18.1 Energy Priorities for Federal Action

America is confronted by transformative energy challenges, including extreme price volatility in the oil and natural gas markets, costly electricity reliability issues, ever-increasing dependence on oil from unstable foreign nations, and mounting environmental concerns, including global climate change. At the same time, the U.S. Energy Information Administration predicts America’s energy demand will increase about 15 percent by 2030 (roughly an average rate of 0.7 percent per year).

Responding to these energy challenges, Governors have pioneered a wide array of innovative energy policies in their states. For example, Governors have launched state energy efficiency programs and renewable electricity standards; initiated public-private partnerships to finance wind, solar, advanced clean coal, and natural gas projects; adopted alternative transportation fuels standards; promoted hybrids and plug-in hybrids; and created state and regional climate change initiatives.

Governors call on Congress to supplement state efforts by enacting new federal policies to promote clean, secure, and affordable energy to fuel America’s future. In doing so, Congress needs to balance goals for energy, the environment, and the economy. Policies must also be mindful of the needs of low-income individuals and families, especially in a time of escalating energy costs.

To achieve these objectives, Governors have identified the following specific policies as energy priorities for congressional action. The priorities are designed to enhance the nation’s energy security; reduce energy price volatility; promote clean, affordable energy technology; and encourage innovative solutions to enhance U.S. global competitiveness.

18.1.2 Enhancing Transportation Efficiency. To enhance America’s energy independence by reducing U.S. consumption of transportation fuels and advancing domestic production of oil and gas in an environmentally responsible manner, governors call on Congress to:

• Expand Production of Alternative Fuels. Continue to promote the expansion of alternative fuels from a variety of sources, including hydrogen, butanol, biodiesel, coal-to-liquids, crop-based and cellulosic ethanol, and methanol to the extent these fuels can contribute to an overall fuels and technology strategy that enhances energy security and reduces greenhouse gas emissions.
• Enhance Transportation Fuel Efficiency. 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. Implement increases in Corporate Average Fuel Economy (CAFE) standards in a timely and efficient manner.

18.1.3        Promoting Clean, Affordable Electricity.

• Enact a Permanent Extension of the Renewable Energy Tax Credits. Provide companies and their investors stability to plan and finance renewable energy projects by enacting the renewable energy production tax credit and expanding the investment tax credits for solar energy and fuel cells.
• Incentivize Carbon Capture and Sequestration Technologies. Accelerate the development of carbon capture and sequestration technologies. Among the options available are expanding research and development, commercial scale pilot programs, continuation of existing and creation of new tax credits and other financial incentives, and addressing potential liability from any damages directly resulting from commercial-scale carbon sequestration.
• Implement and Expand Federal Loan Guarantee Programs. Implement as expeditiously as possible the federal loan guarantee program for innovative technologies enacted as part of the Energy Policy Act of 2005.

18.1.4        Encouraging Technology and Innovative Solutions to Fuel America’s Future Economic Progress.

• Enhance Energy Efficiency and Conservation. Expanding incentives for energy efficiency and conservation will slow the growth of future energy needs, minimize ratepayer costs, and lessen potential environmental impacts. Among the options available are fully funding state energy offices, weatherization assistance programs, and residential and commercial energy code development, enforcement, and training; extending and expanding existing tax incentives; adopting more aggressive appliance energy standards in a timely manner; promoting the development of a smart grid; and expanding funding for strategic growth and development.
  
• Increase Funding to Promote Advanced Technologies. Provide more funds for research, development, and deployment of advanced energy technologies to promote energy diversity, and expand federal clean energy loan guarantees to bring to market projects such as cellulosic ethanol, coal gasification/liquification with carbon capture and sequestration and treatment, to the extent these approaches can contribute to an overall fuels and technology strategy that enhances energy security and reduces greenhouse gas emissions, and next-generation nuclear.

