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June 6, 2001

The Honorable George W. Bush
President of the United States
The White House
1600 Pennsylvania Avenue, NW
Washington, D.C. 20500

Dear President Bush:

On behalf of the National Conference of State Legislatures, (NCSL) we would like to take this opportunity to comment on your National Energy Policy proposal. Our comments are derived from our own comprehensive policy revised and readopted last year without opposition. A broad group of state legislators who are leaders in their state energy, transportation and environment committees developed NCSL's National Energy Policy. Because our effort involved state legislators from across the country and from both political parties, we believe our policy is a truly balanced call for increased domestic production, as well as support for significant increases in energy efficiency, conservation, renewable energy and increased fuel efficiency.

In addition to our updated National Energy Policy, NCSL recently adopted an Energy Regionalism Policy that supports a federal partnership with states working together regionally or otherwise to solve our energy problems. NCSL also has current policies on Alternative Fuels and Alternatively Fueled Vehicles, Electric Industry Restructuring and its Environmental Impacts and other related policies. Copies of the named policies are enclosed.

As you will see, we support the majority of the recommendations contained in the Report of the National Energy Policy Development Group. However, we believe it is unfortunate that NCSL has not been identified to participate in the same fashion as the National Governors' Association in energy discussions with the administration. We hope that you will reconsider this recommendation especially in light of the fact that NCSL is the only state and local organization of elected officials with a comprehensive national energy policy that allows us to comment on this proposal in depth. As you know, state legislatures play an important and often primary role in developing and adopting a myriad of energy, environmental and economic policies. We are hopeful that these initial comments will commence a collaborative effort between your administration, Congress, and NCSL in addressing national energy policy needs.

Our position on a variety of the recommendations contained in the National Energy Policy Development (NEPD) Group's report are as follows:

NCSL supports the NEPD Group's recommendation that the President direct the Secretary of Energy to explore options such as legislation to create public education awareness programs about energy that would be long-term in nature and funded and managed by the respective energy industries. While NCSL supports private sector education efforts proposed in these programs, we also believe that publicly funded programs should be emphasized as well to ensure a balanced presentation of all energy options and their impact on the environment.

• We urge you to consider the creation of a state block grant program this year to promote energy education.

NCSL strongly supports the NEPD Group's recommendation that the President take steps to mitigate impacts of high energy costs on low-income consumers by strengthening the Low Income Home Energy Assistance Program (LIHEAP) by making $1.7 billion available annually. Given the breadth of energy sector price increases, a less stable economy and increasing unemployment rate, it is essential to provide additional assistance to citizens struggling to afford their rising energy bills.

• NCSL also urges the administration to request supplemental funding for FY 2001 for LIHEAP.
• NCSL supports a higher FY 2002 appropriation for LIHEAP, perhaps as high as $3.4 billion as proposed in S.352 and H.R. 683, to address needs caused by price hikes.
• NCSL supports the NEPD Group's suggestion to increase LIHEAP funding, but we believe general funds should be used as needed and increased LIHEAP funding should not be at the expense of energy efficiency or renewable energy R&D programs.

NCSL strongly supports the NEPD Group's recommendation that the President increase funding for the Weatherization Assistance Program by $1.2 billion over ten years. Over the past five to ten years, utility companies have reduced the provision of these services which has greatly increased the need for additional federal and state assistance. NCSL believes this funding increase will help ease the burden of high energy costs for many Americans. Increased funding for this program should not be at the expense of R&D programs for energy efficiency or renewable energy.

NCSL opposes the NEPD Group's recommendation that the President support legislation to allow funds dedicated for the Weatherization and State Energy Programs be transferred to LIHEAP if the U.S. Department of Energy (USDOE) deems it appropriate. NCSL believes that considering the rising energy costs across all sectors, it is vitally important for the President and Congress to fully fund all energy efficiency and energy relief programs. If LIHEAP requires additional funding, the President and Congress should work together to increase its funding levels, not shortchange other energy assistance programs by siphoning funds from them to be transferred to LIHEAP. Also, NCSL believes the states should determine the most appropriate disbursement levels of funds for the programs listed above.

