SPECIAL UPDATE: Final Energy Bill Passes House, Close to Senate Approval
This update was originally sent out as an e-mail message to AGI's
IN A NUTSHELL: This Monday, a House-Senate conference committee
completed work on a 1,200-page compromise bill that 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 Friday 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.
The House passed its version of comprehensive energy legislation,
H.R. 6, in April of this year. The closely divided Senate spent the
last week of July debating their version, S. 14, but that debate quickly
became bogged down by nearly 400 proposed amendments and a partisan
fight over President Bush's judicial nominees. Rather than leave town
for the August recess without a vote, Senate Minority Leader Tom Daschle
(D-SD) and Senate Majority Leader Bill Frist (R-TN) brokered a deal
under which this year's bill was traded for last year's Democrat-sponsored
bill (S. 517 in the 107th Congress). That "ticket to conference"
bill passed 84-14 and set the stage for a conference committee of
House and Senate members to iron out differences and come up with
a final version.
Alas for Senate Democrats, the passage of their bill also marked
the end of bipartisan involvement in the process. Republican conferees
spent 71 days negotiating over a wide variety of competing provisions
in the two different versions passed by the House and Senate (with
Senate Republicans working from the provisions in S. 14). They emerged
late on Friday, Nov. 14th, with a nearly 1,200-page conference report
(H. Rpt. 108-375) describing the final bill. Democrats had their first
chance to see the report over the weekend, having been shut out of
negotiations that had instead showcased the extent to which competing
interests and ideologies exist within the majority party. Delays resulted
from particularly lively disagreements between the chairmen of the
House and Senate tax-writing committees, who could not agree on the
scope of tax incentives included within the bill as they sought to
satisfy their own constituencies.
The conference committee approved the measure on Monday, Nov. 17th,
and the House passed it the following day by a 246-180 vote. Senate
debate has already begun and could wrap up by the end of this week.
The final bill reflects a whirlwind of conflicting political, regional
and economic pressures. Senate Energy and Natural Resources Committee
Chairman Pete Domenici (R-NM), who was in charge of the conference
process, told the Washington Post: "We had to write one law for
the country, a country with many strong regional and ideological differences
on energy policy. We cant do what cant be done."
Rather than a single national strategy, the final package contains
dozens of pieces that reflect diverse visions of the nations
energy future and, perhaps more importantly, enough "sweeteners"
to discourage a Senate filibuster.
Arctic Gas, Not Arctic Oil
In many ways, what is most notable about the bill is what it does
not include. When President Bush first called for a national energy
policy three years ago, a key goal was to reverse the increasing U.S.
dependence on crude oil imports. But the final bill does not include
some of the key actions that were supposed to help achieve that goal.
First and foremost, exploration in the Arctic National Wildlife Refuge
(ANWR) was left out of the bill. Indeed, opposition to oil and gas
drilling was so strong that a provision was dropped that would have
accounted for and taken stock of offshore energy resources in areas
currently under moratorium. The conference report does provide federal
financial support for a proposed $20 billion trans-Alaska gas pipeline
a major potential source of new natural gas supplies. But these
incentives may not be enough to get the project off the ground, and
some analysts predict that the gas will not make it to the lower 48
states for at least 10 more years, regardless of the financial scenario.
Oil and Gas Research and Production Incentives
Although the bill does not mention ANWR, there are plenty of other
provisions that deal with encouraging domestic oil and gas production.
The bill requires the Secretary of Energy to research, develop, demonstrate
and find commercial applications for oil and gas exploration and production
including gas hydrates, reservoir life and extension, transportation
and distribution infrastructure, ultraclean fuels, heavy oil and oil
shale, related environmental research and compressed natural gas marine
Several new clauses were included in the conference report that have
not been seen since last year. There are new marginal property production
tax incentives for oil and gas wells that produce an average of less
than 25 barrels per day. This is in addition to the royalty relief
those properties also receive. The bill also includes an increased
tax credit for coalbed methane extraction.
