their economic growth expands, and those governments have no intention of curtailing that growth to mitigate a hypothetical risk. Congress should permanently prohibit any federal regulators from using GHG emissions as a reason to regulate economic activity.
  2. Remove energy subsidies. Energy subsidies waste taxpayer dollars, promote economic inefficiency, and create technological stagnation. Subsidizing energy sources merely shifts labor and capital away from economically viable projects that would help to grow the economy to politically determined projects. Furthermore, subsidies increase the incentive to lobby for more subsidies, thereby perpetuating technological mediocrity by removing the incentive to innovate, reduce costs, and compete in the marketplace. Ending subsidies for energy industries would compel companies to rely on innovation and efficiency, not American taxpayers, to remain competitive and thrive in the free market. Congress should eschew new subsidies and remove existing subsidies for all energy sources.
  3. Open access and require lease sales when ready. We are the only country that places a majority of its territorial waters off-limits to energy production; Congress should open America’s coasts to exploration and drilling. Further, Congress should open the limited area needed to drill in the Arctic National Wildlife Refuge. Congress should also require the Secretary of the Interior to conduct lease sales if a commercial interest exists to explore and drill in those areas. Although it will take time for the federal government to lease these areas and for the energy companies to develop them, the process at least can begin.
  4. Devolve the environmental review and permitting of all energy resource development activities on federal lands to the states. Advancements in drilling and extraction technologies and better information have provided a recent surge in domestic oil and gas production in some regions of the country while the rate of production in others has slowed or even decreased. Many of the shale oil and shale gas deposits in the U.S. are beneath state and privately owned lands, but an important reason for the rapid increase in production has been an efficient permitting process. The time frame by which states process an application for a permit to drill is measured in days or weeks, whereas the average application process for a permit to drill on federal lands takes months and sometimes over a year. States are in the best position to promote economic growth and protect the environment, which is why Congress should devolve the authority to state regulators to manage energy production and resources in their respective states.
  5. Maintain state-level regulation of hydraulic fracturing. Hydraulic fracturing, also known as fracking, has helped tap vast supplies of oil and natural gas in the United States and will be a critical part of the country’s future energy extraction process. Fracking has proved to be safe and has been successfully regulated at the state level for decades, showing that the fears of radical environmentalists are unfounded. Federal attempts to further regulate fracking are both redundant and unnecessary. Congress should act to prevent federal agencies from creating additional layers of red tape that would slow energy production and much-needed economic growth in the United States.
  6. Lift restrictions on energy exports. The abundance of lower-priced domestic natural gas has led producers to seek opportunities to export natural gas to foreign markets where the price is much higher. Despite concerns from special interests that exports will raise natural gas prices domestically, the net economic gains from natural gas exports are overwhelmingly positive. The problem is that the Department of Energy’s role in permit authorization is causing unnecessary delays. Congress should remove the Department of Energy (DOE) from the export permitting process and lift restrictions on natural gas recipient countries.
  7. Reform the arduous permitting process for new nuclear power plants. Permitting new nuclear plants and new nuclear reactor technologies is becoming prohibitively complex and expensive. Though the U.S. Nuclear Regulatory Commission (NRC) plays an important role in maintaining U.S. nuclear plant safety, it must operate in a way that allows the industry to move forward safely. To do this, the current four-year permit schedule should be reduced by two years for new reactors to be built on or adjacent to existing nuclear power plants. Second, the NRC must prepare to regulate newly commercialized nuclear technologies that, absent a regulatory framework, are now effectively prohibited from entering the marketplace.
  8. Introduce market principles into nuclear waste management reform. The federal government’s inability to fulfill its legal obligations under the 1982 Nuclear Waste Policy Act has been cited as a significant obstacle to building additional nuclear power plants. Given nuclear power’s potential to help solve many of the nation’s energy problems, now is the time to break the impasse over managing the nation’s used nuclear fuel. Congress must first ensure that the NRC finishes reviewing the DOE’s application to construct a nuclear waste repository at Yucca Mountain, Nevada. In addition, the federal government’s responsibility for nuclear waste management should be transferred to waste producers. This would allow waste producers to seek the most economically rational methods to manage and dispose of nuclear waste. Private firms, operating under NRC guidelines, would emerge to provide those services.
  9. Allow the U.S. Department of the Interior to provide the appropriate lease sales for oil shale. According to the Department of the Interior and the Bureau of Land Management, a moderate estimate of 800 billion barrels of recoverable oil from oil shale in the Green River Formation is three times greater than the proven oil reserves of Saudi Arabia. The technology to collect and refine oil shale is developing at a rapid pace, and private companies are willing to invest in it. When the private sector demonstrates that oil shale is economically feasible and that extraction can be done safely, the DOI should allow commercialization to move forward.
  10. Repeal the Renewable Fuel Standard (RFS). The United States is almost halfway through the mandate to produce 36 billion gallons of ethanol by 2022. This unworkable policy has been disastrous, and tinkering around the edges will not rescue it. Moreover, the federal government should not be mandating what type of fuel drivers use in the first place. Instead of attempting to reform the RFS or continually calling on the EPA to waive the mandates, Congress should repeal the RFS to protect American families from artificially higher food and energy prices and eliminate unfair subsidies that go to a small set of special interests that benefit from the mandate.
  11. Return the Department of Energy to its proper role. The DOE has spent billions of research dollars on technologies to reduce carbon dioxide emissions, including energy-efficient technologies, renewable energy sources, carbon capture and sequestration, clean coal technologies, nuclear energy, and alternative-energy vehicles. All of these energy sources and technologies are available today, but they are not commercially viable, whether because of burdensome regulations or simply because they are still prohibitively expensive. It is not the government’s role to force these technologies into the marketplace, and Congress should remove all funding for DOE-funded commercial activities.
  12. Allow the free market to ensure an effective energy distribution system. Government at all levels—federal, state, and local—should remove unwarranted obstacles to the energy distribution system. Efficiency in electrical grids, oil and gas pipelines, and vehicle distribution systems will help keep American energy available and affordable.

