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Powering an Oil Reform Agenda

Congress and the White House Must Drive Together

SOURCE: AP/Patrick Semansky

Workers collect oil that has washed ashore on Fourchon Beach Port Fourchon, Louisiana.

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Read also: America Needs an Oil Reform Agenda by John D. Podesta and Daniel J. Weiss

The BP oil gusher continues to spew oil into the Gulf of Mexico, and the American public’s anger and concern are growing over what is “probably the biggest environmental disaster we’ve ever faced in this country,” according to Carol Browner, the assistant to the president for energy and climate change. Incident commander Thad Allen of the Coast Guard has meanwhile acknowledged that plugging the hole is very unlikely and efforts should shift to capturing as much oil as possible.

The tragic BP oil disaster reinforces the urgency of making oil production safer while reducing oil use faster. John Podesta and Daniel Weiss outline a strategy for getting started on a bold and direct response to reducing our oil use in “America Needs An Oil Reform Agenda.” President Barack Obama has already taken some historic strides in reducing oil consumption by improving vehicle efficiency. But the president can go further in saving oil and bringing the United States into the clean energy future, and Congress must seize the opportunity to lead on this issue as it considers comprehensive clean energy legislation.

Congress and the president should collaborate on the following measures going forward so that we can make the goal of reducing our oil dependence a reality.

Implement offshore oil production safeguards

Raise the liability limit under the Oil Spill Prevention Act from $75 million to at least $10 billion. It is simply unconscionable that BP could only be on the hook for $75 million when it has caused the biggest oil disaster in history. BP has said that it will honor “all legitimate claims,” but that is a slippery standard that enables BP to evade paying for long-term damages. Exxon fought claims and penalties for years after the Exxon Valdez oil spill rather than settling them.

The Big Oil Bailout Prevention Act, S. 3305, sponsored by Sens. Bob Menendez (D-NJ), Frank Lautenberg (D-NJ), and Bill Nelson (D-FL), would accomplish this objective. Its House companion, H.R.5214, is sponsored by Rep. Rush Holt (D-NJ) and cosponsored by 35 other House members.

Require BP to put its first quarter 2010 profits of $5 billion into an escrow fund to ensure prompt reimbursement of federal clean-up costs and compensation to harmed coastal residents. Exxon fought payments for years after the Exxon Valdez oil spill. Eight thousand claimants died while waiting for compensation by Exxon while the company made a $3.8 billion profit in 1989 and $5 billion in 1990. We can’t allow that to happen with this much worse disaster.

Promptly implement and enforce Interior Department recommendations issued in the “Increased Safety Measures for Energy Development on the Outer Continental Shelf” report. President Obama ordered the Department of Interior to conduct a prompt assessment of the BP oil disaster on April 30. He requested that the report examine what, if any, additional precautions and technologies should be required to improve the safety of oil and gas exploration and production on the outer continental shelf. The report included a number of recommendations that require swift action, including new, enhanced inspections of blow-out preventers and other back up systems, with the reports made publicly available; new safety features for blow-out preventers and other safety equipment; new design, testing, operations, and training procedures for casing and other elements of exploratory wells; and enhanced management requirements for offshore rigs.

Establish new, permanent protection zones for the most fragile parts of our coasts. President Obama has announced that there will be a six-month time-out on new offshore oil drilling permits, but when that expires, current law will allow oil drilling three miles offshore and beyond. Based on the Deepwater Horizon Commission’s findings, the federal government should establish new, permanent protection zones for the most fragile parts of our coasts, and enable potentially affected states to veto offshore drilling where an accident could affect them. This provision is already in the draft American Power Act for areas that are 3 to 75 miles offshore. The bill is sponsored by Sens. John Kerry (D-MA) and Joe Lieberman (I-CT).

Establish an oil-reduction policy and adopt measures to achieve its goals

Establish an oil use reduction target of 7 million barrels per day by 2030. This is one-third less than current oil consumption. Congress should also make interim targets of reducing consumption by 1 million barrels per day by 2015 and 3 million per day by 2022. It should also provide the president with the authority to require such reductions. This is modeled on an oil savings proposal made by Sen. Mary Landrieu (D-LA) in 2003.

Continue efforts to increase vehicle fuel efficiency. The Obama administration used its existing authority to establish a 35.5 miles per gallon average fuel economy and greenhouse gas standards for cars and light-duty trucks built from 2012 to 2016. This will save 1.8 billion barrels over the lifetime of the vehicles. President Obama launched the process on May 21 to adopt still more efficient standards for model years 2017 to 2021, which should be at least 40 miles per gallon by 2020. The president also ordered the Department of Transportation and Environmental Protection Agency to develop the first-ever fuel economy and greenhouse gas standards for medium- and heavy-trucks. This is particularly critical because they use 20 percent of all oil used for transportation.

Promote the purchase and use of natural-gas-fueled medium- and heavy-duty trucks. The federal government should use its purchasing power to buy natural-gas-powered medium- and heavy-duty trucks and buses for federal fleets. Congress should also establish incentives for the private purchase of medium- and heavy-duty trucks, buses, and fleet vehicles powered by natural gas. This should include incentives to develop the infrastructure to fuel these vehicles. Such provisions are in the NAT GAS Act, S. 1408, sponsored by Senatos Menendez, Harry Reid (D-NV), and Orrin Hatch (R-UT). Its House companion is H.R. 1835, sponsored by Reps. Dan Boren (D-OK), John Larson (D-CT), John Sullivan (R-OK), and 141 additional representatives.

