October 26, 2007

Dear Chairman Bingaman, Senator Domenici, Chairman Dingell, and Representative Barton:

On behalf of the nation’s governors, we applaud your efforts to enact an energy bill that enhances our energy security and promotes clean, secure, and affordable energy to fuel America’s future.

Governors believe that the pathway to greater energy security should include all resources available to each state. Governors support the development of a diverse and flexible portfolio of fuel sources, including increased domestic production from renewable and alternative sources and from conventional sources like coal, oil, and natural gas. In addition, Governors support an energy policy that adheres to federal and state environmental standards and requirements. We are pleased that many of our priorities are reflected in the energy legislation scheduled for conference.

We are particularly encouraged by three aspects of the conference bills that will supplement ongoing state efforts to promote clean, affordable energy. First, the governors applaud your efforts to expand the renewable fuels standard to require blenders to use alternative fuels. We look forward to working with you to ensure that the fuels standard is technologically neutral to allow all clean fuels equal access to the marketplace and maintains current considerations for the non-contiguous states and territories.

Second, governors support expanding energy efficiency and conservation incentives to slow the growth of future energy needs, minimize ratepayer costs, and lessen potential environmental impacts. We appreciate your focus on such measures that represent low-cost, environmentally safe, and sustainable options to respond to our nation’s energy needs. The governors support a requirement that the U.S. Department of Transportation increase the Corporate Average Fuel Economy (CAFE) standards to the maximum feasible level in light of a range of factors, including safety, cost, U.S. employment, economic impact, and fuel savings. In addition, the federal government should establish tax incentives and increase funding for research, development, and deployment to speed domestic commercialization of advanced hybrid, clean diesel, electric, flex-fuel, and hydrogen technologies.

Third, we support accelerating the development of carbon capture, storage, and sequestration technologies. It is essential to support all available options to expand commercial scale programs, including tax credits and other financial incentives. Congress should also consider ways to address other barriers hindering the development and deployment of carbon capture, storage, and sequestration technologies, such as the legal uncertainties and potential liability issues.

While we are encouraged by both the House and Senate’s effort to promote clean, affordable energy, we are concerned about several provisions in both bills that fail to preserve states’ traditional authority over the protection of the environment and the judicious management of their energy and other natural resources. For example, the energy efficiency title fails to include language that would preserve states’ right to adopt energy efficiency appliance standards if the Department of Energy fails to act. Similarly, states should retain their authority to enact stricter energy efficiency guidelines if the federal government fails to update the standards as required.

Governors are also concerned about the absence of any requirements for state coordination in the energy and environmental block grant program. As drafted, one city could devote millions to installing E85 gas pumps while its neighbor invests in natural gas vehicles. Neither approach will be successful without broader coordination. To avoid the inefficient use of scarce resources, we suggest that the funds be coordinated through the states, with a required pass through to local governments. States are in a better position to encourage local coordination and to leverage state and local resources to achieve common objectives.

With regards to issues related to a national renewable portfolio standard, NGA does not have an official position because of the variation in the availability of renewable resources across states.

Energy security is one of the most important issues facing our nation today. We applaud your efforts to enact an energy policy to address these needs and we look forward to working with you to ensure that our citizens have a constant supply of safe, clean, affordable energy.

Sincerely,