NCSL conditionally supports the NEPD Group's recommendation that the President recognize unique regional energy concerns by working with state organizations to address these problems. NCSL strongly supports a coordinated effort between state and federal government in producing a national energy policy.

• However, NCSL is extremely concerned that the recommendation identifies only the National Governors' Association and regional governor associations (p.2-12) as potential partners in the state/federal energy dialogue with the administration. We believe that by excluding NCSL and other state and local groups, the President and the nation will risk losing valuable input and collaboration from state legislatures and localities on issues vitally important to them and their constituencies. NCSL and its members are eager to work with the President and Congress on energy concerns facing this country and we offer our full cooperation in developing legislation and other initiatives.

NCSL supports the NEPD Group's recommendation that the President direct the U.S. Environmental Protection Agency (USEPA) to propose multi-pollutant legislation. The legislation would establish a flexible, market-based program to significantly reduce and cap emission of sulfur dioxide, nitrogen oxides and mercury from electric power generators. In addition, it is stated that the cap program would involve appropriate measures to address local concerns.

• NCSL agrees that the USEPA should consult with localities, however, states also should be included in that consultation.
• State laws governing power plant emissions should not be preempted or impacted by the proposed legislation.
• States should be authorized to implement stricter emission laws if they prefer.
• The President needs to indicate the level of the caps, when the program would take effect and how long the program would be in effect to provide a clear signal to the energy industry as well as environmental regulators.

NCSL supports the NEPD Group's recommendation that the President issue an Executive Order to rationalize permitting for energy production in an environmentally sound manner by establishing an inter-agency task force. This task force would ensure that federal agencies set up appropriate mechanisms to coordinate federal, state, tribal and local permitting activity in particular regions where increased activity is expected.

• NCSL applauds the President's commitment to work with states on permitting issues. However, no federal permitting law should preempt or impact state laws governing energy facility permitting.
• NCSL offers to assist the task force in its efforts and looks forward to participation in this process.

NCSL strongly supports aggressive federal promotion of energy conservation and efficiency. NCSL policy states that the "federal government must maintain and increase its commitment to cost effective energy conservation and efficiency while maintaining adequate and reliable supplies."

NCSL strongly supports the NEPD Group's recommendation that the President direct the Secretary of Energy to promote greater energy efficiency through:

1. Expanding the Energy Star program beyond office buildings to include schools, retail buildings, health care facilities, and homes;
2. Extending the Energy Star labeling program to additional products, appliances, and service; and
3. Strengthening the USDOE public education programs relating to energy efficiency.

• As with any expansion, extension or strengthening of a program, however, there is an increased need for funding. NCSL urges the President to propose additional federal funds for the Energy Star program to meet the growing need for greater energy efficiency in this country.

NCSL also strongly supports the NEPD Group's recommendation that the President direct the Secretary of Energy to improve the energy efficiency of appliances through:

1. Supporting the appliance standards program for covered products, setting higher standards where technologically feasible and economically justified; and
2. Expanding the scope of the appliance standards program, setting standards for additional appliances where technologically feasible and economically justified.

• NCSL would like to understand what the definition of "economically justified" is in relation to improved energy efficiency. If too narrow a definition is chosen, the long-term benefits of energy efficiency could be sacrificed to a relatively insignificant increase in short-term expense.
• NCSL urges the administration to further expand the incentives for the purchase of Energy Star products by offering increased tax credits and rebates to individuals, private and public consumers.
• Also, NCSL supports the NEPD Group's recommendations to increase appliance energy efficiency standards.
• For consistency's sake however, we urge the withdrawal of the administration's issuance of a less stringent standard for air conditioner energy efficiency levels. This retreat from requiring greater energy efficiency in an appliance that is used extensively, especially in some of the areas hardest hit by electricity increases recently, seems counterproductive to trying to relieve the energy constraint and supply problems across the country.

