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Energy Policy Overview (11-10-04)

Energy policy involves many issues of interest to the geoscience community, including resource development on public lands, environmental regulations, climate change, nuclear waste disposal, and research related to coal, oil, gas, geothermal, and hydroelectric power.  The inability of the previous 107th Congress to pass comprehensive energy legislation has created a stong impetus for the 108th Congress to act swiftly. The House is expected to vote this spring, and Senate action could occur this summer. General background information on the issues surrounding the development of a national energy policy is available from several Congressional Research Service (CRS) reports available from the National Library for the Environment. Because a great deal of recent activity has centered around natural gas policy, a separate review of gas-related issues is also available on this site.

NEW: For a quick run-down of the Senate and House energy bills, view this comparison chart that highlights the bills' major provisions and the differences between the two.

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The International Energy Agency (IEA) reported in October that world energy demand is projected to rise 60% by 2030. In their "World Energy Outlook 2004" report, the IEA urged worldwide government action to reduce unsustainable energy demand. In a Greenwire article, IEA Executive Director Claude Mandil said that he believed in market forces. However, he elaborated, "the challenge is so huge that we need governments to guide and provide the right market frameworks" to make more energy-efficient products available to consumers and to encourage further investment in energy production." Mandil said the rate of oil discoveries has fallen in recent years due to a lack of investment and the tumultuous political climates of some oil producing regions. "The problem is not a problem of resources, but of incentives to invest in places where the resources are," he said. (11/10/04)

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Environmental Protection Agency (EPA) officials announced last week that vapor from the gasoline additive MTBE also poses a threat to groundwater supplies. Recent efforts have focused on monitoring and preventing liquid leaks in underground tanks but have largely neglected the threat of vapor leaks, possibly underscoring recent efforts to improve liquid leak detection and prevention. The warning came during a groundwater contamination conference in Maryland, which has experienced significant MTBE contamination in the last month. Maryland Governor Bob Ehrlich (R) has proposed new rules to prevent leaks in roughly 13,000 underground fuel storage tanks across the state, where over 200 wells have been found containing MTBE. Eight of these wells had MTBE concentrations 1,300 times higher than acceptable levels, causing widespread concern of water contamination throughout Maryland. (8/25/04) On January 8, 2003, Secretary of the Interior Gale Norton renewed the federal right of way agreement for the Trans-Alaskan Pipeline System (TAPS). In a press release, Norton noted that "The 30-year renewal follows completion of a comprehensive Environmental Impact Statement (EIS) analyzing renewal options. This action provides a high degree of certainty that the TAPS will continue to operate safely for many years to come." Alaska renewed the state right-of-way agreement in November 2002. These right-of-way agreements will allow TAPS and the supporting infrastructure to continue to pump more than a million barrels of oil per day from the North Slope. Construction of TAPS began is 1975, was completed two years later, and recently survived a 7.9 magnitude Denali Fault Earthquake. (1/10/03)

On January 16th, the Department of the Interior (DOI) released a study of the oil and natural gas resources in several key western basins: Paradox-San Juan, Unita-Piceance, Greater Green River, Powder River, and Montana Thrust. The report, entitled Scientific Inventory of Onshore Federal Lands' Oil and Gas Resources and Reverses and the Extent and Nature of Restrictions or Impediments to Their Development, was prepared by DOI's Bureau of Land Management (BLM) and U.S. Geological Survey (USGS), Department of Agriculture's U.S. Forest Service (USFS), and the Department of Energy's Office of Fossil Energy (FE) and Energy Information Administration (EIA). In the press release, Assistant Secretary for Land and Minerals Management Rebecca Watson noted that the study "is a planning tool for the Congress that identifies areas of high and low oil and gas potential and the nature of constraints to the development of those resources in the basins in the interior West." The study, which was requested as a part of the 2000 Energy Policy and Conservation Act, also looked at resources and reserves that are federally owned under privately owned land. It does not make any policy recommendations, instead, as Watson noted, it is a "planning tool" for Congress as it debates a national energy policy. (1/17/03)

In February, the Senate Energy and Natural Resources Committee held a series of hearings addressing oil and natural gas prices, supply, and potential on federal lands to prepare for creating comprehensive energy legislation. The testimony from industry and the administration focused on new sources and how they affect prices and supply in the present and the future. Witnesses emphasized that because the bulk of the world's oil reserves are not located within the U.S., it is essential to create a globally diverse oil supply in order to protect our energy security. On the other hand, large sources of natural gas do occur domestically, providing more control over supply and prices than with oil. Witnesses testified that the recently elevated natural gas prices are due to an increase in demand without an increase in supply. While short-term volatility will likely persist, they suggested increasing the natural gas supply by providing greater accessibility to federal lands, such as Alaska's Arctic National Wildlife Refuse and parts of the Rocky Mountains, and providing support for new pipelines to aid long-term stability. Energy production on federal lands, however, continues to arouse debate with conflicting viewpoints on the quantity of oil and gas they contain, and the amount of land that is actually off-limits to exploration. Additional information from the hearings can be found at AGI's Energy Hearings site. (3/11/03)

On February 28th, the House Energy and Commerce Committee unveiled a draft of comprehensive energy legislation, including provisions for clean coal technology, automobile efficiency, and an increase to the Strategic Petroleum Reserve. Described by E&E Daily as "bare bones," the draft does not include more controversial provisions such as drilling in Alaska's Arctic National Wildlife Refuge (ANWR), ethanol mandates, and renewable portfolio standards. It is expected, however, that those and many other provisions would be added later as the bill makes its way to the floor combined with legislation produced by other committees -- particularly the House Resources, Science, and Ways and Means Committees. The draft's oil and gas related provisions include permanent authorization of the Strategic Petroleum Reserve, enabling legislation for a natural gas pipeline from Alaska's North Slope to the state's southern coast, and one calling for an EPA study of its regulation of hydraulic fracturing associated with coalbed methane extraction. Energy legislation is on a fast track and could make it to the House floor for a vote later this spring. (3/14/02)

