PART 4 OF 4
ACTION PLAN
The Task Force recommends a two-part action plan. The first stage consists of immediate actions to establish appropriate mechanisms to manage potential supply disruptions and to buffer the economy against harm from price volatility. The second part, consisting of longer-term actions, tackles the causes of recent shortfalls and emergencies. These initiatives establish a framework for developing new supplies and ample capacities along various linked global energy supply chains, while preserving and enhancing the human habitat.
Immediate Actions
There are few options available to government to expand supply in the short run or to reduce short-term demand. Consequently, immediate actions should consider all possible means of de-bottlenecking supplies and reducing obstacles to delivery of supplies, both domestically and internationally. In addition, the short-term actions must establish permanent machinery for integrating energy policy with economic, environmental, national security, and foreign policies. To the degree that new supplies alleviate energy shortfalls in periods of peak demand, they will provide protection to consumers against price spikes.
Virtually all actions available to remove obstacles along the supply chain in the very short term involve tradeoffs with other policy objectives, including environmental, national security, and foreign policy concerns. Therefore, tradeoffs must be carefully weighed. Any supply-side relief also eliminates the only current mechanism for controlling demand: higher prices. Proper policy must consider measures that will prevent the public from keeping U.S. energy security perpetually beyond reach. For the immediate and short term, two sorts of policies need to be considered:
• Those that quickly alleviate supply bottlenecks and damp demand.
• Those that need to be adopted in a timely manner in order to have a desirable impact in the longer term, given the long lead times required in order to mobilize capital or new technologies.
Key elements of this plan are designed to:
o safeguard supply in times of accident or disruption to ensure orderly markets.
o ease and eventually eliminate constraints in the energy infrastructure.
o promote diversity of clean, fairly priced, abundant supply sources.
o enhance energy efficiency and curb unbridled growth of energy consumption.
o ensure fair competition and market solutions.
o promote restructuring of formal institutions and informal arrangements for managing international energy relations.
Steps:
1. Deter and manage international supply shortfalls
a. Develop a diplomatic program ensuring GCC allies remain prepared and willing to maintain stable prices for global economic growth and also to fill any unexpected supply shortfalls in times of turmoil in the oil markets, whether created by accident or by adverse political actions on the part of any producing nation.
b. Prepare for contingencies and gain agreement on coordination in the IEA in efforts to deal with any removal of oil by adversary nations from international markets.
c. Minimize public conflicts with OPEC and other independent oil-exporting countries but emphasize importance of market factors in setting prices.
d. While moving to defuse tensions in the Arab-Israeli conflict through conflict resolution and negotiations, maintain energy and political issues in U.S.-Middle East relations on separate tracks.
e. Review policies toward Iraq to lower anti-Americanism in the Middle East and elsewhere; set the groundwork to eventually ease Iraqi oil-field investment restrictions.
2. Remove bottlenecks and other obstacles to energy supply, both domestically and internationally.
a. Streamline procedures for waiving product specifications.
b. Establish procedures to grant Jones Act waivers without adversely affecting U.S. ship owners or U.S. labor.
c. Enact legislation for federal primacy over state regulations especially with respect to product specifications and pipeline right of way.
d. Enact legislation to facilitate regional solutions to energy challenges.
e. Investigate whether any changes in U.S. policy would rapidly facilitate higher Caspian Basin oil exports.
3. Take a fresh approach to building and maintaining national strategic and commercial crude oil and petroleum product inventories.
a. Review the size and financing of the SPR.
b. Establish professional criteria for managing the SPR.
c. Establish clear policy for use of the SPR.
d. Review tax, accounting, and other factors affecting industry’s incentives to hold petroleum product and natural gas inventories with the intent of enhancing inventories before seasonal demand, and neutralizing any adverse impact of current rules.
e. Encourage states to review minimum inventory for fuel switching where feasible and also fiscal incentives to industry to build inventories in advance of seasonal demand increases.
