SPECIAL UPDATE: Senate Passes Energy Bill, Conference Is Next Stop

(Posted 5-8-02)

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

IN A NUTSHELL: On April 25th, the Senate voted 88-11 on its version of comprehensive energy legislation (H.R. 4), paving the way for a House-Senate conference to work out a final bill. The large number of supporting votes reflected a desire by both the Senate leadership and the White House to complete action. The administration and congressional Republicans hope to use the conference to restore key provisions found in the House version of H.R. 4, passed last August. The Senate named its conferees on May 1st, and House conferees are expected to be named soon. The conference is likely to last well into the summer and perhaps beyond. This update provides a snapshot of the treatment of various geoscience-related issues in the Senate- and House-passed bills. Unlike the House version of H.R. 4, the Senate version does not include a provision opening the Arctic National Wildlife Refuge (ANWR). Instead, the bill calls for opening a natural gas pipeline from the North Slope of Alaska to the state's southern coast. The Senate bill contains $15 billion worth of tax incentives for energy efficiency and increased domestic energy production, heavily weighted toward renewable energy sources. The House version includes $33 billion in tax breaks with a greater emphasis on incentives to increase production from more traditional energy sources.


Efforts to overhaul the nation's energy policy took a major step forward on April 25th with Senate passage of its version of a comprehensive energy bill. The current round of energy policymaking began early in the Bush administration with the release of Vice President Dick Cheney's task force report. Although most of the more than 100 recommendations in the president's National Energy Policy (http://www.whitehouse.gov/energy/) could be carried out by executive orders and federal agency actions, the most far-reaching recommendations required congressional action. Last August, the Republican-controlled House passed the Securing America's Future Energy Act of 2001 (H.R. 4) by a 240-189 vote. The bill was introduced by Rep. Billy Tauzin (R-LA), the Chairman of the House Energy and Commerce Committee, but in its final form was an amalgamation of four separate bills that passed through as many committees. The House-passed H.R. 4 reflects many of the recommendations of the Cheney report.

Republican efforts to push the president's policies through the Senate had been derailed three months earlier when Democrats took control of that chamber. Although a number of different bills were put forward last year, Senate debate over energy legislation did not progress much past committee hearings. In late December, Senate Majority Leader Tom Daschle (D-SD) and Energy and Natural Resources Committee Chairman Jeff Bingaman (D-NM) unveiled their plan (S. 1766), but action did not begin in earnest until this February.

In order to expedite debate and avoid a contentious fight in committee, Daschle took the unusual step of moving S. 1766 directly to the Senate floor by inserting it as an amendment to S. 517, a small bill that was already pending on the floor. Thus S. 517, which started life as a $30 million authorization of a national laboratory partnership program, become the vehicle for the massive, 997-page energy bill.  Several hundred amendments were proposed before debate even began.

Beginning in the middle of February, with only a brief hiatus to consider the campaign finance reform legislation, the Senate spent nearly two months debating S. 517 and its many amendments. The final step was to insert the heavily amended and revised S. 517 as a substitute into the House energy bill, H.R. 4, which has been renamed the Energy Policy Act of 2002. The final vote tally was 88-11, but that landslide does not reflect broad consensus so much as it does a widely shared desire to move to a House-Senate conference. In particular, the support of Senate Republicans reflected their hope to use conference to restore many of the provisions that appear in the House version but not the Senate version.
Despite the shared bill number, there are more differences than similarities between the House and Senate energy bills.  In many ways, the two bills represent two separate approaches to energy policy.  The House version relies heavily on tax-based incentives and other programs focused on boosting domestic production of both traditional and alternative energy sources. Although the Senate bill also contains some production incentives, it is more heavily weighted toward programs aimed at reducing the consumption side of the energy equation. Below is a general overview of the two bills with direct comparison for a few of the key issues of interest to the geosciences. The complete text of both versions are available online from the Library of Congress at http://thomas.loc.gov (type in "h.r.4" in Search box).  Additional information from AGI on energy policy in available at http://www.agiweb.org/gap/legis.html#energy.

Arctic National Wildlife Refuge

More ink has been spilled over the issue of opening the coastal plain of ANWR to oil exploration than on any other aspect of this legislation.. In an effort to soften opposition to this key pillar of the president's energy strategy, the Cheney report proposed using lease bonuses to fund alternative energy research. The initial version of the House bill included that proposal in its provision to open 1.5 million acres (the so-called 1002 Area) to exploration.  During floor debate, Rep. John Sununu (R-NH) introduced two amendments related to ANWR.  The first amendment required that royalties derived from resources in the refuge go to either the Renewable Energy Technology Investment Fund or the Royalties Conservation Fund; it passed in a 241-186 vote.  The second set a limit of 2,000 (noncontiguous) acres for the surface area covered by exploration and production operations in ANWR; it passed in a near party-line vote of 228-201 on the last day of debate.

