October 17, 2016

Increasing Prosperity, Resource Stewardship, and National Security

An Energy Policy Strategy for the Next President

On January 20, 2017, a new U.S. president will take the oath of office. He or she will assume responsibility for assuring the safe, reliable, and affordable provision of energy for the country, a critical component of the economic health and security of the nation. This task will involve addressing a number of grave deficiencies in current energy policy and prioritizing several urgent energy initiatives. Laying a strong, early basis for new energy policy will enable the incoming administration to set the country on a path to aligning national energy capabilities and technological developments with economic and security needs, now and in the future.

Energy touches all facets of life. The next generation of federal leaders must prioritize a sober approach to the following fundamental realities of our national energy system:

  • The national electricity grid will have to accommodate, in a safe and reliable manner, the integration of increasing renewable energy sources and new technologies.
  • Oil and gas will remain the dominant fuel source to power the global economy.
  • The rise in domestic energy production over the last decade presents economic, climatic, and security benefits on which the next president can build.
  • Instability in key oil producing regions – primarily the Middle East, Africa, and Russia – will remain a significant source of economic and energy security concern for the United States.
  • The aging domestic energy transportation system, including railways, pipelines, ports, and inland waterways, is in need of significant improvement and is vulnerable to critical infrastructure threats.
  • Political leaders must continue to address environmental and community concerns about the impacts of oil and gas development in order to sustain this critical industry and economic input.
  • Climate change cannot be ignored, and national leaders must directly address this topic through a focus on research, development, and deployment of new energy technologies.
  • National leaders must advance a comprehensive view of energy security to encompass supply, trade, efficiency, infrastructure, development of technologies, resiliency, and emergency response.

Facing these structural elements of the energy system head-on in new policy will enable the next president to mitigate vulnerabilities that will continue to threaten U.S. prosperity and security: unrest and supply disruption in major producing countries, and the price shock–related consequences disruptions could pose to such countries and global consumers. At home, energy system vulnerabilities include aging and at-risk infrastructure, including transportation systems. They also include the deeply politicized public debates about energy production and natural resource stewardship.

This report outlines for the next administration a bipartisan agenda to advance sound energy policy in the first 100 days after inauguration and in the years ahead. Partisanship and local interests have created deep and difficult-to-surmount policy impediments. In many instances and forums, divisive debate about science, environmental effects of energy production, and how to monitor, permit, and regulate energy activities block progress toward creating more contemporary and cost-effective energy policy. A sustained effort at the executive level to forge common ground, building on some recent examples of success, can achieve progress. Indeed, this must be a priority for resilience, U.S. strength, and global leadership.

The next president and his or her team must advance energy policy at home and abroad by attending simultaneously to conventional production, trade, efficiency, renewables, new technology, cyber security, resiliency, and emergency preparedness.

Among top energy policy initiatives, the next president should prioritize electricity grid upgrades, energy transport modernization, proactive energy diplomacy, a stronger federal central coordinating mechanism for energy and environmental issues, and enhanced support for research, development, and demonstration of new energy technologies. The challenge of addressing climate change is important, but will remain a source of deep policy division. While a broad array of stakeholders and representatives of both political parties agree that the current policy and regulatory approach to climate change is not ideal and far from the most cost-effective, there is very limited common ground in this domain. Notwithstanding the difficulty of sustaining constructive public debate on climate change, this effort will be critically important for future leaders to advance a holistic treatment of energy interests and policy.

The next president will achieve energy-system and economic success if he or she can enact reasonable and depoliticized standards for energy production that are technology-neutral and cost-effective. Furthermore, a crucial measure of the next administration’s contribution to U.S. national security will be the degree to which national leaders promulgate a broad formulation of energy security, including managing economic vulnerabilities, that permanently discards a narrow emphasis on domestic self-sufficiency. Instead, the next president and his or her team must advance energy policy at home and abroad by attending simultaneously to conventional production, trade, efficiency, renewables, new technology, cyber security, resiliency, and emergency preparedness. This approach will lay a strong foundation for U.S. energy policy going forward and affirm the status of the country as a clear global leader on energy.

First 100 Days’ Agenda

The policy recommendations offered in this report will take years for the next president to implement. During the first few months of the next administration he or she will have a unique opportunity to make progress on key energy priorities to establish a framework for further measures in the years to come.

Prioritize modernization of energy infrastructure as an urgent national policy.
The primary focus of this priority should be new regulatory efforts to promote accelerated siting and permitting of new and expanded pipeline, railway, inland waterways, port, and transmission line projects. These efforts should be shepherded by White House leadership, coordinating various federal agencies as well as interaction with state-level authorizers. The next administration should consider offering a one-time accelerated depreciation program for replacement of aging pipelines if launched within two years of enactment.

Reverse Congress’ decision to draw down a substantial amount of emergency oil reserves to plug budget holes unrelated to energy security.
The new administration should identify alternate sources of funding for transportation needs and rescind Strategic Petroleum Reserve (SPR) sales for purposes other than SPR modernization. If necessary, the administration should review executive authority to suspend implementing this decision in the interest of national security. This recognizes Congress’ error in reducing U.S. emergency response options despite ongoing economic vulnerability to oil price shocks. Pump prices are based largely on crude prices, which are set in a globally traded and fungible market. While U.S. oil imports have fallen sharply in recent years, the U.S. economy and national security are vulnerable to shocks arising from a global oil market featuring significant geopolitical disruptions and nearly no OPEC spare production capacity. It is appropriate to sell some SPR crude to finance much needed modernization of the facility, but doing so for other government expenditures would be reckless.

Create a formal Assistant Secretary of State position for the Bureau of Energy Resources.
This will elevate the current head of this bureau in stature, signaling a greater prioritization of international energy diplomacy by the next president. The incoming administration should also urge the Senate to quickly confirm the appointee to this post, to accelerate and make more effective diplomatic efforts to promote global energy security. A key task of such diplomacy will be signaling to Gulf partners a continued U.S. security commitment to the secure maritime shipment of energy, and coordination with European partners on regional supply diversification and energy transport policy.

Establish a high-level, White House–led, interagency coordinating mechanism to address energy policy issues.
Expand on the existing, though disparate, focus on these issues throughout various administration agencies by formalizing a body responsible for coordinating policy in this domain. This coordinating mechanism will evaluate the various energy-market and natural resource stewardship, economic, and security considerations of energy policy issues and develop policy options for the next president.

Increase federal investment in new and advanced energy technologies.
Through grant programs or, potentially, loan guarantees, the next administration should, in a fiscally sound manner, rapidly expand research, development, and deployment support for carbon capture and sequestration, battery storage, advanced nuclear technology, natural gas capture and monetization, and smart grid technology. Federal officials also should explore cost-effective strategies to signal and offer incentives for further private sector investment in these new energy technologies.

Signal strong support for the use of natural gas in new international power-generation projects.
Through leadership of international financial institutions and multilateral aid projects, the next president should promote this lower-carbon energy resource in electric power development. This will address energy poverty concerns abroad, have an emissions-reductions effect, and offer potential new export opportunities for U.S. gas producers.

Prioritize vastly improved collection and dissemination of global energy market data.
The United States leads the world in providing comprehensive and timely energy market data, but international partners can do better. The global nature of energy markets and associated security, environmental, and climate concerns make it imperative to rectify the often incomplete or time-lagged publication of data on energy production, consumption, and inventories. Building on efforts in the G7, International Energy Forum, and Joint Oil Data Initiative, the White House should lead an effort to improve international publication of energy data so as to better inform policy and private-sector understanding of markets, shape policymaking, and dampen volatility stemming from uncertainty.

The full report is available online.

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