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Issue Position: The Richards Plan for Energy Independence

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The Richards Plan for Energy Independence

High gasoline prices continue to serve as a clear reminder that our nation needs a real strategy for energy independence and diversity. Our dependence on oil from the Middle East and elsewhere defies common sense. The United States now imports over 60 percent of the over 20 million barrels of oil that we use daily. If no turn toward energy independence takes place, our percentage of foreign oil is projected to rise above 70% by 2025. Yet Washington has been unwilling and now still appears too divided to act on this as well as many other crucial fronts.

Jody Richards strongly believes that the fifty states can no longer wait on Washington. He also knows that Kentucky is well positioned to lead our nation's turn toward energy independence. That is why he has been pushing a series of legislative steps as Speaker of the State House to establish Kentucky's leadership status in this arena. At the same time he knows that Kentucky cannot realize its full potential on the energy independence front or anywhere else unless our state has the kind of innovative gubernatorial leadership now lacking in that office. His administration will be committed to transforming Kentucky into the leading state in the nation for energy independence.

Jody Richards understands that Kentucky is uniquely positioned to combine its natural resources and new technologies into an abundance of new 21st century domestic energy. For example, Kentucky already ranks third in the country for coal production and is estimated to have more than 250 years of coal reserves at current levels of production. The University of Kentucky's Center for Applied Energy Research, moreover, is one of the nation's research leaders in innovative "gasification" processes that result in new "clean coal."

Kentucky is also in the top third of states in corn and soybean production. Those two farm products are prime resources for the production of such promising biofuels as ethanol. Speaker Richards helped push through funding for Kentucky's first biomass plant. Our state now has ethanol and biodiesel plants that are on schedule to produce 62 million gallons of biofuel annually. The UK Center has been working closely with a number of Kentucky industries on biofuel innovation. Energy research in biofuel and other new energy options is also occurring at such other higher education institutions as Western Kentucky University and private laboratories across the state.

Jody Richards knows that no "silver bullet" exists for energy independence and that a diverse portfolio of domestic energy sources must be developed. He has been working closely with legislative allies on building a solid step-by-step approach in the legislature toward a comprehensive strategy. Moreover, as Kentucky's next Governor, Jody Richards will be dedicated to making Kentucky the leading state in the nation for energy independence.

Laying the Foundation for Energy Independence in the Legislature

Last year under Speaker Richards' leadership, the General Assembly passed the landmark Kentucky Energy Security National Leadership Act. Sponsored by Majority Leader Rocky Adkins, the legislation created the Kentucky Office of Energy Policy (OEP) and charged the OEP with the goal of devising a strategy for catapulting Kentucky into national leadership status on the domestic energy front. The OEP was authorized, among other things, to aggressively pursue federal research funding, start identifying suitable locations throughout the state for new energy facilities, and new incentive measures for energy development.

This year Jody Richards has pushed successor legislation through the House that moves our state's energy independence agenda significantly forward. Again sponsored by Representative Adkins, this year's legislation (HB 5) is designed to move Kentucky ahead on the alternative energy as well as energy-efficiency fronts. Its major elements do the following:

* Extend the state's coal tax-credit incentive to the fuel range of alternative and renewable fuel facilities from biofuels to hydrogen, wind and solar power.

* Provide a tax exemption for tangible personal property used to build, repair, renovate, or upgrade alternative fuel and renewable energy facilities.

* Refunds for sales and use tax paid on energy-efficiency machinery.

* Directs state government to pursue the goal of converting at least half its fleet to alternative energy vehicles.

* Instructs the Finance and Administration Cabinet to enhance the use of energy-efficient state buildings and establish benchmarks for energy savings procedures throughout state government.

Taking the Next Steps for Energy Independence as Governor

Jody Richards' election as our next Governor will serve as a mandate for transforming Kentucky into the national leader among states for energy independence. Governor Richards' first budget will feature a set of major new concrete steps to take Kentucky to a new level in this effort.