Opening ANWR for exploration was not part of S. 1766, the Senate Democratic leadership's bill, but Sen. Frank Murkowski (R-AK) -- the lead proponent for opening ANWR -- proposed an amendment (S. Amdt. 3132) that followed the House-passed provision, including the 2,000 acre limit. Although the actual floor debate on that amendment was short, the issue loomed over much of the energy policy debate with filibuster threats emanating from both sides. In a procedure used to test the senatorial waters on an issue where filibusters are threatened, the amendment was put to a cloture vote on April 18th, which is a decision to limit debate and move forward with a vote on the measure itself.  Murkowski's proposal lost in a 46-54 vote, meaning that the amendment failed to obtain even a simple majority, let alone the supermajority of 60 votes needed to overcome a Democratic filibuster. Murkowski pulled the amendment, but the topic will remain high on the list of issues for the House-Senate Conference Committee (see below).

In place of ANWR, the Senate bill would lay the groundwork for a natural gas pipeline from the North Slope south through Alaska, expediting pipeline approval and offering an 80% loan guarantee. The House bill also mandates the so-called "southern route," but that is all. The Senate bill also would provide additional funding for pipeline research and safety.

CAFE Standards

Months before the House passed it version of the energy bill, the National Research Council (NRC) released a report reviewing the corporate average fuel economy (CAFE) standards.  Although the NAS report did not make a specific recommendation on what the CAFE standard should be, it did suggest that the nation could see notable fuel savings within the next decade through available technology.  The House bill would require a modest improvement in CAFE standards and would preserve the current two-tier system for passenger cars and light trucks.  H.R. 4 would also require the Department of Transportation to contract another NAS study to look at the feasibility of improving CAFE standards significantly by model year 2010.  The Senate version, despite many amendments and heated debate, does not contain specific language on improving the CAFE standard. Instead, the Senate would require the Department of Transportation to study the issue and propose new standards by 2004.

Domestic Energy Production Incentives

The tax incentives in the House bill total more than twice the Senate proposal, but both versions would provide credits for domestic oil and gas producers, particularly for energy produced from marginal wells. Both bills provide tax credits of $3 per barrel for crude oil production and $0.50 per 1,000 cubic feet for natural gas production from marginal wells during periods of low prices.  Also included in both bills is a provision that would allow geological and geophysical expenditures to be taken as tax deductions.  These tax breaks total $3.2 billion in the Senate bill and only $1.1 billion in the House bill. The House bill extends tax credits on existing coalbed methane wells while the Senate bill also includes future wells and requests that the National Academy of Sciences study the effects of coalbed methane development on water resources.

The Senate bill would provide a total of $15 billion over ten years and reduces the tax credits for conventional fuel production in favor of alternative energy production.  According to a Congressional Research Service report on energy tax policy, the Senate bill "is evenly balanced with about half of the tax cuts accruing to fossil fuel and production and nuclear power, and the other half accruing to energy efficiency and alternative (and renewable) fuels."

The House version contains a sizable section on offshore oil and gas production, including a review of lease sales and resources in the Gulf of Mexico and deep-water royalty relief. Both bills would require review of federal leasing review, and royalty programs -- often cited as a barrier to domestic energy production -- with the House version containing more detailed provisions. The House bill would allow oil refiners to expense capital costs and credits for making low-sulfur diesel fuel. The House bill calls for expanding royalty-in-kind programs, while the Senate bill would use royalty-in-kind to fill the Strategic Petroleum Reserve.

Both House and Senate bills include a number of tax incentives for energy produced using clean coal technology, a prime project for the Bush administration. The credits total $1.9 billion in the Senate bill and $3.3 billion in the House bill.  In addition to these credits, the House bill contains authorization language for the Department of Energy to establish a clean coal power initiative -- authorized at $200 million annually until 2011.

Among renewable and alternative energy resources, geothermal energy production would receive royalty reduction and relief in the House bill. The Senate bill authorizes research to reduce drilling costs and enhance exploration for geothermal resources.

The House bill includes a number of provisions relating to enhanced energy production on federal lands, a topic not covered in the Senate bill. The House version directs the Secretary of the Interior, in consultation with the Secretaries of Agriculture and Energy, to assess energy production potential on federal lands; directs the Secretaries of the Interior and Agriculture to "identify means by which unnecessary impediments to the expeditious exploration and production of oil and natural gas on [federal] lands can be removed"; directs federal land management agencies to justify their regulations that differ from state laws; and allows the Secretary of the Interior to develop roadless areas.