18.2 Federal-State Partnership

Within our federal system, the states have responsibilities over areas such as land use planning, environmental protection, public health and safety, and the conservation and management of natural resources. Successful development of national energy policies requires the active participation of state and local governments. This includes utilizing joint task forces and allowing for early state review and comment. Additionally, the administration of federal programs must be flexible to allow for regional differences and diversity among states.

18.3 Energy Conservation and Improved Energy Efficiency

Energy conservation and improved energy efficiency represent a first, low-cost, environmentally safe, and sustainable option to respond to our nation’s energy needs. The nation’s governors are dedicated to maximizing energy conservation and improved energy efficiency as a means to decrease our reliance on imported oil, reduce the environmental impacts of fossil fuels, promote energy efficiency to consumers, reduce the operating costs of businesses and industries while pursuing and expanding jobs that support energy and electricity initiatives, slow the depletion of our finite energy resources, and extend the time to transition to new and innovative energy technologies.

Governors believe that the federal government should maintain its central role in promoting funding and developing a wide-ranging program of energy conservation and improved energy efficiency that considers all sectors of the economy. Such a program should be cooperatively developed and implemented by the states and the federal government working together as full partners.

A properly constructed program must build on existing public and private elements, and must recognize the benefits and limitations of the marketplace in realizing the full potential for energy efficiency. To maximize energy efficiency and conservation efforts, Governors support:

• programs to increase consumer awareness;
• increased technology transfer opportunities;
• incentives to encourage greater investment in energy efficiency and conservation technologies;
• promotion and expansion of the U.S. Department of Energy (DOE) Energy Star programs;
• elimination of unnecessary regulatory barriers to achieving greater energy efficiency; and
• collaboration among stakeholder groups at all levels of government to promote carbon neutral new and renovated buildings as outlined by the American Institute of Architects.

18.3.1 Federal Government Actions. The federal government should show leadership by directing federally owned buildings to make use of economical energy conservation and efficiency programs, including introducing new efficiency techniques into federal buildings. Federal departments and agencies should take appropriate actions to reduce energy consumption at their facilities to the maximum extent that is cost-effective in the long term.

18.3.2 Appliance Standards. DOE should take steps to improve the energy efficiency of appliances by supporting expanding the scope of, and implementing as quickly as possible the appliance standards programs, setting higher standards, including regional standards, where technologically feasible and economically justified.

18.3.3 Transportation Efficiency. Governors recognize that meeting our national energy policy objectives in the transportation sector will require significant reductions in fuel consumption. Governors believe that the following policies can help reach this goal:

• requiring greater fuel efficiency, taking into consideration a range of factors, including safety, vehicle affordability, U.S. employment, economic impact, environmental impact, and fuel savings;
• providing better congestion management in high traffic areas;
• retiring older, less efficient vehicles from the market more quickly;
• promoting the development and introduction of, and the infrastructure for, advanced technology vehicles;
• creating and continuing federal tax incentives for the purchase of fuel-efficient hybrid, plug-in hybrid, and fuel-cell vehicles;
• supporting public/private partnerships for investment in research, development, and deployment of fuel efficiency technologies;
• improving the efficiency of mass transit systems; and
• promoting walkable communities and alternatives to single-occupancy vehicles.

18.3.4  Demand Response. The federal government should support state efforts to provide mechanisms for consumers to change their energy demands in response to price fluctuations. Incentives for retail consumers also should be provided to manage demand for peak load, conserve energy, and utilize energy-efficient technologies and tools in a manner consistent with state air quality planning. The federal government should encourage expansion and demonstration of smart grid technologies, including but not limited to installation and use of advanced meters, superconducting cables, and distributed electricity generation. Part of this action should include the development of national standards for the design and operation of “Smart Grid” devices including “advance metering infrastructure” (AMI) for efficient and effective installation across the nation.

18.3.5 Energy Conservation Education, Research, and Development. The federal government should promote energy conservation education programs and fund research into efficiency technologies. The development of energy-efficient technologies, including fuel-efficient engine and vehicle technologies, should be actively promoted. DOE and the U.S. Environmental Protection Agency (EPA) should be provided with adequate authority, staffing, and funding to undertake and support energy efficiency activities.

