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Office of the Assistant Secretary
May 7, 2008
Chris Paolino, (202) 208-6416

Kempthorne, Bodman Send Energy Letter to Speaker Pelosi

WASHINGTON, D.C. - Secretary of the Interior Dirk Kempthorne and Secretary of Energy Samuel Bodman on Monday, May 5, 2008, sent the attached energy-related letter to Speaker of the House Nancy Pelosi.


The Honorable Nancy Pelosi
Speaker of the House of Representatives
Washington, D.C. 205 15

Dear Madam Speaker:

Thank you for your letter to President Bush of April 22, 2008. The Bush Administration shares
your concerns regarding the effects of high fuel prices on individual Americans, especially low
income families who devote a greater share of their income to energy expenses. The President
has repeatedly addressed the broader issue of our degree of national dependence on oil, and what
this dependence means to our prosperity and our security. We were pleased to work with you to
enact the Energy Independence and Security Act of 2007, increasing fuel economy standards,
and mandating increased use of alternative fuels. As you are well aware, this legislation
followed the President's call to establish even more aggressive alternative fuel standards than
were ultimately enacted by the Congress.

The price of fuel, like that of any commodity, is governed by the fundamental laws of supply and
demand. President Bush has called for several actions to address both the supply side and the
demand side of the oil market. Increasing fuel economy while encouraging greater use of
alternative fuels, as required by the recent bipartisan legislation, will help dampen the effects
from oil demand pressures that drive up prices. Increasing domestic energy production to help
dampen the effects from supply pressures is equally important.

The President again calls upon Congress to take legislative action to expand domestic
production. According to the Department of the Interior, of the 31 billion barrels of oil on
Federal onshore lands, 92 percent is subject to some restriction with 62 percent not accessible at
all. In addition, 85 percent of the Outer Continental Shelf in the lower 48 States, which is likely
to be energy rich, is off limits to exploration and production. Providing more access to Outer
Continental Shelf resources, opening a small portion of the Arctic National Wildlife Refuge, and
streamlining the siting and expansion of oil refineries, would each help to relieve Americans
from further upward pressure on the prices they pay for fuel. We call upon Congress to pass
legislation to accomplish these goals.

The Administration will continue to oppose Congressional initiatives that would increase the
price that consumers pay at the pumps, including recent proposals to increase the gas tax. Earlier
this month, the President laid out his principles for addressing climate change. Among those
principles was the Administration's opposition to any measure that would sharply increase
gasoline prices and the cost of energy. Unfortunately, most of the legislative proposals in
Congress do not meet this test. To the contrary, several of these provisions would have
counterproductive effects.

The Administration strongly opposes and has threatened to veto H.R. 2264, the "NOPEC" Bill.
This Bill would result in a targeting of foreign direct investment in the United States as a source
of damage awards and would likely spur retaliatory action against American interests in those
countries and lead to a reduction in oil available to United States refiners. The net effect would
be to harm United States interests abroad, discourage investment in the United States economy,
potentially limit the availability of gasoline, and possibly to further increase the price of fuel.

The Administration strongly opposes and has threatened to veto so called "price gouging"
legislation as well. Such legislation would do nothing to alleviate the supply/demand balance
that drives fuel prices in our competitive markets. Such provisions could result in gasoline price
controls and in some cases bring back long gas lines reminiscent of the 1970s. Gasoline price
controls are an old -and failed- policy choice that would exacerbate shortages and increase fuel
hoarding after natural disasters, denying fuel to people when they need it most. Moreover, it is
already illegal for companies to collude to raise gas prices or for a single firm with market power
to engage in anti-competitive behavior to exploit consumers. The Department of Justice and the
Federal Trade Commission remain vigilant in monitoring the markets and stand ready to
prosecute any such behavior.

The Administration also strongly opposes and has threatened to veto legislation that would use
the Federal tax code to single out specific industries for punitive treatment. Repealing the
manufacturing deduction specifically for certain oil and gas companies is a targeted tax increase
that would put United States firms at a disadvantage relative to their foreign competitors.
Changes to the foreign tax credit rules related to foreign oil and gas extraction income and
foreign oil-related income would also disadvantage United States-based companies by reducing
their ability to compete for investments in foreign energy-related projects. When Americans are
suffering from high gas prices, Congress needs to heed economic realities rather than political
temptations; singling out and denying a specific industry the tax advantages broadly provided to
others can only result in still higher prices for their products. In short, this is no time to drive the
price of fuel still higher by imposing a tax increase on its production.

We appreciate the bipartisan process by which the energy legislation of 2007 was enacted, and
believe that a similar bipartisan approach should guide any future legislative efforts.

Secretary of the Interior

Samuel W. Bodman
Secretary of Energy

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