American Geological Institute

Government Affairs Program SPECIAL UPDATE


Energy Policy Heats Up

(5-11-98)


This update was originally sent out as an e-mail message to AGI's member societies

IN A NUTSHELL: In recent weeks, legislation has been enacted to stop the sale of oil from the Strategic Petroleum Reserve and to halt the Minerals Management Service from finalizing and implementing a rule on oil and gas royalty valuation. Secretary of Energy Pena pushes Congress on a Caspian Sea pipeline even as his successor is being lined up. A Senate bill is introduced to block implementation of Kyoto climate change accords even as the European Union and Japan ratify the treaty, and AGI sponsors a climate change forum at AAPG Annual Convention in Salt Lake City. Finally, nuclear waste legislation may have finally found a veto-proof compromise.

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It has been said that interest in energy policy is directly proportional to the price of gasoline. Except for the related debate over global climate change, energy policy has been off political radar screens for a considerable time. But some recent activity on a number of fronts may suggest that historic lows in the cost of oil, with its associated impact on oil-producing regions of the country, can change the equation. This update reports on a number of energy-related issues that are receiving the attention of Congress and the President.

Sale of Oil From Strategic Petroleum Reserve Stopped
On May 1st, the President signed an emergency supplemental appropriations bill for fiscal year 1998 to cover the cost of recent disaster-relief efforts. Included in the bill was a provision, sponsored by Senate Energy and Natural Resources Committee chair Frank Murkowski (R-AK) and supported by the President, to halt the sale of oil -- mandated in an earlier spending bill -- from the Strategic Petroleum Reserve. Because the oil was purchased when prices were around $30 a barrel, the government stood to lose over $500 million by selling. Moreover, flooding the market with government oil would depress prices much to the dismay of small producers already strapped by the current situation. More on the SPR sales.

Implementation of MMS Rule on Oil Valuation Blocked
In contrast to the comity over halting the SPR sale, President Clinton expressed his displeasure over the inclusion of a provision in the supplemental appropriations bill that delays the Minerals Management Service from implementing a rule that would change the way that the agency calculates royalties for oil and gas on public lands. Senator Kay Bailey Hutchison (R-TX) convinced a House-Senate conference committee to add the provision prohibiting the use of federal funds in the current fiscal year for the rule, which would base royalties on world market price rather than the current system of internal industry valuation. Legislation has also been introduced to reverse the reversal and implement the rule, but it has little hope of passage. The MMS rule ha s been opposed by the Independent Petroleum Association of America and others in the industry who favor taking royalties in-kind, thus eliminating the price question. Several pieces of legislation to implement such an approach are currently pending. More information on royalty-in-kind.

Pena Seeks Repeal of Azeri Aid Ban, Promotes Caspian Pipeline
At a hearing of the House International Relations Committee, Energy Secretary Federico Pena pressed for the repeal of a statute prohibiting any US government assistance to Azerbaijan. He testified that the Freedom Support Act of 1992 is an impediment to negotiations with Azerbaijan and neighboring countries over the location of a pipeline connecting oilfields in the Caspian Sea region to a deep-water port. The US supports a pipeline to the Mediterranean rather than a shorter one through Iran. Although Pena emphasized that the US government would not directly fund such a pipeline, the repeal would improve both US leverage in the matter and the environment for US companies. The ban on US aid to Azerbaijan is the result of a still-smoldering conflict between Azerbaijan and neighboring Armenia, both former Soviet republics. More on the hearing, including Pena's testimony.

Richardson Is Probable Successor to Pena as Energy Secretary
Since Pena announced his plans to step down in June, rumors have been swirling about a possible successor. Deputy Energy Secretary Betsy Moler, who was expected to get the job a year ago, was the early favorite, but according to news reports the job has now been offered to United Nations Ambassador Bill Richardson. No formal announcement has been made, and both Moler and former CIA Director John Deutch (now back at MIT) may still be in the running. A former congressman from New Mexico, Richardson would add to the state's dominance over DOE matters. Senator Pete Domenici (R-NM) already controls the agency's pursestrings as chair of both the authorizing and appropriations subcommittees in the Senate, and Senator Jeff Bingaman (D-NM) is likely to be the rank ing Democrat on the Energy and Natural Resources Committee when Sen. Dale Bumpers (D-AR) retires later this year.

Ashcroft Bill Blocks Kyoto Implementation As EU and Japan Ratify Climate Treaty
While Congress continues to debate the merits of the Kyoto protocol, both the European Union and Japan have now ratified the treaty. President Clinton has yet to send the treaty to the Senate for ratification and is unlikely to do so this year. But many in Congress believe that the President's budget request includes a number of initiatives that represent a de facto implementation of the treaty's emission-reduction requirements. On April 30th, Sen. John Ashcroft (R-MO) introduced S. 2019, legislation prohibiting the use of federal funds to implement the treaty until it has been ratified by the Senate. A companion bill, H.R. 3807, was introduced in the House by Rep. Joe Knollenberg (R-MI) on May 7th. The Administration argues that the budgetary initiatives pre-date the treaty and simply represent good policy meant to achieve improvements in energy efficiency and other Administration goals.

AGI Sponsors Climate Change Forum at AAPG Convention
For those going to the AAPG Annual Convention in Salt Lake City, AGI is sponsoring a forum on climate change this Sunday, May 17th, at noon. Climatologists and oil company representatives on both sides of the global warming debate will present their positions and discuss the issues. Participants include Richard Lindzen from MIT, Michael McCracken from the U.S. Global Change Research Program, David Jenkins from British Petroleum and Skip Mick from Marathon Oil. The event is moderated by Lee Siegel, science editor of The Salt Lake Tribune.

Can Nuclear Waste Legislation Pass?
For several years, Congress has been trying to enact legislation to establish an interim disposal site for spent fuel from civilian reactors and other high-level nuclear waste adjacent to the proposed underground repository site at Yucca Mountain in Nevada. Last April, the Senate passed S. 104, its version of the Nuclear Waste Policy Act of 1997 by a 65-34 margin, two votes shy of the two-thirds supermajority needed to override a promised presidential veto. The House passed its version, H.R. 1270, by a 307-120 margin last fall. Since then, efforts have continued behind the scenes to find two more votes in the Senate. Prospects improved recently when the Nuclear Energy Institute, representing the nuclear utility industry, wrote to the bill's sponsor, Senator Murkowski, urging him to incorporate amendments proposed by Sen. Jeff Bingaman (D-NM) that could bring in the votes. The amendments would make siting of the interim storage facility dependent on the suitability finding for the permanent repository. Up until now, industry has been reluctant to couple the two projects, fearing that continued delays in characterization of the repository would hamper the opening of an interim facility. But even with NEI's support, Murkowski is reluctant to add the Bingaman provisions, suggesting that they could lose as many votes as they gain. Although the bill is slated to go to the Senate floor for another vote this week, its fate is still far from certain.


Sources: Energy & Environment Weekly Bulletin; Washington Post; Library of Congress

Contributed by David Applegate and Kasey Shewey, AGI Government Affairs

Please send any comments or requests for information to the AGI Government Affairs Program at govt@agiweb.org.

Last updated May 11, 1998


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