18.3.6 Energy Efficiency Programs. The federal government should provide funding and incentives for programs that help businesses, industries, schools, public agencies, and residences use energy-efficient building techniques, building materials, appliances, equipment, motors, combined heat and power, load management, and other systems readily available in today’s market. Public benefits funds and tax incentives are examples of how these programs may be accomplished. Additionally, the federal government, working with applicable professional engineering associations and the private sector, should support the establishment of industry standards that improve the energy efficiency of the items listed above.

18.3.7 State Energy Program. The federal government should fully fund the State Energy Program (SEP) since it is the primary state-federal cooperative program addressing energy efficiency and renewable energy projects in all sectors of the economy. State energy offices match federal dollars with state, local, and private funds to help homeowners, small businesses, schools, municipalities, and hospitals save energy and reduce energy costs.

18.3.8  Weatherization Assistance Program. Funding should be enhanced for the Weatherization Assistance Program (WAP), which helps low-income families, the elderly, and the disabled by improving the energy efficiency of low-income housing. Each year the program has exceeded its target, and has weatherized an average of 94,000 homes since 2000. Increased funding would allow WAP to expand quickly to reduce energy usage by approximately 25 percent in each assisted home. This represents savings that families can use to pay for other necessities, while reducing the nation’s energy demand by the equivalent of 15 million barrels of oil every year.

18.3.9 Developing a Trained Workforce. Congress should support the state development of curricula, certifications, and other means to develop a trained workforce with the ability to design, install, manufacture, and maintain advanced energy and energy efficiency technologies. Governors also urge the federal government to provide the states increased flexibility in developing and implementing programs to develop and support a trained energy workforce consistent with NGA policy ECW-1, Governors’ Principles to Ensure Workforce Excellence.

18.4 Improving Domestic Energy Production and Supply

The national security and economic well-being of this nation are predicated on securing economic and environmentally sustainable supplies of energy. To improve domestic energy production and energy supply, Governors support the following measures:

• exploration and development of the nation’s energy resources, to the extent they are competitive in energy markets and can be developed consistent with federal, state, and local environmental requirements;
• federal land management agency participation and coordination with states regarding decisions by federal agencies about energy exploration and production on federal lands, particularly regarding public lands withdrawals and lease stipulations; a state must have a primary role in decisionmaking regarding energy exploration and production on federal lands within its borders;
• continuation of the production of energy on federal lands and allowing states physical access to federal lands for state exploration and production projects that will promote the development of clean energy supplies;
• federal policies and incentives that encourage reliable, affordable, and clean energy supplies and that encourage capital investment, protect current production, and promote marginal production;
• federal policies that add stability to domestic energy production designed to provide greater long-term investment, not only in the infrastructure necessary to produce energy, but also in the human capital necessary for domestic energy production; and
• removal of barriers that discourage energy-efficient technologies, renewable energy resource development, and fuel diversity.

Consistent with these measures, there is a need to develop a diverse and flexible portfolio of fuel sources, including increased domestic production from renewable, alternative, and conventional sources. Further, federal and state environmental standards and requirements must be adhered to, in order to protect and improve the nation’s air, water, and public health.

18.4.1 Oil. Promote new domestic production through exploration and development of additional petroleum reserves and refining capacity, and promotion of enhanced oil recovery technologies. Promote new domestic production through exploration and development of additional petroleum reserves and refining capacity while encouraging the Federal agencies to recognize the role of governors in determining the future of petroleum development and projects within their state and in the Outer Continental Shelf adjacent to each state. Encourage the promotion of enhanced oil recovery technologies and understand the role that these technologies can play in carbon sequestration. Governors understand that oil will continue to play an important role as a transportation fuel and support development of air emission control technologies that limit carbon dioxide emissions.

