As families gear up for summer vacations, the good news is that oil and gasoline prices are falling. The bad news? They’re still higher than they have to be.
Both Congress and the administration have failed to remove obstacles that would allow the market to respond more effectively to high oil prices. Here are 10 actions Congress can take to help lower gas prices in both the short and long terms:
• Lift offshore and onshore exploration and drilling bans. The United States is the only country that has made a majority of its territorial waters off-limits to oil exploration. The federal government should open America’s waters and unblock prohibited areas onshore.
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• Approve Keystone XL. Congress should recognize its authority to regulate commerce with foreign nations, accept the State Department’s conclusion that the project is environmentally safe and approve construction of the pipeline.
• Require timely environmental review. The White House Council on Environmental Quality estimates that an environmental impact statement to approve a larger drilling project on federal lands should take one year to complete. But this process has taken, on average, five years since 2005. The reality is that it could be done even faster than 12 months. Congress should place a 270-day time limit for energy projects on federal lands.
• Permitting process. The processing time frames for applications for drilling permits extend well beyond the 30-day time limit stipulated by the Energy Policy Act of 2005. This delay is creating the perverse incentive for companies to submit more permit applications than they need, hoping that some will make it through. Congress should require the Interior Department to honor the law’s deadline unless the department finds fault with the application. And it should ultimately transition the permitting process to state regulators, who are best able to balance economic growth and environmental well-being.
• Issue leases on time. Rather than implementing an efficient leasing process, the Interior Department added three additional administrative regulations to the leasing process in January 2010. Congress should remove these additional levels of red tape and stipulate that if the department fails to issue the lease to the winning bidder within 60 days, the lease should be considered issued by default.
• Allow development of oil shale. U.S. oil shale production could be a global game changer. The U.S. holds the largest known reserves of oil shale in the world. While the technology is still developing and environmental considerations need to be taken into account, Congress should make permanent the Interior Department’s 2008 guidelines for oil shale development so companies can pursue this extremely valuable resource.
• Stop the land grab. The Interior Department’s land grab – unilaterally and arbitrarily classifying federal land areas as “Wilderness” or “Wild Lands” – will not only restrict access to new drilling areas but also prevent production on existing leases. Congress should block these attempts and require any such designation to require congressional approval.
• Implement 50-50 revenue sharing. States receive 50 percent of the revenues generated by onshore oil and natural-gas production on federal lands, and Congress should apply this allocation offshore as well. Drilling off states’ coasts and allowing them a larger share of the royalty revenue would encourage more state involvement.
• Prohibit greenhouse-gas and Tier 3 gas regulations. In 2010, the Interior Department suspended 61 oil and natural-gas leases in Montana alone because environmental groups charged that the energy production would contribute to climate change. Reducing greenhouse-gas emissions, and simply reporting on emission outputs, is extremely costly, especially for small, family-owned wells. It will also drive up refining costs and have no measurable impact on global temperatures. The proposed Tier 3 gas regulations to lower the amount of sulfur in gasoline could add 6 to 9 cents per gallon to the cost of manufacturing gasoline – and the Environmental Protection Agency has declared no measurable air-quality benefits. Congress should prohibit the implementation of these regulations.
• Repeal the renewable fuel standard . The RFS aptly demonstrates the government’s incompetence in micromanaging the market. Very soon, refiners will be fined when the amount of ethanol mandated exceeds the amount that can be refined for use. In 2011, the EPA fined refineries $6 million because they could not meet the minimum volume requirement for cellulosic ethanol; no companies have been able to make it commercially viable. The ethanol mandate has been both an economic and environmental disaster. Congress should repeal the RFS.
The federal government should reform the framework for companies to extract and develop America’s untapped resources if a commercial interest exists. Increasing supply will help lower prices and generate much-needed economic activity.