NCSL supports the NEPD Group's recommendation that the President direct the Secretary of Treasury to work with Congress to encourage increased energy efficiency through combined heat and power projects (CHP) by shortening the depreciation life for CHP projects or providing investment tax credits.

• NCSL's own National Energy Policy urges the federal government to support "research and development projects emphasizing emerging technologies". We believe CHP, which greatly increases the efficiency of energy consumed by a facility, represents a technology with tremendous potential for energy conservation. However, the investment tax credits must be substantial enough to spur investment in the technology.

NCSL conditionally supports the NEPD Group's recommendation that the President direct the Secretary of Transportation to review and provide recommendations on establishing CAFE standards with due consideration of the National Academy of Sciences Study to be released in July 2001.

• In accordance with its own National Energy Policy, NCSL urges the President to "strengthen and improve CAFE standards for all automobiles and light duty trucks, including sport utility vehicles and minivans, while recognizing the significance of economic costs on various segments of the population including rural areas."
• NCSL would oppose any effort to weaken or reduce CAFE standards resulting from such review of the National Academy of Sciences Study especially given rising gasoline prices and the administration's expressed goal of reducing U.S. dependence on foreign oil.

NCSL supports the NEPD Group's recommendation that the President direct the Secretary of Treasury to work with Congress on legislation to increase energy efficiency with a tax credit for fuel-efficient vehicles. With the escalation of gasoline prices across the country, a tax credit that encourages the purchase of new hybrid fuel cell vehicles and other fuel-efficient vehicles will provide additional incentives for consumers to purchase vehicles that use less gasoline and save money in the long-run.

• NCSL also recommends that similar tax credits be extended to the purchase of more fuel efficient vehicles other than hybrids.

NCSL supports the NEPD Group's recommendation that the President direct all agencies to use technological advances to better protect our environment including:

1. Continued federal investment in Intelligent Transportation Systems (ITS) and encouragement for private sector investment in ITS applications;
2. Administrative support for the USDOT's fuel-cell powered transit bus program as proposed in TEA-21; and
3. Administrative support for the Clean Buses program established in TEA-21.

NCSL supports the NEPD Group's recommendation that the President direct the Secretaries of Energy and the Interior to promote enhanced oil and gas recovery from existing wells through new technology. A basic tenet of NCSL's National Energy Policy is the "promotion of reliable sources of domestic energy supplies". The policy also establishes that "energy independence must be a goal of the United States". Enhanced oil and gas recovery could be one tool used to reduce dependence on non-domestic sources.

• NCSL also supports the recommendation to improve oil and gas exploration technology through continued partnerships with public and private entities. We would urge that state legislatures be included in those partnerships.

NCSL believes that the majority of issues associated with electric industry restructuring should be within the purview of the states and that any federal legislation should help enable state restructuring without imposing federal mandates. Only half of the fifty states have restructured their electric industry thus far. In addition, in light of the energy problems in California directly resulting from their electric restructuring law, some states have opted to withdraw their restructuring laws or delay them for a number of years. NCSL firmly believes that in light of these developments, the federal government should not impose a "one-size-fits-all" approach to electricity delivery. However, if a national electric restructuring plan is pursued, NCSL has a number of concerns that are addressed in our policy on Electric Industry Restructuring and testimony on the subject.

• In addition, NCSL strongly supports the NEPD Group's recommendation that the President encourage FERC to use its existing authority to promote competition and encourage investment in transmission facilities - provided it is at the wholesale level only.
• States have jurisdiction over retail level transmission facilities and should not be preempted by this provision or any other federal law.

NCSL policy states that "the federal government should work with the states to prevent any increase in interstate and international transportation of air pollution that may result from increased electricity generation."

NCSL supports the recommendation that the President direct the USDOE to continue to develop advanced clean coal technology by:

1. Investing $2 billion over 10 years to fund research in clean coal technologies;
2. Supporting a permanent extension of the existing research and development tax credit; and
3. Directing the federal agencies to explore regulatory approaches that will encourage advancements in environmental technology.