18.4.2 Natural Gas. Encourage effective market-based measures that will support production of natural gas supplies and development of infrastructure in an environmentally sound manner, reduce impediments that limit such production, and promote policies against unfair transportation practices. Governors oppose preemption of traditional state and local authority over the siting and permitting of liquefied natural gas and other energy facilitiesand infrastructure. Governors support maintaining the right of states and communities to participate meaningfully in the planning and permitting process for inland, coastal, and off-shore facilities and infrastructure.

Governors also support research into potential new natural gas resources, such as natural gas hydrates. In addition, Governors endorse, pending completion of appropriate environmental reviews, a project to bring Alaska natural gas to market while ensuring full pipeline safety to protect the public and the environment.

18.4.3  Coal. Encourage technologies to utilize coal more cleanly and efficiently, including continued support for the Clean Coal Technology Program, in partnership with the private sector. The goal of such efforts should be to meet growing energy demand through domestic energy sources and reduce carbon dioxide emissions. In addition, governors support a wide variety of fossil energy research and development programs, including research development and demonstration of carbon capture, storage, and sequestration, and integrated gasification combined cycle, as well as research and development in clean coal usage. Governors also support federal initiatives that encourage stability for the domestic coal market. Such initiatives should be designed to improve capital investment and training for the skilled workforce necessary to promote efficient, safe, and environmentally sound mining methods.

18.4.4 Nuclear. Support efforts to resolve nuclear power issues at existing nuclear facilities. While nuclear power is a non carbon-emitting source of energy, Governors believe a safe solution to the nuclear waste issue must be achieved. Governors support adequate resources dedicated to research into promising technology options for waste reduction, cost-effective reprocessing safe storage, transportation, and disposal. Oversight of operations, licensing, and plant life considerations should also be addressed.

18.4.5 Renewables. Governors support federal incentives and continuing research and development of renewable energy sources including environmental and economic impacts, as well as support of technologies and policies that assist in integrating renewable energy into existing energy systems and infrastructure. Governors also support net metering that promotes distributed generation from all types of renewable resources.

18.4.6 Combined Heat and Power. Support the development and adoption of commercial applications of combined heat and power (CHP) through federal support of research, development, and demonstration projects. Also support federal policies, such as tax incentives, education, and outreach efforts, that promote CHP. Governors support increased funding to states to test various CHP equipment configurations and applications in support of federal CHP research and development priorities.

18.4.7 Alternative Transportation Fuels. Support additional federal tax incentives for the increased availability and affordability of alternative transportation fuels that contribute to the nation’s energy security, environmental responsibilities, and economic prosperity. Such fuels may include, but are not limited to, hydrogen, natural gas, propane, biodiesel, butanol, coal-to-liquids, electricity, liquefied petroleum gas, and gasoline mixtures that contain at least 85 percent ethanol (E-85), to the extent these fuels can contribute to an overall fuels and technology strategy that enhances energy security and reduces greenhouse gas emissions. Proposals to provide tax credits for the installation of fueling infrastructure would increase access to alternative fuels and keep prices competitive. Governors also support the continuation of dual-fuel vehicle credits established under the federal Alternative Motor Fuels Act that encourage auto manufacturers to produce vehicles that are capable of operating on alternative transportation fuels. Both of these incentives will ensure that the public has the ability to own and operate alternative fuel vehicles on alternative fuel. Governors support improved research and accelerated deployment of cellulosic ethanol.

18.4.8 Hydrogen. Support efforts to promote the development and use of hydrogen through fuel cell technologies and distributed generation. Federal assistance for research and development, removal of institutional barriers, development of unified standards, as well as production and use incentives, are warranted to promote hydrogen as a viable fuel source.

18.4.9 Hybrid Vehicles. Governors believe it is in the national interest to accelerate the deployment and use of hybrid, plug-in hybrid, battery storage, and other advanced vehicle technologies. Governors support greater federally sponsored research and development of these technologies to ensure rapid and broad adaption in domestic and global markets.

