Energy bill legislation moving through House and Senate committees

Maureen Lorenzetti
Washington Editor

WASHINGTON, DC, Mar. 24 -- Republican congressional leaders redoubled efforts last week to reach consensus on a comprehensive energy bill this year that tracks the White House's energy policy goals.

In the House, an Energy and Commerce subcommittee passed a measure Mar.19 that largely follows legislation the full House approved last year. The House Energy and Air Quality Subcommittee passed Chairman Joe Barton's energy plan relatively intact, with few amendments accepted.

Democratic lawmakers unsuccessfully tried to change the bill throughout the 1-day mark up. Rep. Sherrod Brown (D-Ohio) offered an amendment calling for a national gasoline stockpile modeled after the Strategic Petroleum Reserve. That measure failed on a 10-18 vote.

Other rejected amendments would have boosted auto fuel efficiency standards and discouraged diesel fuel use in hydraulic fracturing.

A proposal by Rep. Ed Markey (D-Mass.) seeking to boost natural gas price transparency was withdrawn but may see action on the committee level. Markey said he wants a government-controlled clearinghouse to gather price information instead of having marketers use trade publication figures as benchmarks.

Next action
Barton's bill, which as yet does not include clean fuel reform provisions or a tax title, will likely be considered by the full House and Energy Commerce Committee the first week in April. Republican leaders in both houses want a comprehensive bill to include new tax incentives for domestic oil and gas production and provisions that retool the reformulated gasoline market.

A May 2001 White House energy blueprint called for RFG market rules to be simplified but did not offer specific guidance on such thorny issues as how to address water contamination problems associated with the clean fuel additive methyl tertiary butyl ether. Congress this session is expected to tackle MTBE concerns and to consider a possible ethanol mandate plan.

The White House energy plan does not advocate new tax incentives to boost domestic production. Both the House and Senate, however, are expected to add new tax incentives into a bill, albeit not as generous as the versions discussed last year, which included $8 billion in the House bill and $4 billion in the Senate package for oil and gas.

One key proposal expected to be missing from a final energy bill is leasing within the Arctic National Wildlife Refuge. The Senate defeated 52-48 a proposal to effectively allow leasing under a budget resolution last week (see OGJ Online, Mar. 19, 2003.)

ANWR supporters, which include most of the House Republican leadership, say they will not give up on ANWR drilling and may seek to include a leasing provision in an energy bill. Last year, the House energy proposal included ANWR; the Senate version did not.

This year Senate ANWR leasing opponents have warned Republican leaders that an energy bill will not pass Congress with an ANWR development plan in it. House leaders remain undaunted, however, and say they will press to see ANWR leasing happen. They have not ruled out trying to include it in other pending measures before Congress.

Another proposal that could sidetrack a comprehensive energy bill is reform of the wholesale electricity market. Senators from Western states dislike an administration plan to standardize the wholesale electricity grid, saying it oversteps federal authority.

Senate proposals
In the Senate, the chairman of the Committee on Energy and Natural Resources Pete Domenici (R-NM) plans to mark up an energy bill Apr. 1-10 with a goal of getting the measure to the Senate floor in May. Although a draft of the pending proposal has not yet been released, committee staff members have outlined what they anticipate in the draft.

Like Chairman Barton in the House, Domenici at least initially plans to leave RFG reform and tax issues to other committees that hold jurisdiction. However, another energy committee member may seek to include an RFG proposal during the mark-up process on Domenici's bill, Senate energy staff said.

Similarly, the Bush administration's new controversial "Clear Skies" plan, which seeks to streamline the way that utilities meet federal air quality rules, also may be inserted as an amendment during the mark-up process in committee or added during floor debate, which could take 3-6 weeks.

One item guaranteed to be missing from a Domenici draft is ANWR leasing, because the Senate already rejected a proposal under a budget resolution plan that did not require a 60-vote supermajority.

A Domenici spokesperson said that while the senator was "sorely disappointed" an ANWR provision was stripped from the Senate budget blueprint, he is "pragmatic" enough to understand that ANWR probably has an even smaller chance of surviving an energy bill that can be filibustered.

Nevertheless, the senator has not completely abandoned the idea of Congress passing legislation that includes ANWR. A staff member said that it is not the "current" intention to have it in an energy bill. ANWR proponents insist there still is a chance such legislation may be approved by this Congress, perhaps in the context of improving energy security if world events were to trigger a dramatic increase in world oil prices.

Other domestic issues
Another Alaska-related provision likely to be hotly debated is a plan to encourage the construction of a $20 billion natural gas export pipeline from Alaska's North Slope to the Lower 48.

Before the November 2002 elections, lawmakers considered a Senate plan that offered both loan guarantees and a floor price to spur construction of the Alaskan gas line. Senate language included a $10 billion loan guarantee, along with a tax credit triggered when the Alberta hub price falls below $3.25/MMbtu.

The White House endorsed the idea of a pipeline but had serious reservations about incentives connected with the project.

The House bill did not offer any kind of tax incentive for the pipeline but mandated a southern route favored by Alaskans. Domenici's new proposal is expected to endorse that southern route which parallels the existing oil pipeline from the North Slope to Fairbanks and then the Alaska Highway to British Columbia.

Producers also are considering a northern route favored by the Canadian government that runs across the Beaufort Sea into Canada's Mackenzie Valley.

Senate Energy Committee officials said they expect negotiations to commence shortly on what kind of "fiscal incentives" may be needed to build the pipeline, which proponents say could become the single largest US construction project so far.

One proposal now being informally discussed within industry would allow producers to receive as much as 52¢/MMbtu credit for Alaska gas transported to market. The credit phases out when prices are $1.35/MMbtu.

Additionally, the US government would guarantee up to 80% of the total capital cost of the project. Producers also want the government to allow pipeline owners to accelerate depreciation of the asset to 7 years from 15 years. Finally, they would like to see a 35% tax credit for a gas treatment plant connected with the project.

Lower 48
The Senate energy bill also would encourage domestic production in frontier areas and deep water, although there would be no effort to lift existing drilling moratoriums, Republican energy committee staff said.

Of keen interest to Domenici are means of streamlining the public land permitting process. And while the administration has existing legal authority to reduce bureaucratic red tape, Congress may want to offer statutory guidance to help reduce costly and time consuming litigation, staff members said.

Contact Maureen Lorenzetti at maureenl@ogjonline.com

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