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Congress Tackles Energy Bill Again

Senate plans to push ahead on legislation early this year; outcome hinges on two votes

by Jeff Johnson
January 19, 2004 | A version of this story appeared in Volume 82, Issue 3

A credit for wind energy is one of a few renewable energy tax breaks whose fate turns with the bill.
A credit for wind energy is one of a few renewable energy tax breaks whose fate turns with the bill.

This week, as House and Senate members return from holiday recess, they are expected once again to take up energy legislation. Like last year, the focus will be on the Senate and whether Republicans can muster the votes needed to bring a national energy bill to the Senate floor.

Late last November, Senate Republican leadership was unable to overcome a filibuster before leaving for holiday vacation. The Senate came close to marshaling the 60 votes needed to move the bill to the floor but fell two votes short (C&EN, Dec. 1, 2003, page 10).

Despite much talk and posturing over the holiday recess, it appears that the two votes are as hard as ever to lock in, and the division between energy bill supporters and opponents in Congress remains deep.

The Senate's Republican leadership strategy is to put off the bill until late February or March, says Marnie Funk, Energy & Natural Resources Committee communications director.

Committee Chairman Sen. Pete V. Domenici (R-N.M.) is upbeat on moving the bill to the floor and is now planning a strategy to clear the bill and get it to President George W. Bush's desk, she says. "We feel very comfortable that we can get the two votes," Funk says, but notes that getting these votes will not be the end of the battle for passage.

The bill holds some $32 billion worth of tax breaks and direct spending to help energy providers over 10 years. The amount is more than three times higher than levels the President sought and almost twice the amount budgeted by the Senate for energy legislation.

Consequently, under Senate rules, because of the high price tag, the bill's passage could be blocked by any senator opposed to the size of the tax breaks.

Again, 60 votes will be needed to overcome the block, and this might be tricky. Three senators--Sens. Don Nickles (R-Okla.), Jon Kyl (R-Ariz.), and John Ensign (R-Nev.)--voted to shut down the filibuster but do not support the high costs, Funk says. Consequently, the bill actually faces two hurdles before it can clear the Senate.

Passage must occur before May, congressional staffers say, to avoid the "crazy season" engendered by the upcoming elections and the partisan politics that will play out among Congress members and presidential candidates. That milieu may make it too tough to reach consensus on a bill with so many affected players and industrial sectors with much to gain or lose.

Despite much talk and posturing over the holiday recess, the division between energy bill supporters and opponents in Congress remains deep.

ALREADY, this bill's history has been a study of partisan politics. The complex, 1,100-page bill sprang from a White House energy plan, prepared in closed sessions with input restricted to energy providers and industrial energy users and a handful of Republican congressional members and staff.

Republican leadership wrote a bill, and House leaders pushed it through. In the Senate, a hard fight ensued that was finally resolved when the upper body cleared a bill, knowing it would be rewritten in conference with the House.

A House-Senate conference committee began last summer, but rather than the usual give-and-take to hammer out a compromise, Republican leadership met among themselves, rewrote the bill, released portions in dribs and drabs, and finally issued the whole bill and a huge tax section on a Saturday in mid-November.

After fighting internally since August to craft provisions, Republicans gave Democrats 48 hours to examine the bill before calling for a vote to take it out of conference and to the House and Senate floors.

Republicans believed they had constructed a bill with enough pluses for enough interests that it could become law even if Congress members objected to some parts. It had a strong tilt toward coal, natural gas, nuclear, and other energy companies, but it held provisions that members from certain parts of the country would have a hard time opposing.

The bill had many supporters: the U.S. Chamber of Commerce, the National Association of Manufacturers, energy companies, the American Chemistry Council, and most industrial groups. And it had its share of foes.

It was opposed by the editorial boards of the New York Times, Wall Street Journal, and Washington Post. Environmental activists said it provided too much money for oil, gas, and nuclear power and too little aid for renewable energy providers and conservation. The fact that it did not call for drilling in the Arctic National Wildlife Refuge was not enough to sway them toward the bill.

Although many Democrats objected to the process and the bill, some supported individual provisions that would help their constituents.

GOP leadership powered the bill through the House on a 246 to 180 vote. With a 24-vote Republican margin in the House and the President's support, the bill flew through that body with 46 Democrats backing the bill and 25 Republicans opposing it and their leadership.

Provisions for ethanol and MTBE producers may determine the energy bill's outcome.
Provisions for ethanol and MTBE producers may determine the energy bill's outcome.

In the Senate, however, with a single-vote difference in parties and the power of a filibuster, the scene was different. A majority of Democrats together with a handful of moderate Republicans would not vote to end the filibuster, and the GOP fell two votes short of the necessary 60.

In the end, what dictated the bill's fate last November--and may determine it again this year--were oxygenates, compounds added to gasoline to make it burn more cleanly.