On March 19, 2003, the House Energy and Air Quality Subcommittee marked-up and passed Subcommittee Chairman Joe Barton's (R-TX) draft energy bill. Democrats attempted to insert a number of amendments, including an amendment by Rep. Henry Waxman (D-CA) to reduce the country's demand for oil by 2.5% over the next seven years, and an amendment by Rep. John Dingell (D-MI) to revert the hydropower title to language agreed upon in conference last year that would respect local environmental conditions. Both of the amendments, along with a number of others that sought to increase environmental protection, failed. Barton argued against most of the amendments, often stating that they mischaracterized the situation, did not include enough details, or were not comprehensive in their scope. The draft bill will soon be considered by the full committee. (3/21/03)

On April 11, 2003, the omnibus energy bill, H.R. 6, passed the House 247-175. The bill is a combination of four separate bills from the House Energy and Commerce, Ways and Means, Resources, and Science Committees containing provisions on drilling in the Arctic National Wildlife Refuge, electricity restructuring, oil and natural gas royalty relief, and research and development for President Bush's Hydrogen Initiative, FreedomCar program, energy efficiency, clean-coal technology, and nuclear programs. Rep. Lois Capps's (D-CA) amendment to remove the provision calling for a complete inventory of oil and natural gas resources in areas offshore of Alaska, California, Florida, Oregon, Washington, and the East Coast passed by voice vote. Reps. Sherwood Boehlert's (R-NY) and Edward Markey's (D-MA) amendment to increase the Corporate Average Fuel Economy standards to 30 miles per gallon was defeated 162-268. The bill now waits for the Senate to finish its version of the bill before heading to a conference committee. Sen. Pete Domenici's (R-NM) draft bill spent the past week in mark-up in the Senate Energy and Natural Resources Committee. Titles on hydrogen, renewable energy, nuclear power, and oil and gas were approved, but the climate change provision was removed until the floor debate, which is expected to occur in May. (4/11/03)

On April 30th, Senate Energy and Natural Resources Committee Chairman Pete Domenici (R-NM) finally achieved passage of his draft energy bill. Sen. Mary Landrieu (D-LA) joined all of the committee's Republicans in a 13-10 vote that cleared the way for consideration by the full Senate. Although major changes occurred in the electricity deregulation portion of the bill, the most controversial issues were omitted from consideration in order to move the legislation out of committee. The omitted issues -- including drilling in the Arctic National Wildlife Refuge, reformulated gasoline reform, and climate change -- are likely to reappear on the Senate floor. Sen. Ron Wyden (D-OR) attempted to address the climate change issue during the committee mark-up by introducing an amendment on carbon sequestration, but withdrew it on the urging of Domenici. According to E&EDaily, Wyden criticized the committee for "ducking" climate change in favor of quick committee passage and vowed to re-propose the amendment on the Senate floor. Like its House counterpart, the Senate bill calls for a substantial increase in funding for Department of Energy's (DOE) Office of Science, up to $5.4 billion in FY 2008 from the current $3.3 billion. The bill would also authorize significant changes in the organizational management of DOE's science programs. For additional commentary on the current congressional efforts to pass energy legislation, please see the Political Scene column in the May 2003 issue of Geotimes. (5/5/03)

As reported in an AGI special update, the Senate spent the final week of July debating energy legislation. After much bickering over the 400 proposed amendments and seven major issues, it looked like the Senate might leave town for the August recess without finishing the energy debate. But Majority Leader Bill Frist (R-TN) and Minority Leader Tom Daschle (D-SD) brokered a deal under which this year's bill, S. 14, was traded for the bill that passed the Senate last year during the previous Congress (S. 517) when Democrats controlled the chamber. This compromise passed 84-14, setting the stage for a conference committee of House and Senate members to iron out the differences between this bill and the bill that the House passed, H.R. 6, on April 11th. The Bush administration, which made energy policy a priority from the outset, is eager to see the conference committee complete its work this fall. With a number of key issues affecting geoscientists, the energy debate continues to offer an opportunity to provide input at a crucial time. For more on the outcome of the Senate debate, see an AGI special web update at http://www.agiweb.org/gap/legis108/energy_senatefinal.html. AGI's web site also provides information about how last year's Senate bill stacks up to this year's House bill at http://www.agiweb.org/gap/legis108/energy_bill_comparison.html. (8/4/03)

In response to the current natural gas issues, House Speaker Dennis Hastert (R-IL) created the Task Force for Affordable Natural Gas, which is composed of 18 Republicans from the Energy and Commerce Committee and Resources Committee. The intended purpose of the Task Force is to report to the Speaker on the causes of the gas supply shortage and possible short-term solutions. On July 21, 2003, the Task Force held it first public meeting. Task Force Co-Chair Billy Tauzin (R-LA) said the Task Force will not dictate solutions, define balances, or make policy. Their only concern is to recommend possible solutions. He asked the members to assign one member of their staff to work with the committee staff on the problem. By August 1st, Tauzin said, the staffs should have defined background information, the current state of the gas market, gas trends, and policy. Over the August recess, the Task Force will hold meetings to discuss the issues. By mid-September, the Task Force should finalize their recommendations, which are due to the Speaker by September 30. Tauzin said he did not agree with analysts, such as Alan Greenspan, who say there are no short-term solutions to the natural gas shortage. Co-Chair Richard Pombo (R-CA) said that we cannot afford to say there are no short-term solutions. (7/28/03)

Appointment of House conferees for a joint House-Senate energy conference was delayed even as selection of their senatorial counterparts went ahead as planned on September 4, 2003. The House hold-up resulted after House Energy and Commerce Committee ranking member John Dingell (D-MI) introduced a "motion to instruct" conferees to address electric energy reliability in a stand-alone bill independent of the larger energy package that has been an administration priority. The motion, which later failed, highlighted a partisan dispute over the Democrats' wish to separate power grid stability from the energy bill, and the Republicans' goal of combining the two.

