President Obama Outlines US Energy Plan

WASHINGTON (Dow Jones Newswires), March 30, 2011

President Barack Obama, under pressure to respond to rising gasoline prices, on Wednesday outlined initiatives to cut U.S. reliance on foreign oil, including plans to expand oil production, increase the use of natural gas in vehicles and boost ethanol production.

He promised that the federal government would purchase only alternative-fuel vehicles, including hybrid and electric cars, as well as those that can run on a mix of gasoline and ethanol, by 2015.

Obama's latest attempt to take the initiative on energy policy comes as Republicans in Congress are stepping up criticism of the administration for not allowing more oil and natural-gas drilling in the U.S. On Tuesday, House Republicans said they would introduce legislation requiring the administration to sell more offshore leases and to issue drilling permits within a set time frame.

The political heat over energy policy is rising in tandem with the price of gasoline and diesel fuels at filling stations, in a ritual that has become familiar in Washington since the oil-price shocks of the mid-1970s.

"We've been having this conversation for nearly four decades now," Obama said during a March 11 news conference. "Every few years, gas prices go up; politicians pull out the same old political playbook, and then nothing changes."

The White House cast the new effort--a few new ideas combined with many that have been previously announced--as an attempt to deal with the nation's long-term energy challenge, as well as the high gasoline prices of the moment.

"There are no quick fixes...And we will keep on being a victim to shifts in the oil market until we get finally serious about a long-term policy for a secure, affordable energy future," Obama said Wednesday at Georgetown University.

Obama put forward an overall goal of reducing oil imports by one-third by 2025, with about half the reduction from decreasing consumption and half from increasing domestic supply, the White House said.

Driving the debate now is consumer grumbling about gasoline prices that are up nearly 15% on average since Feb. 7, according to the Energy Department. In some parts of the country, including southern California, gasoline prices have hit $4 a gallon--the highest levels since the gasoline-price spike of 2008. Worries over rising prices for gasoline, food and other goods contributed to a sharp drop in consumer confidence in the economic outlook, which had been rebounding since the depths of the recession in 2009, the Thomson Reuters/University of Michigan Surveys of Consumers said in a report last week.

On Tuesday, the administration sought to focus attention on oil companies, releasing a report from the Interior Department that said more than two-thirds of the offshore oil leases in the Gulf of Mexico and more than half of onshore leases on federal land aren't in use. These leases give companies the right to drill but are currently neither producing oil nor under active exploration, the agency said.

"This report shows millions of acres that have already been leased to industry for oil and gas productions sit idle," Interior Secretary Ken Salazar said in a statement. Obama also raised the issue of unused leases in his March news conference, and his 2012 budget plan included an extra fee on oil companies that hold idle leases. That proposal would need congressional approval.

The White House said it would offer new incentives to more rapidly develop these areas, though it wasn't specific about what they would be. A fact sheet released Wednesday morning said the administration is studying a graduated royalty-rate system used in Texas.

Oil-industry representatives said the administration's complaints about unused leases ignore the reality of the oil-exploration business, in which companies scour large areas to find the relatively few tracts with oil and natural-gas reserves worth developing.

Republicans also have complained that the administration has dragged its feet in issuing permits for new domestic production since it formally lifted a deep-water drilling embargo in the Gulf of Mexico after the BP oil spill.

"These bills will directly reverse Obama administration actions that have locked-up America's vast offshore oil and natural gas resources," Rep. Doc Hastings (R., Wash.), chairman of the House Natural Resources Committee, said in a statement accompanying the bills Republicans outlined on Tuesday.

Obama replied that his administration has supported domestic production, approving seven deep-water drilling permits in recent weeks, and he called the criticism a "useful political sound bite" that doesn't match reality.

As part of its effort to reduce oil demand, the White House is setting a goal for the nation to break ground on four new commercial-scale cellulosic or advanced biofuel refineries to produce ethanol in the next two years. It wasn't clear what incentives or financing the administration would propose for the biofuel initiative.

Obama reiterated that his administration would continue to raise fuel-efficiency standards for cars, with the next set of benchmarks to be released this autumn, and establish standards for heavy trucks, out this summer.

In his 2012 budget, Obama also proposed tax credits to encourage purchase of electric vehicles.

Obama also repeated a proposal from his State of the Union address that the U.S. adopt a standard that would require 80% of electricity to be generated from clean-energy sources by 2035. The administration has defined clean energy as nuclear power, natural gas and clean coal, as well as renewable sources such as wind and solar.

He reaffirmed his commitment to nuclear energy, noting that nuclear power doesn't emit carbon into the atmosphere. The U.S. can't take nuclear power off the table, he said, but he noted the administration would incorporate lessons from the nuclear-power disaster in Japan in the designing and building of new plants here.

Copyright (c) 2011 Dow Jones & Company, Inc.