18.5 Improving Energy Transmission

Energy transmission and distribution networks must be adequate to move energy from the source to the consumer. Adequate resources must be invested and equal access for all suppliers must be protected. The transmission network of the United States must be upgraded and expanded. Governors support:

• recognition of state jurisdiction and state responsibility to ensure timely decisions on permitting, siting, and licensing of energy facilities, consistent with state and federal laws and health and safety requirements;
• encouragement of multistate cooperation in identifying the economics of, and need for, additional energy transmission and generation projects, including improved communication among the appropriate state and federal regulatory agencies, affected utility companies, and other affected parties;
• measures to encourage market-based infrastructure investment in transmission capacity, distributed generation, and combined heat and power;
• a requirement that the federal government cooperate with the states in the permitting, licensing, and construction of interstate and intrastate natural gas pipeline construction that allows for the expeditious development of natural gas infrastructure;
• full utilization of existing rights-of-way for energy transmission, consistent with state and federal laws and health and safety requirements, and coordinated environmental reviews; and
• incentives for the development and expansion of alternative fuels infrastructure, including pipelines and fueling stations.
  

Governors oppose preemption of traditional state and local authority over siting of electricity transmission networks, but Governors recognize that situations exist where better cooperation could improve competition and reliability. Governors are willing to engage in a dialogue with the federal government and industry to address these situations in a manner that does not intrude upon traditional state and local authority. States also encourage federal agencies to conduct reviews of facilities on federal lands.

18.5.1        Multi-State Entities. While states do not support federal preemption of state planning and siting authority, better cooperation between states can improve the reliability of interstate transmission networks. Governors recognize and support the efforts that states and regional governors associations are making to develop interstate mechanisms to work with regional electricity markets. Governors encourage Multi-State Entities (MSEs) to address transmission planning, certification of need, and siting of facilities. The MSEs also should be designed to seek regional solutions to issues that may fall under federal, state, or shared jurisdiction.

The Federal Energy Regulatory Commission (FERC) should in no way impede states’ authority to design the MSE in a manner most appropriate for the region. The federal government should provide financial assistance to state organizations to assist states in forming MSEs.

The MSE should be formed through a memorandum of understanding signed by Governors and, where appropriate, federal land management agencies, public power authorities, tribal authorities, and border countries. Any memorandum of understanding should recognize the authority of each state to approve or deny the construction or expansion of facilities and also should establish procedures to address conflicts and impasses among states and the other parties. The boundaries of the MSE should follow the footprints of regional electricity markets, as defined by the participating and affected states.

FERC should direct the regional transmission organization (RTO), Independent System Operators (ISO), independent transmission operators, or other transmission structures to comply with MSE guidelines and decisions regarding regional transmission construction and expansion plans, as well as other regional electricity issues subject to state jurisdiction, including determinations of resource adequacy levels. With respect to regional electricity issues subject to FERC jurisdiction, FERC should direct the RTO or CISOs to show deference to the judgment of the MSE and the regional state advisory committees.

18.6  Energy Emergency Preparedness

States have played a unique and important role in response to past energy crises and must maintain their ability to meet their responsibilities to mitigate the effects of future supply disruptions or shortages. It is imperative that states and the federal government develop strategies for responding to a broad variety of possible energy and electricity emergencies. Initial efforts should focus on strategies to prevent emergencies from occurring. Efforts to diversify our energy systems while maximizing our use of cost-effective domestic energy resources are part of this long-term effort. Additional efforts must focus on planning the response federal and state governments would take if an energy or electricity emergency occurs. Any federal actions must give consideration to existing state laws and programs, and state and local officials must be included in any federal planning process.

Voluntary conservation should be preferred to mandatory measures whenever possible. Any mandatory response should be phased in, beginning with the least stringent measures, with rationing reserved for only the most severe shortage.

To facilitate emergency preparedness, Governors support the following measures.