The Richards budget will include any unfinished business from this year's HB 5 if the Republican-controlled Senate's parliamentary game-playing prevents passage of the legislation. In addition, the first Richards budget will include the following new steps:

1. Small Business Entrepreneurial Fund for Energy Independence

Kentucky's establishment of the Small Business Entrepreneurial Fund for Energy Independence will serve as a logical complement to HB 5's extension of the coal tax-credit incentive to alternative and renewable energy facilities.

The energy-facility tax credits in HB 5 will mainly go to bigger and more established firms which can use credits to offset tax liability. Many smaller and start-up enterprises, on the other hand, do not yet have tax liability and are still sustaining losses as they build up and invest for the future.

The best policy research emphasizes that effective economic development strategies must include incentives for both bigger established firms as well as smaller entrepreneurial firms. While larger firms have the capacity to take on larger projects, smaller entrepreneurial firms will often make more of the innovative breakthroughs. Governor Richard's development of a Small Business Entrepreneurial Fund will provide Kentucky with the needed other half to have a full-sized economic incentive strategy.

The Fund will be designed to provide initially up to a maximum of $12 million annually in grants and low-interest loans to start-ups and other smaller businesses in Kentucky that are pursuing innovations for greater energy independence. The scope of the Fund's financial support will cover the same diversity of energy areas as found in HB 5.

Other states are aggressively moving to support entrepreneurial activities related to energy independence. As Kentucky's next Governor, Jody Richards will make sure that Kentucky is a leader in this arena.

2. Expanding Alternative Energy Facilities and R&D in Kentucky

Last year's Energy Security National Leadership Act and this year's HB 5 directed the Office of Energy Policy (OEP) to take a series of specific steps in assisting the development of alternative energy industries. The OEP, for example, is authorized to fund preliminary environmental and other feasibility assessments at possible locations for new alternative energy facilities. The OEP is also authorized to provide financial assistance to innovative university and business technology demonstration projects eligible to receive additional monies from the recently-passed federal energy legislation.

To support such OEP activities, the state has provided $7 million in funding over the past two years. Governor Richards' first budget will triple funding to $21 million over the biennium. Such expanded support will expedite and serve as a strong incentive for the development of alternative energy facilities and industries throughout Kentucky. Governor Richards' larger goal is to turn Kentucky into a major hub for alternative energy R&D activity and establish it as a prime candidate for the siting of a top federal research center.

3. Developing "Kentucky Patriot" Biofueling Stations

Jody Richards understands the chicken-and-egg problem surrounding the use of such alternative automobile biofuels as ethanol. Despite some growing popularity, the appeal of new bio-friendly vehicles is limited by the concern of motorists about finding bio-friendly stations on the road. At the same time, despite its growing status as a wise investment for the future, station owners are often financially hard pressed to increase their capacity and provide alternative bio-fueling at their pumps. As a result, major automakers remain concerned about making larger investments in manufacturing and marketing more bio-fueled vehicles.

Jody Richards believes that our state government is well positioned to bridge this bio-fueling gap. In his first budget as Governor, he will provide funding for a new initiative consisting initially of $10 million in grants and tax credits to establish bio-fueling alternative pumps throughout Kentucky. Stations interested in providing either "E-85" (85 percent ethanol, 15 percent gasoline) or "B-20" (20 percent biodiesel, 80 percent diesel) will be eligible under the Richards initiative.

Governor Richards' ultimate goal will be to assure Kentuckians and other drivers that they will be able to "fill up" their bio-fueled vehicles throughout our state. He plans to designate and promote all such outlets as "Kentucky Patriot" stations. The state will thereby highlight to drivers where they can fill up to strike blows for domestically-produced energy and against continued dependence on foreign oil.

Other states in our region are moving to develop bio-fueling station capacities on major transportation routes. Thus Jody Richards can envision bio-fueling connections on roads throughout our whole region. And as such regional connections increase, major automakers will see the economic reason to produce more bio-friendly vehicles. Jody Richards understands that jumpstarting bio-fueling alternatives is a win-win situation for Kentucky's and the rest of the nation's economy.

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