After the August 14th blackout affecting 50 million people, the issue of grid stability would likely have enough prominence for Republicans to push their whole energy bill through Congress. Dingell opposes this, explaining that the popular electricity measure could be passed quickly, enabling Congress to "kill the snake closest to us," rather than bogging it down in the bulky energy bill. On the Senate side, Minority Leader Tom Daschle (D-SD), has said that he will also consider separating the issues, especially because Republicans in the Senate wish to include Arctic oil drilling in the larger energy bill. Along a similar vein, the White House signaled on September 5, 2003 that it would like to insert its controversial Clear Skies Initiative into the same bill. Many Democrats have balked at this, favoring instead more stringent anti-pollution legislation. Some Republicans also oppose this addendum, concerned that Democratic resistance to one item will kill the entire energy bill. More information on the Clear Skies Initiative is available at http://www.agiweb.org/gap/legis108/cleanair.html.

The House-Senate Conference Committee includes: Senators Pete Domenici (R-NM), Don Nickles (R-OK), Larry Craig (R-ID), Ben Nighthorse Campbell (R-CO), Craig Thomas (R-WY), Charles Grassley (R-IO), Trent Lott (R-MS), Jeff Bingaman (D-NM), Byron Dorgan (D-ND), Bob Graham (D-FL), Ron Wyden (D-OR), Tim Johnson (D-SD), Max Baucus (D-MT), Representatives Billy Tauzin (R-LA), Michael Bilirakis (R-FL), Joe Barton (R-TX), Fred Upton (R-MI), Cliff Stearns (R-FL), Paul Gillmor (R-PA), John Shimkus (R-IL), John Dingell (D-MI), Henry Waxman (D-CA), Ed Markey (D-MA), Rick Boucher (D-VA), Bobby Rush (D-IL), Bob Goodlatte (R-VA), Frank Lucas (R-OK), Charles Stenholm (D-TX), Duncan Hunter (R-CA), Curt Weldon (R-PA), Ike Skelton (D-MO), Buck McKeon (R-CA), Sam Johnson (R-TX), George Miller (D-CA), Michael Oxley (R-OH), Bob Ney (R-OH), Maxine Waters (D-CA), Susan Davis (D-CA), Timothy Murphy (R-PA), John Tierney (D-MA), James Sensenbrenner (R-WI), Lamar Smith (R-TX), John Conyers (D-MI), Richard Pombo (R-CA), Barbara Cubin (R-WY), Nick Rahall (D-WV), Ron Kind (D-WI), Sherwood Boehlert (R-NY), Judy Biggert (R-IL), Ralph Hall (D-TX), Jerry Costello (D-IL), Nick Lampson (D-TX), Don Young (R-AK), Thomas Petri (R-WI), James Oberstar (D-MN), William Thomas (R-CA), Jim McCrery (R-LA), and Charles Rangel (D-NY).

House and Senate conferees were scheduled to meet with the President on the afternoon of September 10th, but those plans were scuttled due to the scheduling of votes on the Senate floor. Plans for a staff briefing were also cancelled. It appears that serious negotiations will not begin taking place until next week at the earliest.(9/11/03)

Energy Secretary Spencer Abraham sent a Statement of Administration Policy (SAP) to the House and Senate conferees on September 10th. A SAP is issued by the White House or a member of the Cabinet to advise Congress about the administration's position on a piece of legislation -- usually a contentious one. The seven-page SAP issued by Secretary Abraham details strong support for provisions in both the House and Senate bills. Specifically, the administration supports voluntary Regional Transmission Organizations (RTOs), the establishment of mandatory, enforceable reliability rules, a repeal of the Public Utility Holding Company Act of 1935 and reforming the Public Utility Regulatory Policies Act of 1978. The SAP also called for development and deployment of new technology to modernize the transmission grid.

E & E News reported that more controversially, the SAP said the administration supports the House bill's "last-resort" federal siting authority for high-priority transmission lines and the coordination and streamlining of transmission permitting activities across federal lands. The administration also supports House provisions requiring FERC to establish incentive-based rates to promote investment in new and upgraded transmission facilities.

Secretary Abraham's letter to the conferees detailed administration opposition to national renewable portfolio standards on power generation, saying these are best left to the states. It supports the Senate's renewable fuels provisions, and is pleased that both houses authorize funding for the Hydrogen Fuel Initiative and FreedomCAR programs, though the SAP detailed opposition to provisions in both bills that set "unrealistic targets and timetables" for hydrogen vehicle sales or use of hydrogen fuel. Also opposed are the Senate's fuel cell purchase requirements.

