Energy Bill Hits Final Stretch

This week, as Congress returns from the Independence Day recess, it will begin hammering out the significant differences between the House- and Senate-passed energy bills. Its task will be difficult; its schedule will be tight.

The two bills hold several key provisions that are directly at odds with one another and must be resolved during negotiations between members of a House and Senate conference committee. Both President George W. Bush and congressional Republican Party leaders say they want a compromise bill cleared by the committee and passed by the House and Senate before Congress leaves for the August recess.

The President has made weekly speeches about the importance of energy legislation and has even offered to use White House influence and resources to help broker agreement over conflicting provisions. Bush was much less involved two years ago when a bill, written exclusively by Republican congressional leaders, died in the Senate from a filibuster led mostly by Democratic Party senators (C&EN, Dec. 1, 2003, page 10).

This time around, much will turn on how big a role Republican Party leadership offers to the Democratic Party minority when crafting a compromise bill.

The House is not a problem for the Republicans--the party's majority there almost guarantees passage of any Republican-written bill. The party's test is in the Senate, where Republicans must find language that will gain support from 60 senators, the number needed to overcome a filibuster.

Several provisions in the House-passed bill have already been identified as likely to block passage in the Senate. These include language giving refiners liability protection for drinking water contamination due to the gasoline additive methyl tert-butyl ether (MTBE) and provisions allowing oil and gas drilling in Alaska's Arctic National Wildlife Refuge (ANWR). Also, the addition of sections that could result in drilling in restricted offshore coastal areas could lead to the conference bill's death in the Senate.

The MTBE and ANWR provisions were specifically kept out of the Senate bill--to ease its passage through that body--by Sen. Pete V. Domenici (R-N.M.), chairman of the Senate Energy & Natural Resources Committee, and Sen. Jeff Bingaman (D-N.M.), the ranking committee minority member.

ANWR DRILLING might be removed as a problem for the energy bill if drilling advocates are satisfied that they can open the refuge through another path actively being pursued: an amendment to budget legislation that would also provide access to the wildlife refuge.

The MTBE provision is thornier because it is being demanded by several key Texas House leaders, particularly, Majority Leader Tom Delay (R) and Energy & Commerce Committee Chairman Joe Barton (R). One alternative suggested by Barton would include MTBE manufacturer protection in an amendment to the $280 billion highway transportation bill, which is in House-Senate conference negotiations. The shift would remove MTBE from the energy bill altogether.

Domenici says he would support the move, but the highway bill has plenty of its own complications and does not need the weight of another controversial amendment, House and Senate staff say.

The MTBE provision was one that the Bush Administration offered to help resolve a few weeks ago, but how real the promise is and how the President might help are unclear. The provision killed the bill two years ago.

ON OFFSHORE OIL and gas drilling, the Senate backed a provision that limits coastal activities to only an inventory of outer continental shelf (OCS) oil and gas resources. Domenici and other senators, especially several from Texas and Louisiana, had sought more sweeping measures, including provisions allowing coastal states to waive a federal ban on OCS drilling put in place to protect offshore areas.

Florida members strongly objected to any "opt out" provisions, however, and the inventory requirement was presented and accepted as a compromise.

More oil and natural gas production is sought by U.S. industries, especially chemical companies that face large price increases for natural gas, which they use for feedstock and fuel. On the other hand, coastal state senators and representatives from the West, Northeast, and Florida fear that even an inventory will eventually lead to more drilling.

Of significance but less contentious is a mandate for increased ethanol use as a gasoline additive, which both bills provide. The House set a mandate of 5 million gal of ethanol per year by 2012; the Senate is seeking 8 billion gal annually by the same year.

The House and Senate bills also differ on funding. The Senate bill would cost $14 billion over 10 years, including some $18 billion in tax incentives, offset by about $4 billion in revenues. About half of the package is geared to encourage conservation and renewable energy.

The House offers $8 billion in tax breaks over 10 years, directed almost entirely to traditional energy sources, such as fossil fuels and nuclear power.

Although the President set a tax cap on the energy bill of $6.7 billion, the White House spoke in support of both bills.

