An “energy policy with affordability at its core” which recognizes the value of domestic fossil fuels, has the potential to deliver long-term economic growth, Chevron Corp. CEO John Watson said Wednesday at the Peterson Institute for International Economics in Washington, DC.

By recognizing the value of domestic fossil fuels, the United States can achieve “long-term economic, energy and environmental security,” he said. The CEO’s comments partly were directed at Congress, where a deficit-reduction supercommittee is debating ways to lower the federal deficit, which may include taking away tax incentives now enjoyed by the energy industry, and expanding access to public lands and water.

“I believe the United States has an opportunity — in fact, a great responsibility — to create an energy policy with affordability at its core. We need a refreshed policy approach that recognizes the value of fossil fuels and allows a market-driven transition to affordable substitutes over time. And I would suggest that only an energy policy with affordability as its central goal has the potential to deliver long-term economic, energy and environmental security.”

However, Watson said the United States has failed to act.

“In many respects, our energy policy is moving in the opposite direction. Instead of promoting abundant and affordable energy, our policies are creating a framework that risks making energy more scarce and expensive,” he said. “Over the past 30 years, while some people have been promoting the theory of peak oil, we’ve seen the world’s proved reserves of oil and natural gas increase roughly 130%, to 2.5 trillion barrels.

“Our resource base keeps expanding because our technology keeps improving. The industry has been relentless in exploring for new resources. In just the last several years we’ve developed deepwater and shale resources that we couldn’t have imagined 10 years ago. And we’re continuing to make major new discoveries. Because of the utility and abundance of fossil fuels, you’d think that our country would have a set of clear and long-term policies to encourage their responsible development and affordability.

“That is not the case today. Our energy policy is rife with contradictions.”

The Chevron chief admitted that there are “some positive signs on access. But, by and large, U.S. policy approaches access to resources by exception, not by rule. Is there something we know that countries like Australia, Canada, Norway and Brazil do not?..The rest of the world is competing vigorously to find and secure long-term supplies of energy, in all forms. So should we.”

Without a change in U.S. energy policy, the United States “will continue to be marginalized in the global competition for energy and find ourselves in even less control of our energy destiny than we already are. We need a fundamental reorientation of energy policy that puts economic objectives and economic security at its core. We need policy that moves from limiting energy development, which is largely our approach today, to enabling it.”

Enabling development doesn’t mean the industry thinks regulatory oversight should be abdicated, said Watson. “On the contrary, our industry is working diligently with the federal and state governments to enhance the regulatory oversight in deepwater and shale gas development.” However, “regulatory overreach” and litigation roadblocks have prevented access to U.S. energy resources.

“It is tempting to target our industry,” said Watson. “We report large earnings. But we also make large investments.” Other U.S. firms, he noted, also make high profits but at smaller effective tax rates.

It’s not just natural gas and oil that Watson is pushing for. In addition to wind, solar and nuclear alternatives, promising energy technologies are on the drawing board — but they present major challenges.

“Getting to commercial scale remains a fundamental hurdle for most renewable energy,” he noted. For instance, wind and solar power require huge swaths of land and without subsidies, they can’t compete with fossil fuels. “It’s critical that we continue investing in research and development of alternative energy sources,” but “we should be focused on those that can be cost-competitive — without subsidies — at commercial scale.”

Renewable energy standards require utilities to generate a set percentage of their electricity from alternative sources. But “trying to force them through regulation or administrative fiat just distorts markets, squanders capital and adds to costs.”

The 12-member congressional supercommittee, which has been asked to identify by Thanksgiving at least $1.2 trillion in savings over 10 years, should explore “appropriate, thorough but rapid” permitting to drill for gas and oil, said Watson. With more access producers can help grow the economy and help to shrink the deficit.

Some Democrats have called for the supercommittee’s six Democrats and six Republicans to repeal the energy industry’s tax breaks, but the industry argues that other industries enjoy many of the same breaks, like the manufacturing tax credit.

“In the oil industry we don’t need particular incentives, we need access,” said Watson. “We need permitting that enforces good standards but is done on a timely basis…We can create jobs, we can add revenue. There’s a great growth opportunity. That’s what I tell leaders when I visit on [Capitol] Hill and that’s what I hope will be a part of the supercommittee’s work.”

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