In other areas of the SAP, the Bush Administration:

  • supports both houses' efforts to increase production of alternative and traditional energy resources in the Outer Continental Shelf, federal onshore lands and tribal lands;
  • supports the House bill's authorization to open the Arctic National Wildlife Refuge to oil and gas exploration;
  • wants to work with the conference to establish nuclear energy authorization levels that are consistent with its own budget proposals;
  • supports both houses' Corporate Average Fuel Economy standards policies, though it opposes the amendments requiring multi-year National Highway Traffic Safety Administration (NHTSA) rulemakings for both passenger cars and light trucks without also providing statutory authority for NHTSA to consider the full range of of CAFE reform options;
  • supports the Alaska natural gas pipeline, though it opposes the Senate's price floor tax credit plan and in its place would back an "appropriately structured" 80 percent loan guarantee, accelerated depreciation and enhanced oil recovery tax credit to support pipeline construction;
    opposes any climate change provisions, such as those in the Senate bill;
  • opposes new authorizations for research and development authorizations for appropriations "that far exceed any contemplated levels of spending in future years," and is concerned about the "excessive" number of and total authorizations for loan programs, which are "inconsistent with administration policy for risk-sharing, loan terms and program administration;"
  • is concerned that tax incentives in both bills contain total revenue loss that exceed administration policy. (9/11/03)

Senate Democrats scored an apparent victory in August when the Senate Republican leaders, eager to recess, replaced their version of comprehensive energy legislation with a version passed last year when Democrats held the majority. But that victory was short-lived. Since the first and only meeting of the House-Senate conference committee that is hammering out a final bill, Democrats have largely been excluded from the process. As drafts have been vetted by staff on both sides of the aisle, Republicans have taken control of the conference and negotiated each provision that will ultimately be presented to the full House and Senate. Since senators will spend October 6 - 10 in their districts followed by House members spending Columbus Day week with their constituents back home, the conference committee is not expected to resume work on the energy bill until October 20th at the earliest. Here is how things are beginning to shape up.

  • The difficult ethanol debate centers on how the energy bill will address methyl tertiary butyl ether (MTBE). The issues are a federal MTBE ban and liability protection for MTBE producers, both of which are important to petroleum-state representatives led by House Majority Leader Tom DeLay (R-TX). These issues have tied the conference in knots, even splitting the GOP caucus along regional lines. Adding to the turmoil is the rumor that some Republicans want an October 1, 2003, start date for the MTBE liability waiver, rather than simply using the energy bill's date of enactment, according to a source familiar with negotiations. The language would mean that September 30th was the last day any lawsuit could have been filed against an MTBE producer using a defective product claim.
  • Senate Finance Committee Chairman Charles Grassley (R-IA) and House Ways and Means Committee Chairman Bill Thomas (R-CA) must work out differences between the House energy bill's $18.1 billion in tax breaks and the Senate energy bill's $14.5 billion in tax breaks. The latest reports suggest that these negotiations have not yet begun.
    The electricity provisions of the bill are being honed to do two things: delay the Federal Energy Regulatory Commission's contentious proposal on standard wholesale power market design and mandatory regional transmission organizations, while preserving the commission's ability to continue crafting voluntary market structures and policies that would help promote reliability, particularly in the wake of the August 14th blackout.
  • Language authorizing an Outer Continental Shelf oil and gas inventory and opening the Arctic National Wildlife Refuge to oil drilling will most likely survive into the final conference report. At the same time, renewable portfolio standards and climate change provisions favored by some Democrats and environmentalists will not be included, according to E & E Daily and Greenwire. All of these topics are virtually guaranteed to provoke filibusters in the Senate.
  • In a victory for oil companies, draft energy conference report language prohibits the U.S. EPA from regulating a controversial oil and gas extraction method under the Safe Drinking Water Act. The language, which House and Senate conferees have already released as part of the oil and gas title to the energy bill, refines "underground injection" under the Safe Drinking Water Act to exclude hydraulic fracturing from the definition of the term. EPA would not be permitted to bar the drilling technique for "operations related to oil and gas production activities," the draft states. The provision, which was in the House bill, also excludes natural gas storage from the definition of underground injection. According to E & E Daily, this underground injection language overturns a 2001 decision by the 11th Circuit Court of Appeals requiring EPA to regulate hydraulic fracturing -- the process of injecting high-pressure water and other fluids into oil reservoirs to enhance permeability and flow in order to extract more oil and natural gas -- as a drinking water contaminant. (10/2/03)

See the AGI Natural Gas Policy update for information on three newly released reports. The National Research Council (NRC) has released a workshop summary entitled "U.S. Natural Gas Demand, Supply, and Technology: Looking Toward the Future." On September 30th, the House Republican Task Force for Affordable Natural Gas released its final report on the causes of and short-term solutions to the natural gas shortage. On September 25th, Secretary of Energy Spencer Abraham was on hand when the National Petroleum Council released its report, "Balancing Natural Gas Policy -- Fueling the Demands of a Growing Economy." For links and additional information, visit www.agiweb.org/gap/legis108/naturalgas.html. (10/17/03)

House and Senate leaders earlier sought to intervene in the conference to iron out differences between the two chambers' versions of energy legislation. Vice President Cheney has also been involved with the negotiations. On October 30th, President Bush made one of his strongest statements to date while on a political fundraising swing through Ohio. Energy and Environment Daily reported that his message to Congress was "resolve your differences. Understand that if you're interested in people finding a job, we need an energy policy. Get the bill done." Unfortunately, that's easier said than done. In negotiations like these, it helps when the principal negotiators have a good relationship with each other. But Senate Finance Committee Chairman Charles Grassley (R-IA) and House Ways and Means Committee Chairman Bill Thomas (R-CA), who oversee negotiations on tax-related provisions, have a "prickly" relationship at best. As negotiations have progressed, relations between their respective staffs have become strained as well, further delaying action on this legislation. Adding to the tension, Thomas and Grassley are also negotiating the high-stakes Medicare prescription drug reform bill.