Research and Development

House language sets out priority areas for research for renewable and alternative energy sources.  In the opening section of the research provision, the bill states that "federal funding should focus on those programs, projects, and activities that are long-term, high-risk, noncommercial, and well-managed, and that provide the potential for scientific and technological advances."  The fossil energy section highlights primarily downstream technologies, including extraction technology for methane hydrates.  Filling in an aspect missing from the House bill, the Senate version contains a title to enhance energy science and technology programs, outlining specific goals for each renewable/alternative energy and fossil fuel resource.  The Senate bill would authorize close to $2.1 billion over four years for fossil energy research. Also included in the Senate version is support for fundamental energy science research, which would be authorized at close to $17.5 billion for four years.

The House bill also supports widespread research funding for energy use and production.  It also contains a subsection on a program to develop hydrogen as an alternative energy source. The National Energy Technology Laboratory and the U.S. Geological Survey are to work on technology for ultra-deepwater and unconventional drilling techniques that would also include environmental mitigation aspects

Environmental Policy

Reflecting the considerable environmental implications of energy use, the House bill incorporated a number of environmental provisions. For years, the Clean Air Act and energy have been connected by the reformulated gasoline requirements, which then leads into the Clean Water Act as MTBE, one of the most widely used fuel additives, has been found to contaminate water supplies around the nation.  Regional regulations on reformulated gasoline (RFG) have ballooned into a series of "boutique" fuels.  One provision in the House bill would require the Department of Energy (DOE) to report on how these boutique fuels affect a comprehensive energy policy.  On the issue of MTBE, the House bill would require studies on the dangers of the additive. The Senate version would ban the fuel additive MTBE in favor of ethanol.

Similar to the House bill, the Senate version merges environmental and energy policy.  Four titles of the bill deal specifically with integrating energy with climate change policy, a topic largely absent from the House bill. One section focuses on general climate change policy, another on a greenhouse gas database, another on climate-focused energy research and development programs, and another on climate change and technology. There is also a section specifically calling for a NOAA program of research into abrupt climate change, focusing on paleoclimate studies. The greenhouse gas database would be an inventory, reductions registry, and information system housed at the Environmental Protection Agency to provide information that the public and private sectors can use to reduce greenhouse gas emissions. The bill calls for the establishment of a White House Office of Climate Policy specifically tasked with developing a strategy to stabilize greenhouse gas emissions. Many of the provisions are similar to ones proposed in S. 1716, a climate change bill introduced by Sen. John Kerry (D-MA) in November 2001.

House/Senate Conference

Now comes the hard part, taking two bills with different provisions and crafting a compromise that can satisfy a majority of House members, a filibuster-proof supermajority of 60 senators, and the president. Republican conferees are expected to work closely with the White House to ensure that the compromise is acceptable to President Bush, lest the final bill face a veto threat. The Senate announced its members of the House-Senate Conference Committee on May 1st, selecting senior members of the Senate Energy and Natural Resources Committee and the Senate Finance Committee, both of which had jurisdiction over various aspects of the legislation. Conferees include Senators Max Baucus (D-MT), Jeff Bingaman (D-NM), John Breaux (D-LA), Ben Nighthorse Campbell (R-CO), Larry Craig (R-ID), Pete Domenici (R-NM), Charles Grassley (R-IA), Ernest Hollings (D-SC), Jim Jeffords (I-VT), John Kerry (D-MA), Joseph Lieberman (D-CT), Trent Lott (R-MS), Frank Murkowski (R-AK), Don Nickles (R-OK), Harry Reid (D-NV), John Rockefeller (D-WV), and Craig Thomas (R-WY).  This lineup of eight Democrats, eight Republicans, and one Independent (Jeffords) will favor the Senate majority on most matters but not on ANWR -- Sen. John Breaux supports drilling as do all the Republicans. House Speaker Dennis Hastert (R-IL) is expected to announce House members in the coming month, but no specific date has been set. Rep. Billy Tauzin (R-LA), the chairman of the House Energy and Commerce Committee, will serve as chairman of the conference committee.

If negotiations drag on through the summer into fall, compromise will become increasingly difficult as the mid-term elections gear up. It remains to be seen whether the Energy Policy Act of 2002 will become law or just the starting point for a future Congress.

Update prepared by Margaret A. Baker and David Applegate, AGI Government Affairs Program

Sources: E&E News, National Library for the Environment, Library of Congress, and Washington Post.

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

Posted May 8, 2002

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