Wes Hickman (202) 224-5972 or Kevin Bishop (864) 250-1417

WASHINGTON – U.S. Senator Lindsey Graham (R-South Carolina) helped draft and signed on to a bipartisan energy proposal that enables our nation become more energy independent.

 

The proposal, New Energy Reform Act of 2008 from the group dubbed the ‘Gang of 10’, contains provisions on offshore drilling, spent nuclear fuel recycling, promotes new technologies and conservation, and requires the oil companies to pay fair market prices for oil leases and drilling rights.

 

“There is no greater problem facing average American’s and small business today than high fuel costs and our nation’s dependency on foreign oil, “said Graham.  “Our proposal is not perfect, but it is a bipartisan start on the road to a comprehensive energy strategy leading our nation to independence from foreign oil.  It will create new jobs from new technologies good for American wallets and our environment.  I am proud to be part of this bipartisan effort to address this serious problem.”

 

Among the major provisions of the legislation:

• Increased Off-Shore Drilling:  The ban on offshore drilling in large parts of the Gulf of Mexico and Atlantic will be lifted.  States would have to consent to drilling at least 50 miles off their shores.
• Recycling of Spent Nuclear Fuel:  The recycling of spent nuclear fuel would reduce by 90 percent the waste to be placed in long-term storage at the proposed repository at Yucca Mountain, Nevada .  Spent fuel rods would be recycled and reused as fuel in commercial nuclear power plants and would help reenergize our nuclear power industry.
• Strong Conservation and Energy Independence Measures:  The proposal takes strong steps in promoting new technologies that will reduce the amount of foreign oil we consume.  It expands existing incentives to purchase hybrid vehicles, facilitates the development of next-generation batteries, and includes hydrogen infrastructure tax credit to help bring this promising technology to market. 
• Requires Oil Companies to Pay Fair Market Value:  The proposal repeals tax breaks and incentives for oil companies.  Oil companies will also be required to pay royalty payments due on existing leases where royalties were not previously charged.  The inability to collect royalty payments was a result of poor drafting of leases during the Clinton Administration.  The revenue would be invested in alternative fuels.

"Offshore drilling, with the consent of the states, is an integral part of any energy independence plan,” said Graham.  “There is no doubt we need more domestic exploration.  Every barrel of oil we can find in America will be one less we have to compete with China and India for or be subject to OPEC price setting.  The more domestic energy we can locate and utilize the better.

“Since the 1970s, our country has had an irrational view of nuclear power,” said Graham. “This view is best demonstrated by our nation’s refusal to allow recycling of spent fuel rods. For decades the French, Japanese and British have all been recycling spent fuel.  Surely this is an instance were we can be as bold as the French.

“Our proposal also commits billions for research, development, and purchases of alternative fuel vehicles,” said Graham.  “We call for an ‘Apollo Project’ like effort to support the goal of transitioning 85 percent of American new motor vehicles to non-petroleum-based fuels within the next 20 years.

“Quite frankly, this particular tax incentive was never asked for by the oil companies,” said Graham.  “It is irrational to be allocating around $1 billion per year in tax dollars to assist in production at a time when oil is $124 per barrel and companies are recording record profits.  The proposal also seeks royalty payments due on existing leases where royalties were not previously charged.  The inability to collect royalties was a result of poor drafting of the leases during the Clinton Administration and could result in billions in payments being collected over the next 10 years.  These revenues will be invested in alternative fuel technology.

“It is clear to the American people their Congress is broken.  I appreciate the efforts of my colleagues to try to jumpstart serious discussions on how to solve America ’s energy crisis,” said Graham.  “It is my hope that this group will provide some reassurance to the American people that we still can work together and find common ground on the important problems facing every American family and business.  I hope that over the congressional recess support will build for this common-sense, balanced approach to making our nation more energy independent.”

The members of the ‘Gang of 10’ include Senators Kent Conrad (D-North Dakota), Saxby Chambliss (R-Georgia), John Thune (R-South Dakota), Johnny Isakson (R-Georgia), Bob Corker (R-Tennessee), Blanche Lincoln (D-Arkansas), Mary Landrieu (D-Louisiana), Mark Pryor (D-Arkansas), and Ben Nelson (D-Nebraska).

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BACKGROUND ON THE NEW ENERGY REFORM ACT OF 2008

Roadmap to a Secure Energy Future

Overview

Knowing that the rising cost of energy is the number one issue facing Americans today, ten Senators from both sides of the aisle have come together to present a proposal to reduce gas prices, lessen our dependence on foreign oil, and strengthen our economy.  The New ERA legislation represents a true compromise, incorporating common sense ideas.