Analysis by Center for American Progress found that “deployment of 3.5 million of these natural gas vehicles by 2035 would save at least 1.2 million barrels of oil per day compared to business as usual, which is more oil than we imported from Venezuela last year.” Natural gas can be a bridge fuel to clean fuels of the future, but additional safeguards for shale gas drilling are essential to ensure that increases in gas production do not create environmental hazards. The American Power Act includes CAP’s proposal to require natural gas producers to publicly report on the toxic chemicals in their drilling muds.

Spur production of vehicles that significantly exceed fuel economy standards. A Center for American Progress, United Auto Workers, and National Resources Defense Council report recommends that “reengineering the U.S. automobile fleet to use energy more efficiently” is essential to both revitalize our labor force and reduce our oil consumption and pollution. The federal government will need to rethink incentives for manufacturing facilities to accomplish this transition, for example by providing grants or revolving loans to automakers and suppliers to aid in retooling their manufacturing operations to produce advanced vehicles and associated components.

Eliminate subsidies to big oil companies

Save billions of dollars by stopping subsidies to big oil companies. The big five oil companies—BP, Chevron, ConocoPhillips, ExxonMobil, and Shell—made $876 billion in profits from 2001 to 2009. Yet they continue to receive tax breaks and other federal benefits worth billions of dollars annually. President Obama’s 2011 budget proposes to eliminate nine different tax expenditures that primarily benefit large oil and gas companies. Cutting these special tax deductions, preferences, and credits would save the government about $45 billion over the next 10 years. These highly profitable companies can do without this taxpayer largess. The federal government could invest a portion of this revenue in programs for cleaner fuels or public transportation.

Levy a fee on imported oil for clean energy investments

Adopt a modest fee on the nearly two-thirds of U.S. oil imported from other nations, with the revenue to fund oil reduction policies and rebates to consumers—a $2 per barrel fee would raise $9.5 billion annually. The Trade Expansion Act gives the president authority to levy a fee on imported oil if such imports threaten national security. President Gerald Ford invoked this authority in 1975 to levy a $2 per barrel fee on imported oil (equivalent to $8.10 today). The United States imported 37 percent of its oil back then. President Ford proclaimed “it necessary and consistent with the national security to further discourage importation into the United States of petroleum… to create conditions favorable to domestic crude oil production needed for projected national security requirements; …and to encourage the development of other sources of energy.” Ford noted that levy would provide revenue for investments and rebates. He said “those dollars would remain in this country and would be returned to our economy.” President Obama should follow President Ford’s lead by adopting a very modest fee on imported oil to raise revenue to invest in reducing foreign oil use.

Invest in electric vehicles and transit

Invest in electrification of light-duty vehicles and infrastructure to support them. The bipartisan “Electric Drive Vehicle Deployment Act”, H.R. 5442, sponsored by Reps. Ed Markey (D-MA), Judy Biggert (R-IL), and Anna Eshoo (D-CA), would boost the production, purchase, and use of vehicles partially or completely powered by electricity. This includes funds for additional incentives to purchase such vehicles; research, development, deployment, and manufacture of electric vehicles and the infrastructure essential for their operation; and pilot programs in five communities to deploy 700,000 vehicles there by 2016. Sens. Byron Dorgan (D-ND), Lamar Alexander (R-TN), and Jeff Merkley (D-OR) introduced a very similar bill in the Senate, S. 3442.

Invest in public transit, including high-speed rail. Congress should provide revenue for state and local transportation projects that reduce oil use. It can also establish a goal of doubling transit ridership in 10 years. The draft American Power Act, sponsored by Sens. John Kerry (D-MA) and Joe Lieberman (I-CT), would invest billions of dollars annually in such projects.

Reduce oil pollution

The Senate should join the House by passing a declining limit on global warming pollution from oil-based fuels, among other major pollution sources. It could resemble the “reduce and refund” provisions in the American Power Act that require big oil companies and refiners to purchase a quarterly, market-based fixed price for pollution allowances that reflect the carbon pollution content in particular oil-based fuels. A portion of the revenue from these allowances would be returned to people, with another portion invested in public transportation and clean vehicles.

Conclusion

It appears there is little that President Obama and Congress can do to stop the torrent of oil coming from the ocean’s bottom. But they can attempt to prevent future catastrophes by adopting the aforementioned precautions and safety measures for offshore oilrigs. This would be a sea change from the previous eight years when President George W. Bush and Vice President Dick Cheney let big oil companies voluntarily police themselves. For instance, the The Washington Post reported that:

“MMS [Minerals Management Service] actions are shaped in part by the 2005 regulation it adopted that assumes oil and gas companies can best evaluate the environmental impact of their operations. The rule governing what information MMS should receive and review before signing off on drilling plans states: ‘The lessee or operator is in the best position to determine the environmental effects of its proposed activity based on whether the operation is routine or non-routine.’”

The BP oil disaster is Dick Cheney’s Hurricane Katrina in a very real sense because he let the thieves operate the bank.

A comprehensive program to slash oil use and invest in cleaner vehicles, fuels, and transportation would reduce the likelihood of a future BP oil disaster. This program should include a small levy on imported oil to raise revenue to invest in electric cars, natural gas trucks, and high-speed rail. And oil production and reduction reform would include establishing a declining limit on the carbon pollution that comes from oil and its fuels. The American people look to President Obama and Congress for this leadership.

Many of these ideas were developed in collaboration with the Alliance for Climate Protection, National Wildlife Federation, Natural Resources Defense Council, Sierra Club, and Union of Concerned Scientists.

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