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January 6, 2012
Before the House adjourned in December, the Committee on Foreign Affairs met to discuss the growing threats to U.S. economic and energy security due to continuing U.S. dependence on petroleum. Since then, tensions in the Persian Gulf have increased, driving up the price of oil once again over fears of conflict with Iran and potential threats of global supply disruptions. In the meantime, a number of federal tax incentives that encouraged the development of domestically-produced alternative fuels expired at the end of 2011.
December 16, the Subcommittee on Terrorism, Nonproliferation, and Trade of the House Committee on Foreign Affairs held a hearing entitled "Changing Energy Markets and U.S. National Security." Witnesses included Neelesh Nerurkar, Specialist in Energy Policy for the Congressional Research Service; Robert McNally, President of the Rapidan Group; and Dr. Gal Luft, Executive Director of the Institute for the Analysis of Global Security. Their testimony can be found here .
As reported in EESI’s SBFF post December 9 , the production of domestically-produced biofuels is approaching 15 billion gallons per year and exceeded ten percent of the nation’s gasoline supply (by volume) for the first time in 2011. The Renewable Fuel Standard, enacted by Congress in 2007 as part of the Energy Independence and Security Act , requires the production of at least another 21 billion gallons of cellulosic ethanol and other advanced biofuels and biodiesel per year by 2022.
However, the market for ethanol has become saturated under current policies, and Congressional support for expanding biofuel production seems to be weakening considerably. Funding for critical federal biofuels research, development, demonstration, and deployment programs is being threatened, and, on December 31, 2011, Congress allowed several biofuel tax incentives to expire, including:
Further, the $1.01 per gallon production tax credit for cellulosic ethanol is due to expire at the end of 2012 unless Congress acts. This is creating significant uncertainty for the advanced biofuel industry, just as the industry is set to take off producing biofuels from biogenic materials other than corn starch.
Comment There are many ways that the United States can reduce its petroleum dependence and substantially improve its economic and energy security. All should be pursued. The nation can invest more in expanded and improved public transit, improved traffic management systems, and smart growth development. The Obama administration has taken significant steps recently to improve the fuel efficiency of the nation’s vehicle fleet. Raising taxes on petroleum fuels, increasing the use of highway tolls, and assessing fees based on vehicle miles traveled would encourage conservation. Shifting to electric vehicles will be an important part of the solution in the longer term, as well. Finally, sustainable, domestically-produced biofuels can also play a significant and critical role.
U.S. petroleum dependence is an urgent national security concern. Policies to promote greater petroleum production will be great for increasing profits for oil companies, but this will do little to protect the rest of the U.S. economy from the costly effects of rapidly rising global demand, tightening global supplies, and the inevitable supply disruptions that will occur in the future. Rather, reducing petroleum dependence should be the goal, and, to achieve this, strong, consistent, long-term federal policies, including support for biofuels, will be needed.
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