• NCSL's National Energy Policy calls for "research and technology development in clean coal usage including pre-combustion, combustion, post-combustion, and coal conversion areas with desulfurization efforts a top priority".
• The NCSL policy also calls for "coal gasification to be seriously considered as an alternative to the use of coal in a conventional manner".
• The NCSL policy states that "no federal policy having implications for land development or management should be adopted without accommodating the laws and policies of affected states".

NCSL conditionally supports the NEPD Group's recommendation that nuclear energy be a component of a national energy policy assuming that various concerns can be resolved.

• NCSL's National Energy Policy states, "Assuming concerns regarding plant safety, and the transportation, storage and disposal of nuclear waste can be resolved, nuclear power may be an option of a national energy plan. A federal government program for the long-term treatment and disposal of high-level radioactive waste, funded by the generators of the waste, should be pursued with the highest priority given to eliminating generation and transportation of waste and to the safety and technical suitability of storage or disposal sites. Such a program should be developed in full consultation with all of the affected states. The nuclear power plant licensing process for future plant construction must be improved to ensure both public input and timely decisions, and federally standardized nuclear power plant designs should be established.
• However, NCSL's National Energy Policy calls for the establishment of a federal government program for the long-term treatment and disposal of high-level radioactive waste, funded by the generators of the waste. Priority should be given to eliminating generation and transportation waste and to the safety and technical suitability of storage or disposal sites. Such a program should be developed in full consultation with all of the affected states.
• In addition, NCSL's National Energy Policy supports the recommendation that nuclear decommissioning funds should not be taxed. The NCSL Policy urges "the tax code be updated to ensure that existing decommissioning funds are treated in the manner intended by the tax laws and to reflect new business conditions".

NCSL conditionally supports the FY 2002 budget amendment for the USDOE's Energy Supply account that would provide $39.2 million in increased support for research and development of renewable energy resources. However, the overall decreases in the USDOE proposed budget are unacceptable given the pressing need to resolve national energy concerns.

• NCSL's National Energy Policy urges "the federal government to institute a long-range, stable Renewable Energy Development Program which identifies and supports development of renewable energy sources from research and development through demonstration projects and commercialization in a cooperative effort among industry, higher education, and national laboratories."
• In addition, NCSL's policy also encourages "federal development of alternative technologies that improve renewable energy efficiencies, cut costs, and assist in integrating renewable energy into existing energy systems. The U.S. should strive to excel in the use, manufacturing and marketing of renewable energy resources and technologies".

NCSL also supports the NEPD Group's recommendation that the President direct the Administrator of the USEPA to develop a new renewable energy partnership program to help companies more easily buy renewable energy , as well as receive recognition for the environmental benefits of their purchase, and help consumers by promoting consumer choice programs that increase their knowledge about the environmental benefits of purchasing renewable energy.

NCSL supports the NEPD Group's recommendation that the President direct the Secretaries of Commerce, State and Energy explore collaborative international basic research and development in energy alternative and energy efficient technologies and explore innovative programs to support the global adoption of these technologies.

• In particular NCSL policy recognizes a need for "a translation and distribution system for international technical and marketing papers on renewable energy."

In addition, NCSL supports the NEPD Group's recommendation that the President direct the Secretary of the Treasury to work with Congress on legislation to extend and expand tax credits for electricity produced using wind or biomass.

• NCSL commends the President for extending the present 1.7 cents per kilowatt hour tax credit for electricity produced from wind and biomass; expands eligible biomass sources to include forest-related sources, agricultural sources, and certain urban sources; and allows a credit for electricity produced from biomass co-fired with coal.

NCSL supports the NEPD Group's recommendation that the President direct the Secretary of Treasury to work with Congress on legislation to provide a new 15 percent tax credit for residential solar energy property, up to a maximum credit of $2,000.

• NCSL also urges the administration to support and continue the previous administration's "Million Solar Roofs" initiative that to date has exceeded expectations of ultimately installing one million solar roofs in the U.S.

