Letter Opposing the "Energy Independence and Security Act of 2007"

December 5, 2007

TO THE MEMBERS OF THE U.S. HOUSE OF REPRESENTATIVES:

The U.S. Chamber of Commerce, the world's largest business federation representing more than three million businesses and organizations of every size, sector, and region, strongly urges you to oppose the "Energy Independence and Security Act of 2007," a bill expected to be considered by the full House this week.

Like its predecessors in the House and Senate, H.R. 3221 and earlier versions of H.R. 6, the Energy Independence and Security Act effectively "turns off the lights" on the country's energy supply. The bill fails to produce one Btu of new energy while scaling back energy production from both fossil fuels and renewables. Chief among the bill's flaws are an unworkable renewable fuels standard, an impossible-to-meet renewable portfolio standard, and a punitive, overly burdensome tax title.

The bill supposedly calls for a renewable fuels mandate of 36 billion gallons by 2022, with 21 billion of these gallons to be met with "advanced biofuels," or non-cornbased biofuels. The bill does not, however, adequately address such critical issues as: (1) where the U.S. intends to secure enough water (from an already-scarce supply) so that it may grow enough corn and other biomass to meet the mandate; (2) how the nation will protect against formation of "dead zones" of oxygen-depleted water caused by increased farming and irrigation to meet the mandate; (3) how the U.S. intends to transport 36 billion gallons of ethanol, given that current pipeline systems are not compatible; and (4) the effect the increased burning of ethanol will have on background levels of ozone, a pollutant currently regulated by EPA under the Clean Air Act.

The bill is also expected to contain a 15 percent renewable portfolio standard (RPS) for electricity generation to be satisfied only by so-called "renewables," wind, solar, biomass, geothermal, ocean, tidal, and incremental hydropower. A federallymandated RPS could raise electricity prices for all consumers, result in a wealth transfer among states, and impose new burdens on the reliability of our nation's electric grid. The Energy Information Administration (EIA) estimates that a 15 percent RPS would require consumers to pay $1 billion to $2 billion more for electricity. Utilities will be forced to purchase renewable energy credits from the federal government, which amounts to a tax on electricity used by businesses and other consumers, driving up energy costs and hurting economic growth. And a mandatory RPS based exclusively on "renewables" chooses energy winners and losers, excluding good, clean energy sources like nuclear, hydroelectric and clean coal for no good reason.

Renewable generation sufficient to meet an unrealistic 15 percent federal requirement is neither cost-effective nor achievable nationwide; in fact, many states have chosen not to adopt an RPS because they lack sufficient renewable resources. There should be no illusion as to how daunting a task such a mandate would be: using wind energy alone, the Chamber estimates it will require 172,500 additional 1-megawatt wind turbines at a cost of $207 billion to meet a 15- percent RPS; using solar, it will take an additional 11 million 25-kilowatt photovoltaic units, at a cost of almost $390 million, to meet the RPS. This does not even take into account impossibility of siting the facilities: if the 172,500 wind turbines were placed in a straight line about 2,000 feet apart in the water, they would have a total length of about 64,500 miles—nearly six times the length of the U.S. shoreline, and well more than twice the circumference of the earth.

Finally, the Chamber opposes the $21 billion tax package expected in this bill, which would single out the oil and gas industries for punitive treatment. The Chamber opposes any denial or limitation of the section 199 deduction for oil and gas companies. This change would discourage domestic energy investment, result in the loss of U.S. jobs, place domestic oil and gas companies at a competitive disadvantage to foreign oil and gas companies, and ultimately decrease supply and increase energy costs for businesses that rely on oil and gas. The Chamber also opposes the proposed modification of the foreign tax credit rules for oil and gas companies, as it would place domestic firms at a competitive disadvantage to foreign oil and gas manufacturers. Further, the Chamber opposes the proposed extension of the FUTA surtax which was added to the tax code in 1976 as a temporary measure and should have been allowed to expire long ago, having outlived the purposes and term that served as a rationale for its enactment.

The Chamber urges you to oppose the "Energy Independence and Security Act of 2007." The Chamber may consider votes on, or in relation to, this legislation in our annual How They Voted scorecard.

Sincerely,
R. Bruce Josten