4. Develop mechanisms for a new national approach to energy policy.
a. Create an appropriate interagency process to articulate and promote energy security policy and integrate energy policy with overall economic, environmental, and foreign policy.
b. Review and streamline the allocation of authorities within the federal government, especially in areas of land management and energy.
c. Convene a national energy security summit to help develop a national consensus on energy policy objectives and means.
d. Develop a strategic communications plan on energy security policy in order to educate the public on the difficulties of achieving short-term, unilateral solutions to the nation’s energy dilemmas.
Long-Term Policy Initiatives
1. Review international approaches to build, maintain, and use strategic and commercial crude oil and petroleum product inventories.
A. Enhance and modernize IEA strategic stockpile policies in light of the changed international market, taking into account situations that technically fall short of a supply disruption as well as different regulatory authorities among IEA members.
B. Encourage key non-IEA countries (e.g., China, India, Brazil) countries to develop strategic stocks.
C. Review IEA membership, taking into account the desirability of creating a new class of associated members who could be encouraged to hold minimum stocks and also benefit from direct participation in other IEA activities.
2. Accelerate demand-management efforts at home and internationally.
A. Take a proactive government position on demand management.
B. Use federal procurement authority to promote use of alternative fuels and develop programs to introduce new efficiency technologies into federal buildings and nascent transportation technologies into government vehicle fleets.
C. Use federal procurement authority to achieve other demand management goals.
D. Review and establish new and stricter CAFE mileage standards, especially for light trucks.
E. Actively promote the development of energy-efficient technologies, including fuel-efficient engine and vehicle technologies.
3. Maximize efforts to develop every clean source of domestic fuel supply.
A. Oil and natural gas
1. Accelerate completion of the U.S. oil and natural gas reserve inventory, as mandated by Congress, paying special attention to restrictions on resource development. Such an inventory needs to be completed soon and well before any plan is adopted to develop particular domestic resources.
2. Undertake an accelerated and complete review of tax and fiscal policy as they impact U.S. oil and gas development, taking into account the competitive position of the U.S. fiscal regime internationally, in order to attract more capital to the sector.
B. Power (Electricity)
1. Create an appropriate, comprehensive statutory framework for electricity restructuring and for reestablishing a capacity cushion for the nation’s power supplies. A new framework needs to overcome the adverse impacts of today’s highly fragmented regime, which has reduced the reliability of power grid and impeded investment in new generation and transmission capacity.
2. Work expeditiously to improve the statutory framework for approvals of the siting of power generation plants, and transmission and distribution infrastructure.
3. Evaluate the need for incentives to stimulate the introduction of new technologies into the power marketplace, including distributed generation and co-generation.
4. Work with state regulators and regional authorities to let companies offer long-term contracts for electric power, and to encourage them to hedge price risks.
5. Encourage the development of regional power capacity cushions.
6. Recognize that many of the polices required to meet increased demand are power-source specific.
7. Assure that regulations protect open access to electricity generated by new nontraditional fuel sources.
C. Natural Gas
1. Apply strong leadership to develop a coherent, comprehensive strategy promoting efficient development and use of the nation’s natural gas resources.
2. Endorse the construction of natural gas pipelines from the Arctic to the lower forty-eight states and work bilaterally with Canada and the U.S. state of Alaska to address important issues that need to be resolved.
3. Assure regulatory authorities work together to bring about natural gas market efficiencies, including the provision of open access to markets by producers and to supply by end-users, and that allow delivery costs to be determined transparently by market forces so that commodity values are transparent to both producers and consumers.
4. Invest in—or stimulate and encourage private sector investment in—research and development of technologies that focus on safe and cost-effective ultra-deep water production, smaller drilling footprints, and increased production from non-conventional sources, including methane hydrates.
5. Encourage natural gas exploration and production through a series of technology-targeted tax incentives that also encourage use of advanced, environmentally sensitive technologies, and that provide counter-cyclical support for exploration and production.
6. Initiate a mitigation forum process to evaluate infrastructure needs and reduce delays in new pipeline and storage facility siting.