The purpose of the legislation is to transition our economy – particularly the surface transportation sector – to run off alternative fuels other than gasoline and diesel. The legislation dedicates at least $20 billion in the next ten years to this important endeavor.

To ease gas prices in the interim, the New ERA bill includes significant conservation provisions and targeted, responsible measures to increase our domestic production of traditional fuel sources. Any new domestically produced resources must stay in the United States . The bill will also establish a National Commission on Comprehensive Energy Policy to identify critical “inhibitors and prohibiters” to the goals established in the bill and to make recommendations to Congress on policies to overcome these obstacles as well as to address related matters such as carbon capture and storage, nuclear and renewable energy, and the need for upgrading and transitioning the national grid and other energy infrastructure.

The New ERA bill contains three main components:

• An intensive effort to transition vehicles to non-petroleum based fuels;
• a robust federal commitment to conservation and energy efficiency; and
• targeted, responsible domestic production of energy resources.

Converting Cars and Trucks to Non-Oil Fuel Sources to Regain Energy Independence

The New ERA legislation funds a $20 billion “Apollo Project” like effort to support the goal of transitioning 85 percent of America ’s new motor vehicles to non- petroleum-based fuels within 20 years. To accelerate this transition, the legislation includes:

• $7.5 billion for R&D focused on the major technological barriers to alternative fuel vehicles, such as advanced batteries;
• $7.5 billion to help U.S. automakers and parts makers re-tool and re-equip to become the world leader in making alternative fuel vehicles;
• Consumer tax credits of up to $7,500 per vehicle to incentivize Americans to purchase advanced alternative fuel vehicles (those that run primarily on non-petroleum fuels) and up to $2,500 to retrofit existing vehicles with advanced alternative fuel engines.

Enhancing Conservation

To ease gas prices and protect our environment during the transition, the proposal includes a significant federal commitment to promoting conservation and efficiency.  These include:

• Extending renewable energy, carbon mitigation and energy conservation and efficiency tax incentives, including the production tax credit, through 2012 to create greater certainty and spur greater investment;
• New consumer tax credits of up to $2,500 to purchase highly fuel efficient vehicles, to help Americans reduce their annual gas costs and reduce oil imports;
• Extending and expanding the $2,500 tax credit for hybrid electric vehicles;
• $500 million for R&D into new materials and other innovations to improve vehicle fuel efficiency;
• $2.5 billion in R,D&D on next generation biofuels and infrastructure;
• Tax incentives for the installation of alternative fueling stations, pipelines and other infrastructure;
• Expanding transmission capacity for power from renewable sources;
• New dedicated funding for the weatherization assistance program.

Responsible, Targeted Domestic Energy Production

To help meet our energy needs until our economy transitions to advanced alternative fuel vehicles, the New ERA bill increases domestic energy production in environmentally responsible ways. The legislation:

• Provides a CO2 sequestration credit for use in enhanced oil recovery to increase production from existing oil wells while reducing greenhouse gas emissions; 
• Opens additional acreage in the Gulf of Mexico for leasing (in consultation with the Defense Department to ensure that drilling is done in a manner consistent with national security) and allows Virginia, North and South Carolina and Georgia to opt in to leasing off their shores.  Retains an environmental buffer zone extending 50 miles offshore where new oil production will not be allowed.  Requires all new production to be used domestically.  Creates a commission to make recommendations to Congress on future areas that should be considered for leasing. Provides for appropriate revenue sharing for states that allow leasing off their shores;
• Provides grants and loan guarantees for the development of coal-to-liquid fuel plants with carbon capture capability.  Plants must have lifecycle greenhouse gas emissions below those of the petroleum fuels they are replacing;
• Supports nuclear energy by increasing staff at the NRC, providing workforce training, accelerating depreciation for nuclear plants, and supporting R&D on spent fuel recycling to reduce nuclear waste.

Speculation

The Group decided to focus on increasing supply and reducing demand and will await the mid-September report of the CFTC to consider this subject.

Offsets

The $84 billion in investments in conservation and efficiency in the New ERA bill will be fully offset with loophole closers and other revenues.  Approximately $30 billion will come from new revenues from the oil and gas industry through such measures as modifying the Section 199 manufacturing deduction for oil and natural gas production and other appropriate measures to ensure that the federal government receives its fair share of revenue from Gulf of Mexico leases.  Remaining offsets will be finalized in consultation with the Finance Committee after accounting for interaction effects with other pending legislation.