Written by
Thos. E. Capps
Chairman, President and CEO, Dominion
for the
Richmond Times-Dispatch
November 14, 2001
The devastating September 11 terrorist attacks catapulted national-security
concerns ahead of all others on the nation's political agenda.
The debate about energy policy and the so-called energy crisis that dominated
headlines and newscasts earlier this year were sidetracked as Congress and the
administration focused on a response to terrorism at home and abroad.
That's understandable. National defense and the war on terrorism
must be our government's top priority.
But let me offer a suggestion - one with which I think many
of our leaders will agree. Energy policy is inextricably linked to our nation's
long-term security. And a comprehensive energy strategy must be part of our
effort to strengthen the national defense and protect America's economy. There
was ample reason to support that view before September 11. The case is even
more compelling now.
The American people seem to agree. More than 80 percent of
those Americans surveyed in a recent poll commissioned by the American Gas Association
expressed strong support for congressional passage of a comprehensive energy
bill.
President Bush recently said, "We've spent a lot of
time talking about homeland security. An integral piece of homeland security
is energy independence."
Add Senate Majority Leader Tom Daschle's voice to the chorus.
He recently promised Senate action on energy legislation before adjournment
this fall.
Address Immediate Needs
The message is clear: Congress should seize the moment and
bring direction, common sense, and - above all - self-sufficiency to our nation's
energy policy. This legislation should address some immediate needs to protect
our energy infrastructure from attack and other emergencies. It should also
take a longer view and deal with many unresolved energy supply and delivery
concerns. These vital issues have suffered too long from back-burner treatment
in Washington.
Today's global landscape leaves no doubt that energy security
goes hand in hand with the nation's long-term interests.
The report issued by Vice President Dick Cheney's energy
group last April is a good starting point for action. The task force decried
the nation's dependence on foreign sources of energy, especially oil.
Petroleum accounts for about 40 percent of the energy America
consumes, including almost all of our transportation fuels. Imports account
for about 58 percent of the total, most of which originates with the Organization
of the Petroleum Exporting Countries (OPEC).
This state-owned, 11-member cartel controls world oil prices
by increasing and decreasing supply. It's not exactly what you'd call a free-market
system. In fact, some refer to OPEC's strategic manipulation of oil supply as
a form of global economic warfare. Virtually all of the world's surplus production
capacity lies in OPEC countries, especially Saudi Arabia and the United Arab
Emirates.
Memories of Oil Embargo
Those of us who were around 30 years ago remember the embargo
that brought on the 1973-74 oil crisis. Energy prices skyrocketed when OPEC
turned off the oil spigot. And let's not forget that the embargo was led - not
by some militant rogue state - but by Saudi Arabia, a country usually considered
an ally of the U.S.
Let's also not forget the threat posed a decade ago by Saddam
Hussein's aggression in the Persian Gulf region.
Today, more than ever, our country is vulnerable to economic
extortion and blackmail. It might surprise many taxpayers to know we're spending
$12 million a day on oil from Iraq. What if terrorists were to attack the flow
of oil to the West? And what would be the economic repercussions of paying $100
a barrel for oil from Saudi Arabia - five times the current price? A scenario
like that might have seemed implausible before September 11, but it's not anymore.
The sooner we wean ourselves from dependence on OPEC oil, the better.
One way to address this vulnerability is to diversify our
sources of oil. First and foremost, we must look homeward and develop the oil
and natural gas resources in our own backyard.
The United States is rich in natural resources, but much
of the resource base is currently off limits to development. That includes the
Atlantic and Pacific outer continental shelves and federal lands in the Rocky
Mountain Basin.
Our nation currently uses the equivalent of about 22 trillion
cubic feet (tcf) of natural gas a year. Demand is expected to rise to 30 tcf
by 2010 - an increase of 36 percent. Gas supplies, however, aren't expected
to grow more than 2 percent a year over the coming decade. Production from existing
wells is declining 20 percent a year nationwide. And in the Gulf of Mexico,
which accounts for more than one-quarter of domestic annual production, the
decline rate exceeds 35 percent.