The bill establishes a 10-year, $2-billion R&D program for obtaining
natural gas from ultra-deep waters of the Gulf of Mexico and from
unconventional sources onshore such as coalbed methane. Envisioned
as an academic-industry-government partnership, the program will,
according to sponsor Rep. Ralph Hall (D-TX), "go a long way toward
filling the projected gap in natural gas production and consumption
that will exist between now and 2015."
Many bill provisions are highly specific, reflecting the interests
that were brought to bear on the process. For example, Texans successfully
included a "Sense of the Congress" resolution that addresses
oil and gas development under Padre Island National Seashore. As with
some other units of the National Park System, Padre Island was set
aside with an understanding that subsurface resource could continue
to be developed in an environmentally sensitive manner. The resolution
underscores the National Park Service's obligation to allow such development,
stating: "any regulation of the development of oil, gas, or other
minerals in the subsurface of the lands constituting Padre Island
National Seashore should be made as if those lands retained the status
that the lands had" before the park was created in 1962.
Geoscience Data Preservation
One provision in the final energy package with a direct impact on
geoscientists is the National Geological and Geophysical Data Preservation
Program Act. This provision authorizes a cooperative program between
state geological surveys and the Department of the Interior to archive
geologic, geophysical, and engineering data, maps, well logs, and
samples; provide a national catalog of such archival material; and
provide technical and financial assistance related to the archival
material. The legislation authorizes $30 million over 5 years for
this effort, but as is the case with nearly all other programs created
in the bill, such spending levels will only come to pass if the money
is provided in annual appropriations bills.
Renewable/Alternative Energy and Energy Efficiency
The final bill does not include a renewable portfolio standards provision,
which would have required large utilities to steadily increase their
use of energy from renewable sources such as wind and solar power.
The bill also does not require improvements in the fuel efficiency
of cars and trucks (the Corporate Average Fuel Economy standards).
Instead, the final legislation mandates that any future fuel efficiency
requirements take into consideration the impact on auto industry jobs,
among other new factors, before requiring a higher performance standard.
Tax incentives to promote wind power generators, energy-efficient
homes and hybrid passenger cars were among the conservation "sweeteners"
added to the bill. Also included were funds to power government buildings
by state-of-the-art photovoltaic cells, incentives for developing
new energy-efficient traffic lights and $6.2 million to promote bicycles
as a way to conserve energy. Hill leaders are touting these and other
measures saying they will save enough electricity between now and
2020 to make it unnecessary to build 130 new 300-megawatt power plants.
Senate Democrats countered in their "Parade of Horribles"
press release by pointing out that these energy savings only add up
to about three months of U.S. energy consumption.
Geothermal energy will get a small boost in the form of royalty relief
and a slightly streamlined permitting process. Congress will also
require the Departments of Agriculture and the Interior to identify
areas with geothermal potential on federal lands, review management
plans and consider leasing these lands. To carry out this provision,
the departments must establish an administrative procedure for processing
the lease applications and a joint database retrieval system for tracking
lease and permit applications in order to minimize the problems that
arise because different departments oversee different federal lands.
Research-related provisions in the bill provide DOE's Office of Science
with a 65 percent increase over the next five years. Although dominated
by physics, the office does support fundamental geoscience research
Clean Coal and Carbon Sequestration
Rather than address climate change head-on with greenhouse gas reporting
provisions as Democrats had sought in S. 517, the conferees instead
decided to fund additional research into coal mining and coal-related
technologies -- placing special emphasis on research and development
that explores the "minimization of contaminants in mined coal
that contribute to environmental concerns." The Secretary of
Energy was further directed to find innovations for existing power
plants, research the integrated gasification combined cycle, advanced
combustion systems, turbines for synthesis gas derived from coal,
carbon capture and sequestration and joint project permeability enhancement
in coals for natural gas production and carbon dioxide sequestration.