7. Consider providing incentives to state and local governments that agree to expedite natural gas infrastructure siting.
8. Invest in—or stimulate and encourage private-sector investment in—technologies ensuring pipeline infrastructure integrity, reliability, flexibility, and safety.
9. Foster development of advanced storage technologies to increase regional storage capacity and serve peak power and distributed-generation markets.
10. Evaluate the potential of imported Liquefied Natural Gas (LNG) as a major additional source of base load as well as incremental supply, and in the process accelerate environmental reviews required for siting as well as accommodate the commercial logistics and other user needs associated with facilities built or operated by LNG suppliers.
D. Coal
Given the nation’s abundance in coal resources it is critical to foster the development of clean coal technologies to promote coal use in power generation, while mitigating the impacts of coal combustion to meet local, regional, and global environmental challenges
E. Nuclear
1. Support the Nuclear Regulatory Commission to extend plant life where possible
2. Constructively work with stakeholders to resolve nuclear power plant spent fuel (and high-levels defense waste) disposition within the next few years, since this is critical to preserving viable nuclear options for the nation.
3. Work to improve the investment climate for new nuclear power plant construction through NRC streamlining of licensing procedures and by resolving uncertainties surrounding electricity deregulation and restructuring.
4. Work with Congress to sustain the front-end domestic nuclear fuel cycle through the next half-decade.
5. Work with Japan and allies in Western Europe to shape a future nuclear fuel cycle that would garner shared support.
6. Work with the education system to reinvigorate training in nuclear science and technology.
4. Augment diplomatic initiatives to spur non-OPEC production increases.
A. Expand Oil and Gas Forum programs.
B. Investigate ways to facilitate increased investment in Mexico’s oil and gas sectors.
C. Encourage reforms in Russia’s energy sector.
D. Improve access to information and transparency on comparative oil and gas fiscal/commercial regimes.
5. Initiate diplomatic efforts to encourage the reopening of countries that have nationalized and monopolized their upstream sectors.
6. Review sanctions policies, to identify ways to reduce the negative impact on energy supplies while accomplishing the objectives for which the sanctions were imposed.
7. Develop a credible international stance on global warming and other environmental issues.
A. Conduct a thorough review of the Kyoto Accords and recommend ways for the United States to revive international discussions on climate change and also execute bilateral agreements to promote environmental safeguards.
B. Investigate new ways to promote efficiency and clean energy technologies, including clean coal, expanded natural gas use, and automobile mileage and emission standards, for use in large consuming countries in Latin America and Asia, especially China and India.
C. Develop a strategy to coordinate with the European Union and the Association of Southeast Asian Nations (ASEAN) on refined petroleum product specifications through multilateral dialogue and bilateral agreements.
8. Support efforts to develop and disseminate accurate and timely and information about the fundamentals of energy market supply and demand. The administration should recognize that transparency is an important element in maintaining orderly markets generally and in times of emergency or unexpected disruption in particular, and thus should provide a higher budget for the Department of Energy’s Energy Information Agency.
9. Lay the foundation for new global energy institutions
A. Embrace the spirit of the "producer-consumer" dialogue, but not the framework with which it has been associated.
B. With U.S. leadership, foster broad international cooperation on a host of issues including (1) sharing information on oil market trends and the basics of evolving environmental standards on petroleum products and emissions; (2) promoting mechanisms for attracting investment capital; and (3) coordinating information on investments in refinery upgrading and in new demand, which would define the requirements for new grassroots plants.
C. Build global energy institutions in three ways:
1. Consider using the European Energy Charter as the basis of an energy institution that the United States should want to adopt on a global basis.
2. Build on overlapping interests and relations between the world’s largest oil exporter (Saudi Arabia) and the largest energy-consuming country (the United States).
3. Explore a mechanism promoting a North American or Western Hemispheric energy agreement.
D. Form the core of a future multilateral agreement through bilateral or regional arrangements based on improving markets, ensuring energy security, and guaranteeing investments and trade on a mutual, reciprocal, and nondiscriminatory basis