President Clinton today proposed new steps to strengthen the sound, comprehensive energy strategy that has helped keep the U.S. economy robust. The President called for the creation of a regional home heating oil reserve and reauthorization of the Strategic Petroleum Reserve. He also called for enactment of a tax package that will help ensure the productive capacity of the domestic oil industry and that must include measures to promote greater energy efficiency and renewable energy -- measures which Congress has failed to act on twice before. These steps will enhance America's energy security, create jobs, protect the environment, and produce long-term savings for consumers.
· Establishing A Regional Home Heating Oil Reserve: In order to reduce the likelihood that future heating oil shortages will harm consumers, the President is proposing the creation of a home heating oil reserve in the Northeast with an appropriate trigger that could supply additional heating oil to the market in the event of a supply shortage. The President today directed the Department of Energy to commence the appropriate environmental reviews to create this home heating oil reserve and will work with Congress to pass authorizing legislation this year.
· Reauthorizing the Strategic Petroleum Reserve: Current authorization to operate the Strategic Petroleum Reserve expires on March 31st, even as OPEC oil ministers are meeting in Vienna to discuss production quotas. To ensure the ability to use all available tools to respond to the needs of the U. S. economy, the President called on Congress to immediately reauthorize the Energy Policy and Conservation Act, which authorizes the Strategic Petroleum Reserve and the International Energy Program at DOE.
· Will Help Preserve Productive Capacity of the Domestic Oil Industry: President Clinton will propose adjusting the tax treatment for certain exploration activities and to lower the business costs to producers when oil prices are low. The Administration will also continue examining opportunities to preserve marginal well production, which accounts for over 20 percent of on-shore oil production in the lower-48 states.
· Must Include Measures To Improve the Energy Efficiency of the Economy and to Promote the Use of Alternative Energy Sources: To improve the energy security of our economy, President called on Congress to pass the energy efficiency and renewable energy tax components proposed in his current budget. These include tax credits for electric, fuel cell, and qualified hybrid vehicles, tax credits for efficient homes and buildings, and tax credits for non-petroleum based energy sources including wind, biomass, and methane.
Energy-Efficiency Enhances Energy Security And Strengthens The Economy: The strong performance of our economy over the past year, despite oil price rises, underscores the dramatic improvements in energy efficiency and reliability over the past quarter century. While past oil shortages have taken a significant toll on the U.S. economy, the recent increases in oil prices have yet to have a major impact on the U.S. economy. Increased energy efficiency  in cars, homes, and manufacturing  has helped insulate the economy from these short-term market fluctuations. In 1974, we consumed 15 barrels of oil for every $10,000 of gross domestic product. Today we consume only 8 barrels of oil for the same amount of economic output.
· Support The Establishment of a Regional Reserve: The President supports the creation of a home heating oil reserve with an appropriate trigger in the Northeast to combat future product shortages. In the event of home heating oil shortages, heating oil can be sold from the reserve in order to increase the supply on the market.
· Direct DOE To Undertake Necessary Environmental Reviews: The President has directed the Department of Energy to begin the appropriate environmental reviews for the creation of a home heating oil reserve in the Northeast.
· Call on Congress to Establish Reserve Through Legislation: The President calls on Congress to pass legislation that authorize the creation of a regional product reserve, and includes an appropriate trigger. The President reserves his right to establish a reserve under his existing authority, subject to the outcome of the environmental reviews, in the event that Congress fails to act.
II. Reauthorizing the Strategic Petroleum Reserve: Current authorization to operate the Strategic Petroleum Reserve expires on March 31st, even as OPEC oil ministers will be meeting in Vienna to discuss production quotas. In order to ensure that the President maintains the ability to use all available tools to respond to the needs of the United States economy, he will call on Congress to immediately reauthorize Titles I and II of the Energy Policy and Conservation Act, which authorize the Strategic Petroleum Reserve and the International Energy Program at the Department of Energy.
III. Enacting A Comprehensive Tax Incentive Package: In order to insulate the economy from the effects of future energy price increases, the United States needs comprehensive and balanced package of tax incentives. This comprehensive approach includes support for domestic oil producers to reduce our reliance on oil imports and must include incentives to continue expanding renewable energy and increasing the energy efficiency of our economy. These tax proposals are either paid for in the President's budget or will be paid for with offsets.
A. Preserving Productive Capacity of the Domestic Oil Industry: In addition to calling for steps to decrease our demand for oil through increased efficiency, the President is proposing new steps to support new domestic exploration and production, and to lower the business costs of producers when oil prices are low. These tax proposals will cost less than $1 billion over ten years. The Administration will also continue examining opportunities to preserve marginal well production.
ü Expensing of Geological and Geophysical Costs: The President is proposing to support domestic exploration and production by adjusting the treatment of the costs of exploration and development -- geological and geophysical costs -- in the tax code. Under current law, geological and geophysical costs may be deducted in current year if exploration activity was unsuccessful, but must be capitalized if the exploration activity was successful. By allowing the industry to expense these costs, we will be encouraging the discovery of new reserves. The Department of Energy estimates that G&G will add 126,000 barrels of oil a day to domestic production.
