Bodman: conserve, but don't require changes

Saying the damage Katrina and Rita did to the nation’s energy infrastructure will reverberate through the economy for “some time,” Energy Secretary Samuel Bodman is calling on Americans to conserve energy to help keep fuel costs in check.

But as Congress again begins to debate energy policy, Bodman yesterday rejected calls that the federal government reduce demand by increasing the gas tax or fuel-efficiency standards for cars — two efforts some experts say would have the most dramatic result.

The Energy Department announced instead a voluntary conservation campaign this week. Bodman discussed the effort during a breakfast with reporters, sponsored by The Christian Science Monitor.

The campaign, done in partnership with the Alliance to Save Energy, a consumer group, will include a national advertising campaign to raise awareness of the ways individuals, businesses and governmental agencies can cut energy use.

Energy-saving techniques include installing low-flow showerheads and using cold water to wash clothes to reduce the use of hot water and installing programmable thermostats that turn the heating and cooling down for periods when a home or a business is not occupied.

The campaign presages what otherwise is expected to be a harsh winter in terms of heating costs.

With crude-oil prices already high, the hurricanes made a bad situation worse by targeting the Gulf Coast, a key energy producer for the nation.

The Energy Information Administration, which collects and analyzes energy data, has estimated that electricity bills could rise 11 percent and the cost of heating oil could soar 34 percent this winter.

“The damage that has been done by both Katrina and Rita to the infrastructure of this economy has been extreme,” Bodman said.

Congress, meanwhile, is moving to encourage the expansion of the nation’s refining capacity as a way to minimize the potential for future prices shocks, although the efforts will have no effect on short-term prices.

At the breakfast, Bodman said that he believes capacity for turning crude oil into gasoline, heating oil and jet fuel should be increased by as much as 10 percent to deal with growing demand.

Capacity has declined by the same percentage over the past two decades, even as demand for gasoline has grown by 20 percent, according to the National Petrochemical and Refiners Association (NPRA). That has left the system vulnerable to disruption, particularly from something as significant as Hurricanes Katrina and Rita.

Together, the storms closed at least temporarily more than 30 refineries on the Gulf Coast, a major energy producer for the country.

Current domestic capacity is around 17 million barrels a day, Bodman said.

Of the 16 refineries shut down as Rita approached, half are still closed, according to the NPRA. Those facilities have a daily production capacity of 2.15 million barrels a day.

Katrina shut down as many as 10 refineries. Four remain closed.

The disruptions have pushed gasoline prices up toward $3 a gallon on average, according to the EIA.

Just two months after Congress passed a major energy bill, the House is expected to take up the refinery bill tomorrow. The bill would encourage new refining capacity by weakening clean-air rules for new plants and codifying into law an administration rule that allows energy facilities to repair or upgrade without installing anti-pollution devices.

The bill is expected to pass the House, but its future in the Senate is less certain, as Democrats and some Republicans object to easing Clean Air Act rules.

Some senators, including Pete Domenici (R-N.M.), the chairman of the Senate Energy and Natural Resources Committee, have called for additional efforts to encourage conservation, in particular by increasing fuel-efficiency standards for automobiles, which haven’t been raised in more than 10 years. But Bodman said the administration remained opposed to that approach as well.

“We try to execute policies that inflict minimum interference with the free market,” Bodman said.

The energy bill Congress passed and the president signed in August includes about $1.8 billion worth of energy-tax and other incentives for conservation.

Lowell Unger, a senior policy analyst at the Alliance to Save Energy, said his group approved of the energy-efficiency efforts in that bill.

“We also felt like it did not go far enough,” he said.

Parting ways with the administration, Unger said the bill would have been better if a provision in the Senate that called on the Energy Department to cut oil use by 1 million barrels a day survived the conference with the House.

The group also supports an increase of corporate average fuel economy, or CAFE, standards to reduce demand.

An aggressive energy-efficiency effort could save Americans around $73 billion in fuel costs, Unger said.