On the one hand, farmers stand to benefit greatly from bill provisions that double the amount--to 5 billion gal--of corn-based ethanol that would be added to gasoline by 2012. On the other hand, chemical and petroleum companies that produce methyl tert-butyl ether (MTBE), the most popular oxygenate, would get the opposite kind of deal.

MTBE makers are facing a growing number of lawsuits in dozens of states and cities where their product has wound up in drinking water, most likely from leaking gasoline storage tanks. The bill would give them liability protection from these suits in return for an MTBE phaseout by 2014.

The ethanol provisions are a big plus for farm state Congress members--Democrats and Republicans--including Sen. Tom Daschle (D-S.D.), minority leader.

And the MTBE provisions are significant to members with ties to chemical and petroleum companies, in particular House Republican Majority Leader Thomas D. DeLay (R-Texas) and Reps. Joe Barton (R-Texas) and W. J. (Billy) Tauzin (R-La.), who wrote the section on liability protection.

However, these provisions are opposed by members from areas where MTBE pollution has contaminated drinking water. And these provisions led five Northeastern Republicans to oppose the bill and to keep the filibuster alive. The bill's fate appears to continue to rest with them.

The Senate is now in a pickle. After the bill passed the House, the conference committee that drew it up was dissolved. So any modifications--for instance, changing the MTBE provisions--requires the bill to return to the House and the process to begin anew. And DeLay and the others have said they will not modify those provisions, according to House and Senate staff.

Democratic Party staff like to point out that the MTBE issue is actually a Republican problem.

"There is no really easy way to fix this," a Senate staffer says. "House Republican leadership won't bend in their support for the provisions, and the Senate Republicans from the Northeast won't support the liability exemption."

"The easiest thing for supporters to do is find those two votes, but it is awfully hard to get a senator who is on the record voting one way to change his vote," a Senate Energy Committee staff member says. "But conceivably, one senator could feel the weight of the White House coming down on top of him or her and switch. It is hard to exaggerate the amount of pressure that one person could be under. But here, you've got to find two."

Still, bill supporters hope that a combination of the bill's provisions on electricity grid reliability, the big tax breaks for traditional power sources, the support for nuclear power, the ethanol provisions, and others sections will come together to reinvigorate the Senate and push the bill over the finish line.

And while the bill doesn't do much for natural gas supplies in the short term, staff also say rising gas prices this winter may bring more pressure to bear on reluctant Senators to clear the bill.

If the bill doesn't move, however, members are likely to try to carve off sections of it, attaching them to other bills or creating smaller single-issue legislation, says Bill Wicker, minority communications director for the Senate Energy Committee.

"I want to stress that Democrats want an energy bill, but not this one," he says. "At some point, most senators may conclude that they can't get there from here with this particular bill, and if so, the responsible thing to do is to pull it apart. The time to do that may come soon."

Likely candidates for being split off, Wicker says, are electricity grid reliability provisions, the ethanol provisions, provisions to extend the Price Anderson Act to provide federal liability protection for the nuclear power industry, and sections providing tax breaks to particular energy providers.

Several analysts point to wind energy provisions as an example of a stand-alone bill or amendment. An ongoing tax credit for wind energy suppliers expired at the end of last year, but it would have been extended through the energy bill. The bill held a three-year extension of the 1.5 cents per kilowatt-hour production tax credit for electricity generated from wind.

While the bill doesn't do much for natural gas supplies in the short term, rising gas prices this winter may bring more pressure to clear the bill.

THE CREDIT has few foes, and it has been a key to expansion of wind energy. It is supported by many members of Congress, and it could lay the groundwork for the addition of other energy tax provisions in a single bill to move through Congress, analysts say.

Funk and other Republican staff, however, bristle at the suggestion of carving up the bill.

"We are not at an impasse now," she says. "We are not considering stripping off sections of the bill. We have only had one cloture vote. Sometimes you need several to move a bill to the floor. We don't need to look at other options at this time."

Chemical companies generally support the bill, says Thomas Gilroy, an official with the American Chemistry Council. But, he stresses, ACC's focus is "on anything that increases the supply of natural gas."

"Our position is that the energy bill has good things in it, but no matter what happens with it, we are going to be back talking about short-term relief for natural gas." The price run-up over the past few years continues this winter, Gilroy notes, despite today's high inventory levels. And the cost has hurt chemical companies that depend on natural gas for feedstock and fuel.

"On energy, ACC is almost becoming a one-issue association. We are worried about short-term natural gas supplies."

Consequently, ACC is supporting any energy aid that takes the demand away from natural gas--be it coal, nuclear, renewables, or conservation. He notes that the energy bill has provisions to build natural gas supplies but on a 10-plus year horizon, which is too slow for ACC.

As the new session of Congress begins this week, it appears as murky as ever whether some confluence of forces will draw together and push Congress to do what it did more than a decade ago and pass national energy legislation.


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