Both of these bills need to be approved before Congress goes home for the holidays. Doing so would secure two legislative wins for President Bush, and these are politically hot-button issues that nobody wants to address in an election year. Energy conferee and former Majority Leader of the Senate, Trent Lott, was quoted earlier this week as saying that House and Senate leaders should get aggressive about getting the two sides to cooperate. According to Lott, that is best done when the leaders "open the bazaar and say 'What do you need?'" While not substantively linked, rumors have been circulating throughout Washington that some last-minute horse-trading may be done between these two bills and the remaining appropriations bills to wrap up Congress's work for the year. (11/5/03)

As reported in an AGI special update, the House-Senate conference committee completed work on a 1,200-page compromise on November 17th. The final bill quickly passed the House the following day and awaits Senate action. President Bush has already indicated that he will sign the measure if presented to him. Details of the compromise were released on November 14th after 71 days of closed-door negotiations that excluded Democrats but exposed internal rifts among House and Senate Republicans. The final bill does not reflect a comprehensive national energy policy -- indeed it is in some sense more notable for what it does not include than what it does -- but its many provisions address a wide variety of energy-related issues important to the many constituencies that senators and representatives must serve. And a number of the provisions will affect geoscientists. (11/20/03)

On November 21st, an uneasy alliance of northeastern Republicans and non-Midwest Democrats mustered enough votes to prevent Senate Majority Leader Bill Frist (R-TN) from cutting off debate on the final energy bill. The 57-40 vote fell three shy of the 60-vote supermajority equired to obtain cloture and thus end a threatened filibuster. (To be precise, Frist changed his vote to oppose cloture so that -- under Senate rules -- he could bring it up again, so bill proponents only need two more votes.) As reported by E&E Daily, the bill "fell under the weight of a $31.1 billion price tag and controversial provisions giving producers of the fuel additive methyl tertiary butyl ether (MTBE) protection from defective product liability lawsuits." Frist has called for another vote on Tuesday. In the interim, bill sponsors may seek to provide concessions in a separate omnibus appropriations bill to get the remaining votes before senators head home for Thanksgiving. (11/21/03)

Following President Bush's State of the Union address on January 20th wherein he only briefly mentioned energy policy, there was rampant speculation about the fate of the energy bill. On January 21st Energy Undersecretary Robert Card tried to calm fears by publicly stating that the Bush Administration remains committed to its energy agenda. Card also said not to expect any new Statements of Administrative Policy regarding energy from the White House.

Senate Energy and Natural Resources Committee Chairman Pete Domenici (R-N.M.) is working to get the votes needed to pass the energy bill in the Senate. According to Greenwire, Domenici said "The one option I absolutely will not consider is breaking this bill up. It's the start of the year, and we're only two votes down." However, on January 22nd, Senators Hillary Rodham Clinton (D-N.Y.), Maria Cantwell (D-Wash.), Russ Feingold (D-Wis.) and Jim Jeffords (I-Vt.) introduced an electric reliability bill that takes the reliability provisions out of the energy bill and sets them up in a separate, stand-alone bill. Domenici still insists that it is too early to break up the bill and will fight all efforts to do so. (1/23/04)

At the weekly Republican caucus meeting on February 10th, Senate Energy and Natural Resources Committee Chairman Pete Domenici (R-N.M.) failed to get agreement on how to take a slimmed-down energy bill to the Senate floor. The energy bill was stripped of the controversial fuel oxygenate liability protection language and about $17 billion in tax incentives. Dominici introduced the slimmer, trimmer bill as an Energy Omnibus Bill, S. 2095, on February 12th.

Domenici wanted to attach the bill as an amendment to the highway funding reauthorization bill, which is currently on the Senate floor. Many Republicans had strong feelings about the energy bill and the highway bill being kept separate, mostly for the sake of the highway bill. E&E Daily quoted Senator Kit Bond (R-Mo) as saying, "I know the White House wants an energy bill, [but] we don't want to leave a land mine in the road for the highway bill." After a conversation with Senate Environment and Public Works Committee Chairman James Inhofe (R-Okla.), Domenici said that he would not offer his energy bill as an amendment to Inhofe's highway bill.

Not only is the energy bill having trouble making it to the Senate floor, but the Bush Administration still does not agree with its reduced price tag. The Bush Administration would like to spend $8 billion on the bill, not the $14 billion that is now being proposed.

In addition, the National Commission on Energy Policy is working on a bipartisan national energy strategy that will analyze key energy sectors and identify ways to overcome analytical obstacles that have slowed the progress the current energy bill. The 18-member commission was formed in 2002 and includes authors of President Bush's energy plan and President Clinton's climate change policy. The commission will bypass election year politics and issue a final report and policy recommendations next January. (2/13/04)

On Tuesday, May 11th, the Senate approved the corporate tax bill, S. 1637, by a vote of 92-5. The bill was originally proposed to repeal the Foreign Services Corporation/Extraterritorial Income Exclusion Act, which incited large tariffs from Europe due to its illegality under World Trade Organization policy. It provides $170 billion in corporate tax cuts over the next decade to compensate exporters for the loss FSC/ETI subsidies. A $14 billion energy tax incentive package was also included in the bill in an attempt to pass at least some portion of the comprehensive energy bill that has been stalled in the Senate. Within two days of Senate passage, cost estimates for the energy tax package rose to $18 billion largely due to a renewable energy tax credit. Proponents say that the cost of the bill is completely offset by plans for fraud reduction, ethanol excise tax provisions, and repeal of export subsidies. The official Joint Tax Committee score of the bill should be available soon.

Last-minute amendments to the bill are also expected to raise the total cost of the energy package. One amendment proposed by Sen. Don Nickles (R-OK) will accelerate depreciation of electricity transmission property to 15 years for property placed within the next two years. Senate Finance Committee Chairman Chuck Grassy (R-IA) added two amendments: one offering credits to larger ethanol-producing facilities who implement certain emissions control technology, and one relating to renewable energy use by the Tennessee Valley Authority.