Facts & Figures

  • Three decades ago, proven world oil reserves were 645 billion barrels; seven years ago, it was 1.28 trillion, and at the end of 2011, it was 1.65 trillion. Despite constant cries that it is running out of oil, the world continues to use more oil, and innovative technologies have allowed increased discoveries globally. Sound policies will help the United States to recover our own oil.
  • Fracking has increased U.S. natural gas reserves by 75 percent from 2004–2011, and the Energy Information Administration (EIA) expects this trend to continue. Unconventional oil and gas drilling now supports over 1.7 million jobs, and that number is expected to double over the next two decades.
  • North Dakota processes a permit in an average of 10 days. Other states have similarly short time frames: Colorado’s average is 27 days (and improving); Ohio’s is 14 days; and Texas’s is five days (expedited permits are two days). Even California is seven days, and by law, permits must be processed within 10 days or be automatically approved. Drillers in the Bakken formation in North Dakota went from producing 2,000 barrels of oil per day in 2005 to 289,000 barrels per day in 2010 to an astounding 679,000 barrels per day in January 2013. The average application for a permit to drill on federal lands was 307 days in 2011—a 41 percent increase since 2006—because of an increasingly complicated application process. In 2011, it took industry an average of 236 days just to submit the permit application and the Bureau of Land Management another 77 days to approve the permit.
  • The U.S. generates almost 20 percent of its electricity (and 70 percent of its emissions-free electricity) from 104 nuclear power plants. Further, at around two cents per kilowatt hour, nuclear energy is some of the cheapest electricity produced and, with no injuries or deaths as a result of commercial nuclear energy, some of the safest produced in the U.S. Yet due to an onerous regulatory burden and the federal government’s failed strategy to manage nuclear waste, no new plants have been permitted in over three decades.

Selected Additional Resources

Heritage Experts on Energy


  • Daren Bakst

    Research Fellow in Agricultural Policy


  • David Kreutzer, Ph.D.

    Research Fellow in Energy Economics and Climate Change


  • Nicolas Loris

    Herbert and Joyce Morgan Fellow


  • Derrick Morgan

    Vice President, Domestic & Economic Policy


  • Jack Spencer

    Director, Roe Institute


  • Katie Tubb

    Research Assistant

To talk to one of our experts, please contact us by phone at 202-608-1515 or by email.