* U.S. still has 'excessive reliance on oil'-report
* Producing more helps, but also needs to slash use
* Government needs to spur electric, natgas vehicles
* Caution warranted for natgas export decision
By Roberta Rampton
WASHINGTON, Dec 3 A surprising U.S. energy
production windfall puts the country at risk of ignoring the
urgent need to transform its transportation sector to depend
less on oil and more on electricity and natural gas, a
high-profile group of chief executives and retired military
brass warned on Monday.
No matter how much oil is produced domestically, the U.S.
economy is vulnerable to the risk of global price shocks caused
by unrest or production cuts in the Middle East, they said.
"We caution that the situation has not fundamentally
changed, and that it would be dangerous to allow a false sense
of security to result in complacency and inaction," the
nonpartisan Energy Security Leadership Council said in a report
The recommendations come as Washington searches for ways to
boost revenues and cut spending to address the massive U.S. debt
without hurting the economy, which continues to bump along at a
low rate of growth.
Against that backdrop, the energy sector has been a rare
bright spot, boosting jobs, giving new life to the manufacturing
sector and contributing to government coffers.
Production surges have been so strong that the United States
is on a path to overtake Saudi Arabia as the world's top oil
producer by 2017, and will be close to self-sufficient in energy
by 2035, the International Energy Agency forecast earlier this
But the council warned that because of its "excessive
reliance on oil," U.S. energy independence is "meaningless from
a practical standpoint" because oil prices are determined
globally. That means the United States could struggle to
increase economic growth with regular oil price spikes.
The council is led by retired General P.X. Kelley, former
Marine Corps Commandant, and Frederick Smith, chief executive of
Courier delivery giant FedEx Corp whose business is
highly sensitive to transportation costs.
They are to discuss their recommendations at a public event
on Monday with Gene Sperling, a top White House economic policy
advisor and a player in current fiscal talks, as well as
Republican U.S. Senator Roy Blunt of Missouri.
The council urged the administration and lawmakers to take
steps to spur more energy production, including revising the
five-year offshore drilling plan, and overhauling the
bureaucracy for permits for major energy projects - drilling,
renewables, transmission lines and pipelines.
"Today, regulation is too often an opaque process that
serves to dissuade private sector investment through practically
unlimited delay," the council said.
It recommended that the White House Office of Information
and Regulatory Affairs be responsible for overseeing permits for
major energy projects, establishing a 30-month total timeline
for federal reviews of projects.
Currently, projects can be held up for years in an
interagency process before the government makes a decision.
Backers of the Keystone XL oil pipeline, for example, first
applied for a government permit in 2008, and still await a
UNFORESEEN EFFECTS OF ENERGY EXPORTS
But the council said a cautious approach is warranted for a
tricky decision which could come next year on whether the United
States will allow more exports of liquefied natural gas (LNG).
More LNG exports could make domestic natural gas prices
higher or volatile, but at the same time could improve the U.S.
trade balance and strengthen the dollar, it said.
Expanded U.S. LNG exports would tend to displace exports and
lower prices for Russia and Algeria, which count on export
revenues. That could contribute to instability in those
countries, the council said.
"The decision that policymakers make on the question of LNG
exports will have very significant - though not always clear -
impacts on the U.S. economy, our strategic interests, and the
overall geopolitical landscape," the council said, noting it
plans to release a full analysis of the issue in mid-2013.
The council praised new fuel economy standards finalized in
August by the Obama administration as "the most important
progress on energy security in decades" because they will slash
But it said the government needs more investment in research
to reduce the cost of electric and natural gas vehicles, and
must provide incentives for building refueling infrastructure to
make consumers more comfortable buying them.
The Obama administration plowed $2 billion into grants for
battery makers in its first term, but the industry has faltered
because of weak demand, and Republicans have panned the
government's loans and grants for "clean energy" as wasteful.
"Policy needs to be reoriented away from an approach that
has thus far largely emphasized supply-side subsidization
through grants and loans to individual companies," the council