Sen. John McCain (R-AZ) has been a vocal opponent of S. 1637, arguing that it "has grown into a $170 billion Christmas tree of goodies for every conceivable special interest." McCain proposed an amendment to strike out the energy tax portion of the bill, but it was rejected 13-85. Other efforts by Senators McCain and Kyl (R-AZ) to strip down the energy tax package were withdrawn before the Senate reached its final vote.

While many of the tax incentives and cuts benefit conventional energy suppliers, the 1.8-cent-per-kilowatt-hour renewable energy credit may help the United States become a larger force in the renewable technology market. However, some advocates of renewable energy claim that a tax incentive may not be enough to spur the industry's development, and that a renewable portfolio standard (RPS) should be implemented in the United States as it has been in some European countries. The 15 states that have independently adopted RPS policies account for 75 percent of renewable industry growth over the last decade, illustrating the potential effect of RPS. President Bush continues to advocate a voluntary approach to renewable development. (5/13/04)

The House Science Committee unanimously approved H.R. 3890, a bill to reauthorize $20 million a year for the Metals Program at the Department of Energy through 2009. The Metals Program provides funding and guidance for the development of energy efficiency technologies in the metals industry. It aims to reduce energy consumption and environmental impact such as greenhouse gas emissions of metals companies, while improving international competitiveness. The version of the bill that was introduced in subcommittee authorized only $10 million a year to the program, but its sponsor Rep. Melissa Hart (R-PA) succeeded in passing an amendment to double the funds before the full committee. The bill requires industry partners in the program to match 30 percent of the funding they receive and provide progress reports to Congress each year. The $20 million authorization may provide clout for increased Fiscal Year 2006 funding, although an amendment has been added to the bill to flatline funding for Fiscal Year 2005. The Bush administration requested $6.5 million for metals industry efficiency programs in next year's budget. The House Science Committee Republicans blocked an amendment to the bill funding energy efficiency projects in other sectors. They pointed out that such amendments could slow down the bill and that similar measures are included in other legislation. To see a summary of a May 2004 hearing on the Metals Program, click here. (6/18/04)

House Republicans introduced comprehensive energy legislation and other energy-related bills during "Energy Week" debates June 15th and 16th. Environment and Energy Daily reported that high gasoline prices and Democratic opposition to many energy-related bills were likely to serve as important contexts for the debates. The Republican sponsored Energy Week; however, was delayed due to the death of former President Reagan, postponing the debates one week. During this time, gas prices began to fall and the Bush Administration reported that prices were expected to fall throughout the summer. The bills were debated on the House floor under rules that prohibited amendments.

Energy and Commerce Committee Chairman Joe Barton (R-TX) introduced H.R. 4503, the House comprehensive energy bill, which passed with a 244-178 vote. This bill was a reintroduction of last year's energy conference report and included energy conservation, research and development, and energy supply diversification. Many Democrats were agitated that the bill was debated in the House once again, while Republicans focused on the increased domestic production and jobs the bill would provide. Additionally, Barton introduced H.R. 4517, which also passed. This bill will speed up the permitting process for the construction of new petroleum refinery facilities in areas of high unemployment, allowing the Department of Energy (DOE) to establish "refinery revitalization zones" in communities with an unemployment rate 20% above the national average and either a closed refinery or history of major industrial layoffs. Some opponents of the bill argued it would undermine parts of the Clean Air Act and would do little to solve the nation's short-term energy problems. Republican supporters and a spokesperson for the National Petrochemical and Refiners Association insisted that permits will only be granted to refineries who meet existing and future environmental regulations. They also pointed out that without refineries, the U.S. will be unable to move toward more demestic production.

House Resources Committee Chairman Richard Pombo (R-CA) also introduced several bills during Energy Week. One bill, H.R. 4513, passed 229-186. This bill will streamline the process of environmental impact assessments required under the National Environmental Policy Act (NEPA) for new renewable energy projects. It allows federal agencies to propose renewable energy projects without identifying more than one possible location for the project. Opponents argued that without alternative sites, the purpose of NEPA is ignored. H.R. 4515 also passed, which will provide energy companies incentives to produce natural gas from methane hydrate resources, which have been found to contain significantly more gas than all other conventional natural gas resources combined. Although the technology to exploit hydrate resources is not yet available, the bill provides incentives for companies to develop that technology and begin extraction by the year 2018.

Two bills did not make it out of the House. The hotly debated H.R. 4529 was removed from Floor consideration due to a lack of support. This bill called for some of the revenues from the Arctic National Wildlife Refuge (ANWR) oil and natural gas drilling to be used for the cleanup of abandoned coal mines and health benefits for coal miners. These two issues were linked in an effort to gain support from those who oppose ANWR energy exploration. However, the United Mine Workers of America, one of the groups expected to benefit from the bill, issued a letter to Congress June 15th opposing the bill. Another bill, H.R. 4545, failed to obtain the necessary two-thirds vote from the House. This bill, sponsored by House Majority Whip Roy Blunt (R-Mo.) and Paul Ryan (R-Wis.), would have lowered the price of gasoline blends, commonly known as "boutique fuels", and would allow the Environmental Protection Agency (EPA) to waive Clean Air Act fuel requirements for up to five days is there is a significant disruption in the fuel supply. (6/18/04)

The House of Representatives approved H.R. 4520, the corporate tax bill, on June 17th. The bill has been pushed forward with the purpose of repealing the Foreign Services Corporation/Extraterritorial Income Act (FSC/ETI), which has been declared illegal by the World Trade Organization and has incited tariffs from Europe. The Senate passed S.1637 in May for the same purpose, although its bill included a $19.4 billion energy tax package. For a discussion of S.1637, see the May 13th entry below. The House version of the FSC/ETI repeal does not include a major tax package, although it does include some specific provisions suspending duties on nuclear steam generators and nuclear reactor vessel heads. The House and the Senate will meet in conference to reconcile differences between the bills, with discussions likely focusing on energy tax incentives. (6/18/04)

