US congressional negotiators continued discussions last week on a pending comprehensive energy bill with Republican leaders pledging to wrap up talks within 2 weeks.
"We believe these meetings will produce language that can be presented to conferees for their consideration. We look forward to an open and bipartisan process that will deliver final language to conferees for a vote by early October," said House Energy and Commerce Committee (ECC) Chairman Billy Tauzin (R-La.) and Senate Energy and Natural Resources Chairman Pete Domenici (R-NM) in a Sept. 16 joint statement.
Negotiations were expected to be suspended briefly late last week as lawmakers prepared to leave the Capitol because of Hurricane Isabel, which at presstime was expected to make landfall along the US East Coast sometime Sept. 18.
But talks on the staff level were likely to continue with formal meeting resuming this week.
Similarly, a final meeting of a House task force on natural gas scheduled for Sept. 18 was postponed. Recommendations from that report and an upcoming document from the National Petroleum Council due Sept. 25 might be incorporated into a final bill, according to congressional sources and industry lobbyists.
Draft proposals
Formal negotiations on many controversial proposals directly impacting the oil and gas industry are not expected to take place until month's end. This includes tax incentives designed to encourage more domestic oil and gas production, as well as a decision about leasing a small coastal portion of the Arctic National Wildlife Refuge.
Republican negotiators did release draft language that supports the construction of an Alaskan natural gas pipeline to the Lower 48. The language reflects the authorizing language of S. 14, the Republican energy bill that was abruptly pulled from the Senate in August.
The proposal does not include loan guarantees or other pricing incentives; both will be addressed in the larger tax incentives package.
Commenting on pending energy proposals, the White House reversed its position regarding government support for such a pipeline.
Sec. of Energy Spencer Abraham Sept. 10 said the White House still strongly opposes a price-floor tax provision because it feels the plan would "distort markets, could undermine fiscal responsibility, and would likely undermine Canada's support for construction of the pipeline and thus set back broader energy integration."
But President George W. Bush's administration would now be willing to support an "appropriately structured 80% loan guarantee, accelerated depreciation, and an enhanced oil recovery tax credit to support the construction of a pipeline to the nearest economical access point to markets in the continental US that would maximize consumer benefit and minimize risks to taxpayers."
Another provision in the draft Alaska gas pipeline plan mandates the "southern" route through Alaska, a provision in previous Senate and House bills. Republican negotiators also want to create a federal coordinator position to facilitate in the permitting and construction of the pipeline.
Midwest deals
Lobbyists and congressional staff attributed the White House's new support for a federally backed gas pipeline as a predictable concession to the politically strategic US Midwest.
That region and Alaska stand to benefit the most from an Alaskan gas pipeline. Labor groups also support the line, possibly the largest US construction project ever.
Along those lines, a longstanding bipartisan deal to create an ethanol mandate under new reformulated fuel rules could be further expanded if the ethanol industry gets its way.
The Renewable Fuels Association (RFA), a Washington, DC, trade group representing US ethanol producers, joined with several agriculture and renewable fuel organizations to urge energy bill conferees to accelerate the ethanol renewable fuels standard (RFS) schedule in the final energy bill. Without a faster implementation schedule, ethanol producers may face overcapacity problems, the groups said.
To avoid that problem, producers are urging lawmakers to expand the mandated capacity level to 3.2 billion gal/year in 2005. Current Senate language endorsed by a broad coalition of stakeholders, including the American Petroleum Institute stipulates a 2.6 billion gal/year number as part of a larger deal to remove oxygenate standards in reformulated gasoline. The House 2005 figure is 2.7 billion gal/year.
RFA said US ethanol production capacity is expected to exceed 3.4 billion gal/year by 2005, when the RFS is slated to begin. And given current production rates, "neither schedule meets current capacity, and as a result the RFS would not stimulate new ethanol production until at least 2008 under the Senate bill and 2012 under the House bill," RFA said.
API told OGJ it does not support this new ethanol proposal; ethanol interests looking to guarantee 100% of their supply.
It is uncertain whether the White House would support such a change. The administration, in its letter to lawmakers, endorsed reformulated fuel program updates that reflect last year's Senate energy bill.
Indeed, the administration "would oppose changes to the renewable fuels standard provisions that would raise the costs and reduce efficiency of the credit-trading program, which is vital to making the renewable fuels program economically achievable," Abraham said in his letter to Congress.