The recently passed Senate bill also includes another provision that could prove difficult. Efforts by Bingaman led to inclusion of a requirement that energy providers must use renewable energy sources to generate 10% of the nation's electricity by 2020. No such requirement is in the House bill, and renewable mandates are opposed by utilities.

Global warming and greenhouse gas controls may also prove to be a key part of the conference debate. The House-passed energy bill makes no mention of greenhouse gases, although some of its provisions, such as the ethanol subsidy and nuclear power incentives, would indirectly reduce the generation of carbon dioxide.

But in the Senate, a push for CO₂ limits began to build early in negotiations. However, a much-discussed amendment by Sens. John McCain (R-Ariz.) and Joseph I. Lieberman (D-Conn.) to reduce CO₂ emissions to 2000 levels by 2010 and, by 2018, to further reduce them by 18% from today's level, was defeated, 66 to 29. The vote was preceded by a lobbying blitz from the White House, some labor unions, and trade associations for the oil and gas industries. Because the amendment would have provided incentives for nuclear power generation, it lost support from some senators, such as Sen. Patty Murray (D-Wash.), who had earlier supported the bill.

The Senate did clear on a 54-to-43 vote a nonbinding "sense of the Senate" resolution, written by Bingaman, that acknowledges that greenhouse gases are causing significant environmental damage, that human activities are responsible, and that mandatory steps will be required to slow or stop greenhouse gas emissions.

Bingaman had originally planned to offer an amendment that would limit greenhouse gas emissions in relation to economic growth and would require emission intensity to fall 2.4% per year beginning in 2010. After failing to get Domenici's support, however, Bingaman chose not to introduce it. In exchange, Domenici promised to hold hearings on Bingaman's approach later this summer. Domenici said Bingaman's measure was too complex to bring up in the energy bill.

THE SENATE did vote 66-to-29 for a measure by Sen. Chuck Hagel (R-Neb.) to provide direct loans, loan guarantees, and other financial aid for projects, such as coal gasification, that reduce carbon emissions. It also would promote the export of low-carbon technologies to developing countries and instruct the State Department to make climate change a policy issue.

Some environmental groups have given qualified approval to the Hagel amendment. "It is an inadequate response to a very serious problem," says Fred Krupp, president of Environmental Defense. "But it does signal the shift from debating whether we should do something to what we intend to do."

Looking at overall energy legislation, the American Chemistry Council (ACC) was among a chorus of business groups that endorsed the need for energy legislation when the Senate cleared its bill in late June. Like the National Association of Manufacturers and other trade associations, ACC pointed to the possible boost to business and to jobs if the bill passed.

ACC singled out the bill's long-term potential to reduce natural gas use by promoting energy efficiency and conservation and encouraging construction of new liquefied natural gas terminals by giving the federal government control and limiting local authority. ACC also applauded provisions calling for the inventory of offshore gas and oil resources but bemoaned the Senate's failure to allow states to opt out of a federal ban on offshore drilling.

The Nuclear Energy Institute also approved of the Senate bill and noted the bill's support for more R&D funding for nuclear power, financial aid to encourage construction of new plants, and renewal of the Price-Anderson Act, which provides federal insurance for a catastrophic nuclear accident.

However, Public Citizen, a consumer advocacy organization, complained of the bill's high subsidies for such a mature energy industry. It argued that the nuclear industry aid could reach $10 billion through 2025 if provisions allowing a production tax credit for new power plants are figured in.

The Sierra Club panned the bill's failure to increase vehicle fuel economy and warned against continued dependence on foreign and domestic oil producers. It found "a few rays of hope" in the bill's 10% renewables requirement, the tax credits for energy efficiency, and the acknowledgment by the Senate that global warming is a real problem.

Congressional activities over the next month are likely to offer the President his best and last chance to reform national energy policy, which was most recently modified by law in 1992 with enactment of the last national energy bill.

From the first days of the Bush presidency, when the new President put Vice President Dick Cheney in charge of redrawing a national energy policy, energy has been a top focus of the Administration. However, reaching a compromise that satisfies the President, his business supporters, and 60 senators has so far been impossible.

GASIFICATION Clean-coal technologies, like this demonstration project in Florida, would receive nearly $3 billion in investment tax credits and loan guarantees through the Senate energy bill.