A study released July 9th by the Cambridge Energy Research Associates concluded that natural gas prices will continue to rise in North America unless the oil and gas industry can resolve its shortage. The study predicted natural gas prices would rise to $6.62 per million BTU by 2007. New liquefied natural gas (LNG) terminals could help alleviate this problem by 2008 or 2009, but would require permits for LNG expansion to be streamlined and some regulations relaxed. Many LNG terminals are currently being planned and built, but the report emphasized that it would be necessary for Congress to take quick action to balance natural gas supply and demand. (7/12/04)

In late June the Environmental Protection Agency (EPA) released a report stating that there is little threat of pollution to underground drinking water sources due to the injection of hydraulic fracturing fluids in coalbed methane (CBM) wells. The report was issued partly in response to a court decision that declared the EPA was responsible for CBM issues under the Safe Drinking Water Act. As CBM production has increased in recent years, rising in 12 states from 1,252 billion cubic feet in 1996 to 1,353 trillion cubic feet in 2000, concern has grown over the possible consequences this practice could have on underground water supplies. The report examined roughly 200 studies and reviews done on 11 major coal basins, including the three largest: the Powder River Basin in Wyoming and Montana, the San Juan Basin in Colorado and New Mexico, and the Black Warrior Basin in Alabama. The process includes injecting a mixture of water and other fluids at high pressure into a well to crack the rocks, which increases the flow of oil and gas, making it possible to extract hydrocarbons that were previously inaccessible. Often diesel fuel is used as a fracturing fluid, which introduces benzene, toluene, ethylbenzene and xylenes into the ground and potentially into underground drinking water supplies. The largest CBM producers have agreed to voluntarily stop using diesel as a fracturing fluid, but asserted that most of the fluids injected biodegrade or remain stationary. Although the EPA was criticized for not conducting its own investigation, they upheld their finding that there is no strong link between hydraulic fracturing and groundwater contamination. They also agreed to conduct additional studies on the effects of hydraulic fracturing if necessary. (7/19/04)

Late on October 7th, Congress passed the corporate tax bill with a number of tax breaks for the energy industry. Although the bill's primary purpose was to eliminate the now 12% tariff on American goods in Europe from a WTO injunction against American trade policies, it carried along hundreds of coattail tax breaks and subsidies for a myriad of industries. E & E Daily reported, "The energy industry tax breaks range from extension of the wind and renewable energy production tax credit to tax incentives for the Alaska natural gas pipeline, as well as elimination of import duties for imported nuclear power plant parts, a tax credit for marginal oil and gas wells during times of low prices that otherwise would force them out of business, and a tax break for utilities that join transmission companies." Twenty-six oil companies would receive over $60 billion under the tax break, $22 billion and $10.5 billion of which would go to Exxon Mobil and Chevron Texaco respectively. No incentives were included to improve energy efficiency. According to Kara Rinaldi, director of policy for the Alliance to Save Energy, "Tax incentives for energy-efficient new homes and home improvements and for high-mileage hybrid vehicles would ease the pressure on tight energy supplies and on energy costs. Energy efficiency is the quickest, cleanest, cheapest way to help meet America's growing energy needs."

Renewable fuels incentives emerged as a winner in H.R. 4520, the corporate tax legislation passed on October 7th. Under the proposed "Volumetric Ethanol Excise Tax Credit" (VEETC) system, refiners who blend gasoline with ethanol would pay the 18.4 cents per gallon in gasoline excise taxes into the Highway Trust Fund (HTF), up from the current 13.2 cents per gallon they currently pay. However, they would then receive a 5.2 cents tax break, paid out of general revenues, resulting in more funding for the HTF.

Tax credits would also be in store for biodiesel technologies. Although biodiesel is not as popular as ethanol, its usage has skyrocketed in recent years; from 500,000 gallons per year in 1999 to 25 million gallons per year in 2003. Biodiesel has the advantage of being more environmentally friendly and easier to transport long distances compared with ethanol. Joe Jobe, Executive Director of the National Biodiesel Board, told Environment and Energy Daily that "tax credits for biodiesel are especially timely as refiners look to meet new low-sulfur fuel regulations beginning in 2006." Also in the bill, the biodiesel income tax credit would provide a 50 cent per gallon income tax credit for each gallon of biodiesel used or sold as fuel.

Missing from the final bill were tax credits for energy efficiency. Incentives for consumers who retrofit their homes with better insulation or more efficient windows and for developers who build energy efficient homes were removed in conference. Also missing from the bill were tax credits for consumers who purchase fuel-efficient cars and trucks, specifically a provision that would have raised the current $2,000 tax deduction for the purchase of a hybrid vehicle to $4,000. Environmental groups did applaud the closing of a tax loophole that encouraged small business owners to buy large sport utility vehicles. The allowable deduction for these vehicles was reduced from $100,000 to $25,000.

