Energy bill passes conference, heads for Congress

Nick Snow
Washington Correspondent

A House and Senate conference completed its work on the 2005 energy bill after jettisoning a provision that would have provided limited liability protection for producers of methyl tertiary butyl ether. Both federal legislative bodies were expected to approve the reworked measure promptly and send it to President George W. Bush for his signature.

House Energy and Commerce Committee Chairman Joe Barton (R-Tex.) reportedly accepted dropping the MTBE provision in a rare Sunday conference session after Senate negotiators convinced him that the Senate would not pass the bill otherwise. A similar provision last year has been blamed for Congress's not passing an energy bill at that time.

Conferees also removed a House provision to authorize oil and gas leasing on the Arctic National Wildlife Refuge coastal plain. Alaska's congressional delegation had not expected it to survive, a spokeswoman for Sen. Lisa Murkowski (R-Alas.) said. They expect it to be part of the budget reconciliation debate in September, she said.

Barton tried to reach a compromise over MTBE liability when he and Rep. Charles Bass (R-NH) proposed a trust fund that would have provided up to $11.43 billion over 12 years for cleanups and other remediation efforts. Oil refiners and marketers would have been required to pay $4 billion into the fund in exchange for immunity from MTBE defective-product lawsuits.

"Our proposal would allow Americans affected by MTBE contamination to receive compensation for losses and ensure that cleanup efforts begin immediately," Bass said as he presented the proposal. "In the absence of this alternative, victims of contamination will be forced to seek expensive legal recourse with uncertain results, and our waters will remain polluted in the interim."

The compromise was immediately criticized by oil industry groups, who considered it too expensive, and by state and local governments, who regarded it as insufficient, so it was withdrawn.

Republicans elated
Republican congressional energy leaders said the bill emerging from the conference is significant.

"We will put before Congress the most comprehensive energy legislation in the last 30 years," Barton said. "This balanced bill will lower energy prices for consumers, spur our economy, create hundreds of thousands of jobs, and take unprecedented steps to promote greater energy conservation and efficiency."

Senate Energy and Natural Resources Committee Chairman Pete V. Domenici (R-NM) said the conference continued the bipartisan attitude that prevailed on the committee and in the full Senate as it worked on the bill earlier this year.

"The resulting conference report reflects the will of the bipartisan, bicameral majority," he said. "It's also sound policy."

Democrats were more reserved. "The energy conference report is not perfect, but it's a good bill," said Sen. Jeff Bingaman (D-NM), the Energy and Natural Resources Committee's chief minority member. "In many respects, it moves our country in the right direction by encouraging more domestic production and also greater use of renewables."

Most congressional Democrats were stymied as their amendments aimed at reducing consumption were defeated. Sen. Maria Cantwell (D-Wash.), with Sen. Arlen Specter (R-Pa.) as cosponsor, resubmitted her proposal for the US to set an oil savings target of at least 1 million b/d by 2015. Sen. Ron Wyden (D-Ore.) offered an amendment to increase automotive fuel efficiency standards by 1 mpg/year for 5 years beginning in 2008.

Not all Democrats came away from the conference disappointed, however. Sen. Mary L. Landrieu (D-La.) and her state Republican colleague, Sen. David Vitter, successfully preserved $1 billion of coastal impact assistance for six states in the final bill. The provision would allocate $250 million/year for fiscal years 2007-10 for Louisiana, Texas, Mississippi, Alabama, California, and Alaska.

Each state's share would be based on oil and gas production off its coast, with Louisiana likely to receive 54%, or about $135 million/year, Landrieu said. The direct spending, which is not subject to appropriations, was added to the Senate's energy bill in June by a 69-26 vote despite White House opposition, she added.

OCS inventory
Landrieu's other significant contribution to the energy bill—requiring the Interior Department to conduct an inventory of oil and gas resources on the Outer Continental Shelf—also survived the conference despite challenges from other coastal states' lawmakers.

"This inventory is about common-sense policy. We cannot reasonably discuss how to best lessen our dependence on Middle Eastern oil unless we fully understand what alternatives exist here at home," Landrieu said.

Sen. Mel Martinez (R-Fla.) criticized the provision, saying it would be expensive and environmentally invasive.

"The inventory tarnishes the entire energy bill. I think this a precursor to drilling," he declared. He and other offshore drilling opponents are expected to try and make sure money is not appropriated for such an inventory.

The energy bill that came out of the conference addresses natural gas supply primarily by clarifying the Federal Energy Regulatory Commission's exclusive authority to site LNG facilities and by creating a clear process for pipelines, storage, and other gas infrastructure. It also establishes royalty incentives for ultradeep gas wells in the Gulf of Mexico.

Other energy bill provisions affecting oil and gas include provisions aimed at streamlining development of existing federal leases, a mandate for refiners to add 7.5 billion gal/year of grain or cellulosic ethanol to gasoline by 2012, and establishment of a task force to make oil shale and tar sands leasing recommendations.

Industry responses
Oil and gas industry groups' reactions to the bill were restrained. The American Petroleum Institute said in a statement that it hoped Congress would consider the legislation as a first step and lawmakers would develop follow-up measures.

API said: "Energy supply remains a big concern. The conference report does little to open promising areas in the West and off our nation's shores in order to provide important new supplies of clean-burning natural gas and oil. In fact, large areas of the Outer Continental Shelf remain expressly off-limits to energy development."

Independent Petroleum Association of America Pres. Barry Russell applauded provisions in the bill dealing with hydraulic fracturing and storm-water regulation, onshore and offshore federal permitting, tax treatment of geological and geophysical expenditures, oil and gas research and development, and the OCS inventory.

Logan Magruder, president of the Independent Petroleum Association of Mountain States, said the bill represents a positive step toward addressing problems in issuing federal onshore drilling permits, including industry opponents' abuses of the National Environmental Policy Act (NEPA) and Endangered Species Act.

"But it's not as large a step as we would have liked," said Betty Anthony, API's upstream, marine, pipeline, and membership group director, who spoke with OGJ in a meeting that included Magruder. "People who are antidevelopment target steps in the NEPA process for challenges."

She and Magruder, who also is Berry Petroleum Co.'s senior vice- president for the Midcontinent and Rocky Mountain regions, said NEPA needs to be reformed. One third of the Interior Department's annual budget is spent fighting 7,100 lawsuits, many of which are frivolous, he said. The people who bring them "should be exposed to liability if they're going to create damage to an individual," he suggested.

Both emphasized that oil and gas producers don't want to get rid of NEPA and the Endangered Species Act but merely want to make the regulations more efficient.

"The question now is whether Congress will have the backbone to come back and do more work on energy. There's so much more to be done," said Anthony.

Contact Nick Snow at

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