Allowing Expensing of Delay Rental Payments: A "delay rental payment" is an amount paid by a lessee to the lessor of a petroleum resource when the lessee does not begin producing commercial quantities of oil or natural gas as soon as was agreed to. The delay rental payment is intended to compensate the lessor for the royalties he does not receive while production is delayed. Currently, the Federal tax code requires delayed rental expenses to be capitalized to the depletable base of the property to which they relate if the property is being held for development. Prior to 1993 all delayed rental payments were allowed to be expensed in the year incurred. Allowing producers to expense delay rental payments will lower the cost of doing business on Federal lands.
ü Extend the current tax credit for electric vehicles and fuel cell vehicles. Under current law, a 10 percent credit, up to $4,000, is provided for the cost of qualified electric vehicles and fuel cell vehicles. The credit begins to phase down in 2002 and phases out in 2005. The President's proposal would extend the tax credit at its $4,000 maximum level through 2006.
ü Pass tax credits for hybrid vehicles. The President proposes a $500 to $3,000 credit, depending on the vehicle's design performance, for all qualifying hybrid vehicles, including cars, minivans, sport utility vehicles, and pickup trucks.
ü Tax credit for new energy efficient homes. To encourage the purchase of new energy efficient homes, the President proposes a tax credit of between $1,000 and $2,000 for new energy efficient homes.
ü Tax credit for energy efficient equipment in new and existing homes or buildings. To encourage the purchase of electric heat pump water heaters, natural gas heat pumps, and fuel cells, the President proposes a tax credit equal to 20 percent of the cost of the investment, subject to a cap, for equipment purchased between 2001 and 2004.
ü Tax Credits For Solar Energy Systems. A 15 percent tax credit will encourage the purchase by consumers and businesses of solar energy systems. The maximum credit would be $2,000 for rooftop photovoltaic systems and $1,000 for solar water heating systems.
ü Tax Credits For Wind Power. Current law encourages the production of electricity from wind through a tax credit of 1.5 cents per kilowatt hour (adjusted for inflation after 1992). The current tax credit covers facilities placed in service before January 1, 2002. The President proposes a 2.5-year extension of this tax credit.
· Extend Tax Credits For Closed Loop Biomass: Extend current "closed-loop" biomass credit of 1.5 cents per kilowatt hour for 2.5 years.
· Provide Tax Credits For Open Loop Biomass: Expand the availability of the biomass credit of 1.5 cents per kilowatt hour to include "open-loop" biomass (certain forest-related resources and agricultural and other sources) for facilities placed in service from 2001-2005, and provides a 1.0 cent credit for electricity produced from 2001-2003 from facilities placed in service prior to January 1, 2001.
· Provide Tax Credits For Cofiring Biomass: Add a 0.5 cent per kilowatt hour tax credit for electricity produced by cofiring biomass in coal plants from 2001-2005.
ü Tax Credits For Methane from Landfills: Adds a 1.5 cent per kilowatt hour credit for electricity produced from landfills not subject to EPA's 1996 New Source Performance Standards/Emissions Guidelines (NSPS/EG) and 1.0 cent per kilowatt hour for landfills subject to NSPS/EG. Qualified facilities would be facilities placed in service after December 31, 2000 and before January 1, 2006.
IV. Making Common Sense Investments In Promoting Energy Efficiency And Alternative Energy Technologies. In addition to providing tax credits to promote domestic oil production and energy efficiency, the President and Vice President have already presented budget requests for appropriations that will further promote energy security. They have proposed a budget that includes over $1.4 billion next year to accelerate the research, development, and deployment of alternative and more efficient energy technologies.
$275 Million To Make America's Homes and Buildings More Efficient: The Administration has proposed funding for research to make offices, homes, and appliances 50 percent more energy efficient within a decade and has proposed $275 million in the budget to help do so. People understand what that means for their home heating bill. Overall, meeting this goal would save consumers $11 billion a year in energy costs.
$173 Million To Weatherize Low Income Households: Our budget proposes expanding DOE's Weatherization Assistance Program, which helps low-income households make their homes more energy efficient. These are the Americans that most need to reduce monthly energy costs. This program has already weatherized almost 5 million low-income homes and is saving 3.0 million barrels of oil each year. With funding from DOE and the states, we plan to add more than 150,000 homes to the list in the next year  which will save more than an additional 91,000 barrels of oil per year. Our budget seeks $154 million for this important program for next year and an additional $19 million for the current year in the FY 2000 supplemental appropriation.
$255 Million To Make America's Vehicles More Efficient: Our Partnership for a New Generation of Vehicles is on track to deliver attractive, affordable cars that get up to three times the fuel efficiency of today's cars. A car that gets twice the fuel economy of today's comparable vehicle is the equivalent of cutting the price of gas in half for the American driver. A typical consumer would save more than $300 a year in fuel costs and SUV owners would save more than $400 a year. By 2010, DOE plans to develop and commercialize fuel efficiency and alternative-fuel technologies that reduce oil consumption by nearly 700,000 barrels per day. By 2020, these technologies will reduce oil consumption by nearly 1.5 million barrels per day. Our budget seeks $255 million for PNGV.
$410 Million To Promote Clean Renewable Energy: The President's FY01 budget proposes $410 million for DOE efforts to develop domestic sources of renewable energy, including wind, photovoltaics and geothermal energy. In addition, the President's Bioenergy Initiative will help us create new fuels for our cars that will reduce U.S. oil consumption, create new income opportunities in rural America, and meet environmental challenges, such as climate change.