The authorizing language for the Alaska natural gas pipeline was attached to the FY05 Military Construction Appropriations bill just prior to the vote and Congress' adjournment for the election on October 11th. According to Environment and Energy Daily, the language includes "a ban on a northern route for the line that would bypass Alaska markets, provisions that allow Alaska to control in-state use of the gas to promote its use for heating or enhancement of a gas industry in Alaska, and a streamlined permitting and expedited court review process to speed construction and limit judicial or regulatory delays...The bill also includes $20 million for a worker job training program in Alaska, including $3 million for construction of a Fairbanks training facility." This language, which effectively provides all the necessary prerequisites for the $20 billion project to get underway, was welcomed by the Alaska congressional delegation and may help Senator Lisa Murkowski who is currently in the midst of a tough reelection campaign. (10/20/04)

Background

The president's National Energy Policy (NEP), which was released in May 2001, colored most of the energy debate on Capitol Hill last Congress. The NEP, which was assembled by a task force that included several members of the president's Cabinet and was headed by Vice President Dick Cheney, makes 105 recommendations of which 12 can be accomplished by executive order, another 73 can be accomplished by agency action, and the remaining 20 recommendations require congressional action.  According to an AGI special update a majority of the recommendations relate to infrastructure and international relationships. Shortly after the release of NEP, Congress began to hold hearings on the report's recommendations. The House acted quickly to craft legislation (H.R. 4), sponsored by Energy and Commerce Chairman Billy Tauzin (R-LA), that incorporated many of the NEP provisions. H.R. 4 included language to allow exploration in the Arctic National Wildlife Reserve (ANWR).  Despite the fact that opening ANWR was central to the president's plan, the H.R. 4 differs from what the NEP had envisioned due to an amendment introduced by Reps. John Sununu (R-NH; now senator) and Heather Wilson (R-NM).  Their amendment, which passed by a 228-201 vote, limits exploration activity to 2,000 of the 1.5 million acres of the coastal plain in the refuge. The House passed H.R. 4 on August 1, 2001, in a floor vote of 240-189.

Early in 2001, several bills were introduced as being national energy policies but few of them received much bipartisan attention. On February 27, 2001, Sen. Murkowski introduced his National Energy Security Act of 2001, (S.388 and S.389) with the stated aims to decrease the nation's reliance on foreign oil to 50% by 2011 through a suite of policy changes.  These bills contained a provision to open ANWR and several tax incentives for domestic oil and gas production. On March 22nd, then-Senate Minority Leader Tom Daschle (R-SD) and Sen. Jeff Bingaman (D-NM) introduced the Comprehensive and Balanced Energy Policy Act of 2001 (S.596 and S.597) as a counter-measure to the energy legislation introduced by Murkowski.  In the legislation, energy efficiency and emissions reductions are encouraged through tax incentives and regulations that reduce the input of greenhouse gases to the atmosphere. Neither of these bills moved very far in the Senate.

Senate response to the NEP was delayed first by the switch of Senator James Jeffords from Republican to independent that led to the Democrats taking control of the majority. At the end of 2001, the Democrats introduced another energy policy bill entitled the Energy Policy Act (S. 1766) that again emphasized efficiency, conservation, and the development of alternative and renewable energy resources. In hopes to restart the energy debate and to skip over the sticky committee revision, including the possibility of a pro-ANWR vote given the committee's make-up, the leadership added S. 1766 as an amendment to a small bill that was already pending on the floor: S. 517. S. 517 started life as a $30 million authorization of a national laboratory partnership program but became the vehicle for the massive, 530-page energy bill. After more than a month of consideration and hundreds of amendments, the Senate passed its energy legislation in an 88-11 vote. -- just to keep it interesting, the chamber inserted its energy policy legislation portion of S. 517 back into H.R. 4 as an amendment in the form of a substitute. This action paved the way for a House-Senate conference committee to work out a final bill.

Conference committee work began in Fall 2002 but failed to produce a final version before the 107th Congress ended in December 2002. Before breaking for the elections, the conference committee had worked out compromise language on hundreds of pages of bill text but had yet to find consensus on some of the largest issues -- such as the House provision to open the Arctic National Wildlife Refuge (ANWR) for oil and gas exploration and Senate provisions regarding climate change.

Most of the energy debate in the last Congress focused on crafting national energy policy legislation, but a few other energy-related bills also received some attention. The House Science Committee looked into several research and development bills, including H.R. 3929, the Energy Pipeline Research, Development, and Demonstration Act.  H.R. 3929, co-sponsored by Reps. Ralph M. Hall (D-TX) and Lamar Smith (R-TX), aimed to advance pipeline infrastructure research and development (R&D) and streamline the repair and recovery process after a potential pipeline failure.  The committee also drafted an energy bill (H.R. 2460) that was folded into the final House bill. The bill would authorize the appropriation of close to $18.5 billion over the next 8 year period to the Department of Energy (DOE), the Environmental Protection Agency (EPA), and the Office of Science and Technology Policy (OSTP) in the Executive Office of the President.  It would increase funding for conservation and renewable energy programs, fund the administration's 10-year $2 billion clean coal initiative, and fund a new research program on oil and gas drilling in ultra-deep waters.

Addition information on energy legislation in the 107th Congress is available at http://www.agiweb.org/gap/legis107/energy.html.

Sources: E&E Publishing, Greenwire, House of Representatives, Library of Congress, Senate, Washington Post, and hearing testimony.

Contributed by Emily Lehr Wallace, AGI Government Affairs Program; Margaret A. Baker, AGI Government Affairs Program; Charna Meth, 2003 AGI/AAPG Spring Semester Intern; Deric R. Learman, 2003 AGI/AIPG Summer Intern; Ashley M. Smith, 2003 AGI/AAPG Fall Semester Intern; Gayle Levy, 2004 AGI/AAPG Spring Semester Intern; Bridget Martin, 2004 AGI/AIPG Summer Intern; Ashlee Dere, 2004 AGI/AIPG Summer Intern and Dave Millar, 2004 AGI/AAPG Fall Semester Intern.

Background section includes material from AGI's Energy Policy Overview for 107th Congress.

Please send any comments or requests for information to AGI Government Affairs Program.

Last updated on November 10, 2004