For supplies to increase enough to meet projected annual
demand growth, our nation will have to add about 5 tcf of new production a year
- a level the industry wasn't able to achieve during the past decade. The U.S.
Bureau of Land Management simply must free up additional acreage for exploration.
Open Refuge for Exploration
Alaska's Arctic National Wildlife Refuge, commonly known
as ANWR, should also be opened for exploration. The reserve is composed of more
than 19 million acres of land - 92 percent of which can't be legally developed.
Oil drilling and exploration would affect only 2,000 acres of the refuge - 1/100th
of 1 percent of the total acreage. That would be like developing a parcel of
land the size of Dulles Airport within the entire state of South Carolina.
Quite correctly, the Bush administration supports drilling
in ANWR, which experts tell us could provide up to 2 millions barrels of crude
oil per day. Unfortunately, the mere mention of ANWR drilling unleashes a torrent
of criticism from some special interest groups.
Loud dissent, however, can't disguise the fact that ANWR
drilling is a topic that needs further airing and debate. I'm convinced we can
explore the reserve and extract oil in a manner that protects the ecosystem
while helping to meet vital energy needs. Advances in technology will reduce
environmental impacts even more as time goes by. Let's make decisions about
ANWR drilling on the basis of fact and reason - and reject the unbridled hysteria
that so often has characterized its opponents.
Somehow our nation must come to grips with the need for more
domestic oil and natural gas production. The strategic significance of these
resources grows by the day.
The absence of a comprehensive energy policy also has hamstrung
U.S. competitiveness in exploration and production markets. Antiquated tax laws
have squeezed the flow of investment capital and discouraged industry from expanding
our domestic oil and gas resource base.
Advanced drilling technologies and efficiency improvements
in both onshore and offshore rigs could get the job done - while minimizing
environmental damage at the same time. The increase in domestic production also
would create countless business opportunities and skilled jobs for Americans.
In addition to oil and gas, we must expand the use of coal
and nuclear power. Coal is an abundant domestic resource. More research funds
need to go into developing clean-coal technologies to reduce environmental emissions.
Promising new nuclear technologies need additional funding as well. If we're
really worried about global warming and air quality, how can we not take a closer
look at the nuclear option?
Developing Clean Coal
Conservation, greater energy efficiency, improved vehicle
fuel economy standards, and renewable sources of energy also should be part
of the mix. Many of these renewable technologies hold great promise. But their
role is more limited, at least for the foreseeable future.
Finding and developing new sources of energy supply is a
critical need facing our nation. But we can't ignore how that energy will get
to the consumer.
The national power grid is in dire need of a facelift. Transmission
systems across the country often are taxed to their physical limits. But nothing
of any significance is being built, and hasn't been for a long time. The reasons
are many and complex. But it boils down to this: Building new lines is a bad
business decision. Allowable returns on investment are low, regulatory red tape
is abundant, and siting problems can be overwhelming.
Part of the problem is public opposition - the "not-in-my-backyard"
syndrome, but another part of the problem is regulatory confusion and overlap.
Proposed lines must cut across numerous federal and state regulatory jurisdictions.
They often require multiple approvals. One jurisdiction, acting on its own,
effectively can kill a project with regional or even national benefits. We need
regulatory reform - not only to provide industry with the financial incentives
to build transmission projects - but also to iron out jurisdictional conflicts
that tie up projects for years.
Increasing Competition
Above all, it's crucial to sustain the momentum toward greater
competition in both wholesale and retail electricity markets. We've made great
strides through the efforts of Congress, the Federal Energy Regulatory Commission,
and many states, including Virginia.
Vigorous wholesale competition is now a fact of life in the
electricity business, providing the impetus for a construction boom in new power
facilities after years of inactivity. The prospect of retail competition, which
begins on New Year's Day in Virginia, also holds great long-term promise for
consumers. The national movement to deregulate electricity markets will play
a major role in assuring adequate power supplies for the future.
These are some of the many important issues that Congress
must tackle when serious debate resumes on our energy challenges. Nothing less
than our national security and future economic prosperity are at stake.