MTBE and Ethanol
In earlier versions of the energy bill, the Senate sought to ban
the fuel additive MTBE and replace it with ethanol as a means of achieving
Clean Air Act mandates. Environment and Energy Daily reported that
the ethanol provisions in the energy bill, a major sticking point
during conference negotiations, add 5 billion gallons per year of
ethanol and other renewable-based fuel to the nations gasoline
supplies, starting at 3.1 billion gallons in 2005 and ramping up to
5 billion gallons by 2012. At the same time, the bill phases out MTBE
use by 2015 and authorizes funds for producers making the transition
from MTBE to other additives. On the surface it appears the Senate
succeeded in turning out MTBE; however, bill language allows governors
to override the phase out for their individual states and the president
to do so for the nation. There is also a provision that grants liability
protection to MTBE producers from September 5, 2003. This would nullify
at least one lawsuit that was recently filed in New Hampshire.
Reforming the Electricity Grid
In the wake of the August 14th power blackout, the Federal Energy
Regulatory Commission has been trying to create independent regional
organizations to oversee transmission. The conference report effectively
negates those efforts and instead creates mandatory reliability rules
for the nations electricity transmission networks. It also gives
federal regulators the right to use their authority to create rights-of-way
for new transmission lines needed to relieve congestion.
Also in the electricity arena, the legislations most far-reaching
feature may be the repeal of the 1935 Public Utility Holding Company
Act, which limits utility industry mergers. The acts repeal
is a top priority for the electric power industry and the Bush administration.
The Washington Post predicted that "if the bill passes, a wave
of mergers and acquisitions could follow."
The nuclear power industry, which has not received a new plant license
since 1978, will receive a boost. The bill provides more than $100
million a year in production tax credits for about a half-dozen new
plants using advanced designs. Looking to the future, the bill also
authorizes US participation in the International Thermonuclear Experimental
Reactor project, which is a step down the road toward fusion energy.
A Jobs Bill
Shortly after releasing the conference report for lawmakers to review,
Senator Domenici released a statement calling the Energy Policy Act
of 2003 a "jobs bill" that will create nearly 1 million
new jobs. Specifically he touted that the construction of the Alaska
Natural Gas Pipeline would create more than 400,000 direct and indirect
new jobs. The substantial investment in clean coal technology will
garner 62,000 jobs. The mandated natural gas and oil-related research
will create 10,000 research jobs in the fields of math, engineering,
physics and science at an estimated annual salary of $125,000.
Further, incentives for geothermal energy will create between 750
and 1,000 direct jobs and even more indirect jobs. This jobs-based
approach is a significant departure from the original rationale behind
developing a coherent national energy strategy, but it underscores
the economic concerns that are certain to dominate in the coming election
With the House having already passed the final bill, it awaits only
Senate action before heading to President Bush, who has indicated
that he will sign it into law. A number of Democratic senators have
already signaled that they would support the bill -- at least 9 are
needed to close off debate should a senator threaten to filibuster,
assuming that all 51 Republicans vote in favor of the bill. But such
party unity is in no way guaranteed with at least 6 Republican senators
indicating concerns, particularly regarding MTBE liability. Ultimately,
senators must decide -- in the words of Sen. Byron Dorgan (D-ND),
who supports the bill because of its ethanol subsidies -- "Is
there more good than bad here?"
Update prepared by Emily M. Lehr and David Applegate, AGI Government
The Conference Report is available in PDF format at:
Senate Energy and Natural Resources Committee majority press releases:
Senate Energy and Natural Resources Committee minority press releases:
Sources: Environment & Energy Daily, Greenwire, House Science
Committee, L.A. Times, New York Times, Senate Energy and Natural Resources
Committee website, Thomas legislative database, and Washington Post.
Please send any comments or requests for information to the AGI Government Affairs Program.
Posted November 20, 2003