• There must be improved coordination among DOE, the Department of Homeland Security (DHS), the Department of Transportation (DOT), and the states in overseeing the security of the nation’s energy infrastructure.
• Integrated emergency response plans and procedures should be developed and well tested to ensure the coordination and flow of information among energy suppliers, consumers, and federal, state, and local governments.
• Fuel switching capability for large energy users to reduce dependence upon a single fuel source should be encouraged.
• A timely official review of the Strategic Petroleum Reserve (SPR) should be undertaken by Congress and the Administration to determine its ideal size. The Administration also should establish more specific criteria for determining when the SPR should be filled and tapped, taking into account regional reserves.
• Upon a Governor’s declaration of an energy or electricity emergency, non-exempt federal facilities within a state should be required to reduce their energy consumption by at least 10 percent from the previous year’s consumption, for the duration of the emergency.

18.7  Energy Infrastructure Security

Energy infrastructure—power plants, refineries, and transmission and distribution networks—share the vulnerability of all types of critical infrastructures to risks associated with threats from terrorist attacks and weapons of mass destruction. Managing the vulnerability of energy infrastructure is a necessary element of our national security, economic well-being, and environmental protection. Based on the level of vulnerability and risk, measures should be taken to detect, prevent, control, and manage the consequences of terrorism directed toward energy infrastructure. Governors also support the principles outlined in NGA policy EC-5, Homeland Security Policy, and NGA policy NR-20, Improved Pipeline Safety, and support the use of those principles in the implementation of this provision.

18.8 Electricity

18.8.1 State Role.

18.8.1.1 Retail Electricity Sales and Services. During the past nine decades, the state role in utility regulation has evolved to include jurisdiction over public benefits programs, renewable electricity standards, energy efficiency resource standards, universal service, reliability, and all functions and services related to the sale of retail electric energy. States should maintain their authority over the retail transmission, distribution, and sale of electric energy to consumers within a state. FERC should be guided by and give deference to states’ differentiation and identification of transmission facilities dedicated to retail service and facilities used in interstate commerce.

18.8.1.2  Public Benefits. States should maintain the authority to choose which public benefits programs to require, including those that support reliable and universal service, energy efficiency, renewable technologies, research and development, and low-income assistance. States also should:

• maintain their authority to impose nonbypassable charges to fund such programs that provide societal benefits;
• be allowed to develop a consistent renewable energy credit system and energy efficiency program using market mechanisms while making sure double counting does not occur; and
• be allowed to decide what mix of renewable technologies should be included in any renewable electricity standards package implemented in a state.

18.8.1.3  Disclosure. The system governing wholesale electricity markets, which FERC oversees, must enable states to ensure that consumers are getting the information they need to make informed decisions and to verify that suppliers are delivering the products they promise.

18.8.2 Federal Role.

18.8.2.1 Regulate Wholesale Electricity Sales. The federal government has the responsibility to regulate wholesale electricity sales and oversee the implementation of wholesale competition. Governors believe that these responsibilities are consistent with state authority over retail sales and services.

18.8.2.2  Reliability. The states’ views should be recognized and represented in both national and regional reliability organizations, and states should actively participate in the work performed by these organizations to review existing reliability criteria and design new ones. States should help to ensure that new reliability standards developed to meet competitive conditions balance reliability benefits with compliance costs.

18.8.3 Facilitate Operations of State Institutions. The U.S. Department of the Treasury should promptly take administrative action to permanently preserve the tax-exempt status of existing debt associated with the transmission systems of public power utilities that choose to participate in Independent System Operators and Regional Transmission Organizations.

Related Policies:
EC-5, Homeland Security Policy
ECW-1, Governors’ Principles to Ensure Workforce Excellence
NR-20, Improved Pipeline Safety

Time limited (effective Annual Meeting 2009–Annual Meeting 2011).
Adopted Annual Meeting 2001; revised Winter Meeting 2002, Winter Meeting 2003, Annual Meeting 2003, Annual Meeting 2005, Annual Meeting 2007, Annual Meeting 2008, and Annual Meeting 2009.