NCSL supports the NEPD Group's recommendation that the President direct the Secretaries of the Interior and Energy to work with Congress on legislation to increase funding for research into alternative and renewable energy resources, including wind, solar, geothermal, and biomass. However, NCSL believes general funds should be appropriated for this purpose.

NCSL supports the NEPD Group's recommendation that research and development efforts be focused on integrating current programs regarding hydrogen, fuel cells, and distributed energy.

• NCSL urges the federal government to propose increased funding for these types of technologies that hold promise for our nation's future energy needs.

NCSL supports the NEPD Group's recommendation that the President direct the Secretary of Energy to work with the Federal Energy Regulatory Commission (FERC) to improve the reliability of the interstate transmission system and to develop legislation providing for enforcement by a self-regulated organization subject to FERC oversight. NCSL believes any federal efforts to relieve transmission constraint problems at the inter-state level will ultimately help states and regions as they address their individual intrastate transmission constraint concerns.

• However, NCSL strongly opposes any expansion of FERC authority to include intrastate transmission jurisdiction.
• It also opposes the exercise of federal eminent domain in addressing transmission constraint problems, especially in areas that are clearly intrastate in nature. Such action on the part of FERC would be a direct preemption of state authority.

NCSL strongly opposes the NEPD Group's recommendation that the President direct the Secretary of Energy, in consultation with appropriate federal agencies and state and local government officials, to develop legislation to grant authority to obtain rights-of-way for electricity transmission lines, with the goal of creating a reliable national transmission grid. Although NCSL understands the need to improve and increase the electricity transmission infrastructure to reduce constraints and improve reliability of the system, states have jurisdictional authority over retail, intrastate transmission lines. There are sound reasons for this authority being placed at the state level, namely to afford citizens the ability to participate in the determination of the numbers and locations of transmission lines. NCSL understands that the infrastructure needs to be bolstered, but it believes states are already addressing that challenge individually and regionally. The federal government should allow states to continue to work together to solve their energy concerns.

• Any expansion of federal authority that would remove intrastate retail transmission jurisdiction from states would be a direct preemption of state authority and would be vigorously opposed by NCSL.

The NEPD Group's recommendation argues that because similar authority already exists for natural gas pipelines in recognition of their role in interstate commerce, that the federal government should be authorized to obtain the same authority over the electric transmission grid. NCSL disagrees with this argument. FERC has had eminent domain authority to site the construction of natural gas pipelines for decades, yet presently, there is a pressing need to increase and improve the natural gas pipeline infrastructure. If FERC has not met the needs of the natural gas pipeline system with eminent domain authority, NCSL questions why the federal government is proposing to provide the FERC with the same authority over the electric transmission grid?

NCSL supports the NEPD Group's recommendation that the President support legislation to improve the safety of natural gas pipelines, protect the environment, strengthen emergency preparedness and inspections and bolster enforcement.

• NCSL supports federal efforts to improve the safety of the natural gas pipeline system, however, states should have the right to set more stringent requirements on pipelines and the federal government should support a more prominent role for states in regulating pipeline safety in partnership with the federal government.

NCSL supports the President's budget proposal to provide $8 million to maintain the two-million-barrel Northeast Heating Oil Reserve. NCSL's National Energy Policy urges the federal government to examine the feasibility of and where feasible promote state-wide or regional minimum storage level requirements for heating oil for states dependent on this fuel.

We thank you for this opportunity to share with you our support and concerns regarding various elements of the administration's National Energy Policy recommendations. As we stated, our comments directly reflect the principles of NCSL's National Energy policy and its Energy Regionalism policy. We remain available to work with you and your administration on energy concerns. As indicated above, we are the only state and local organization of elected officials with a comprehensive national energy policy which enables us to work with you immediately. NCSL is committed to bipartisan cooperation in finding the best public policy solutions for our nation. We hope our views are useful and we look forward to continuing this dialogue in the future. Please do not hesitate to contact Eileen Doherty of our Washington, D.C. office at (202) 624-8687 or eileen.doherty@ncsl.org if you have questions or concerns.

Sincerely,