Maureen Lorenzetti
Washington Editor
WASHINGTON, DC, Jan. 22 -- The debate over federal spending limits is being closely watched by the US oil and gas industry this week, with key policy issues over environmental enforcement, research, and taxes hanging in the balance.
The Senate Wednesday continued debate on a sweeping "omnibus" spending bill for fiscal year 2003. Tthe government has been operating under temporary spending measures since Oct. 1, when the new fiscal year officially starts.
Now that the elections are over, senators hope to pass a $390 billion budget before February that consolidates nearly a dozen separate appropriations bills into one mammoth piece of legislation.
Included in the bill are annual budgets for key agencies that regulate oil and gas companies, large and small. This includes the budgets for the departments of Interior and Energy and the Environmental Protection Agency and operating funds for the Federal Energy Regulatory Commission and the Securities and Exchange Commission.
But congressional sources say that deadline may be slipping because of dozens of proposed amendments now before the chamber. When the Senate finally does pass a bill, the legislation still must be reconciled with a House version. When that will happen is uncertain, given that the House is out of session until Jan. 27.
Meanwhile, congressional staff are planning hearings on the FY 2004 budget that the White House is expected to unveil shortly. The president's budget director, Mitch Daniels, said Tuesday that the new budget increases most domestic spending by 4%, an increase of less than half of what Congress is expected to pass for the 2003 budget. And White House and congressional officials predict there could be serious cuts in some government programs in order to help pay for increased military spending and a proposed economic stimulus package that includes deep tax cuts ($674 billion over 10 years).
Oil and gas casualties
One casualty could be oil and gas research, some industry sources predicted.
Even before budget deficits were considered a problem, this White House has historically proposed dramatic cuts in the Department of Energy's fossil fuel office.
This year, with oil prices at relatively high levels, there may not be as much political will in Congress to ignore the White House's wishes on the issue, congressional staff said.
Pending 2003 issues
Under consideration in the pending omnibus bill is a myriad of spending items that impact industry directly and indirectly.
These include earmarks for federally funded oil and gas research programs, environmental protection enforcement, and money to process leasing applications. Funds to inventory the oil and gas potential of federal land may also be included.
Some producers also would like to see the "Section 29" tax credit renewed. That tax incentive began in 1980 to encourage unconventional oil and gas domestic production. The comprehensive energy bill that failed last year included an extension; it is uncertain whether the tax credit will be included in this bill.
Also typically in the annual federal budget are public policy mandates: Congress this year is again expected to impose a 1-year moratorium on most offshore drilling, for example.
Amendments eyed
Among the amendments already considered include provisions regarding low-income energy assistance and some clean air rules. The Senate voted 88-4 to increase the Low Income Home Energy Assistance Program by $300 million for FY 2003. The amendment by Sen. Jack Reed (D-RI) brings total LIHEAP spending to $2 billion for the year, which ends Sept. 30.
Meanwhile, Senators, by a 50-46 vote, defeated a clean air proposal by Sen. John Edwards (D-NC). His provision sought to delay an EPA proposal that streamlines a permitting provision of the Clean Air Act called "new source review." NSR is supposed to ensure power generators and refiners do not create more industrial pollution when they expand operations.
The Edwards proposal instructed EPA to not make changes to its NSR program until a study was done by the National Academy of Sciences. Alternatively, on a 51-45 vote, senators approved an amendment by Sen. James Inhofe (R-Okla.) that keeps NSR rules on track but allows for a NAS study.
Industry groups supported the Inhofe measure, which preserves EPA's plan, published in the Federal Register Dec. 31, 2002 (OGJ Online, Nov. 25, 2002).
"The final and proposed NSR rules will help promote safer, cleaner, and more-efficient factories, refineries, and power plants," the National Association of Manufacturers told its members.
EPA has said the changes to NSR would "remove the obstacles to environmentally beneficial projects, clarify NSR requirements, encourage emissions reductions, promote pollution prevention, provide incentives for energy efficiency improvements, and help assure worker and plant safety."
Environmental opposition
Environmental groups, which oppose EPA's plan, said the close vote means there could be pressure on senators to consider the issue again.
"Four likely voters for Edwards were absent because of what once had been expected to be a Senate vacation period," said Frank O'Donnell, executive director of the Clean Air Trust. "So this was indeed a razor-close vote. It is possible there will be future votes on this issue."
O'Donnell said senators voted largely, though not exclusively, along party lines. Some Republicans, including Susan Collins and Olympia Snowe of Maine, Lincoln Chafee of Rhode Island, John McCain of Arizona, and John Sununu and Judd Gregg of New Hampshire, crossed party lines to support Edwards.
Meanwhile some Democrats, including John Breaux and Mary Landrieu of Louisiana, Zell Miller of Georgia, and Blanche Lincoln and David Pryor of Arkansas, voted with the Republicans.
A broad coalition of environmental groups and a group of Northeast states say EPA's rules would weaken and undermine enforcement of the Clean Air Act. They say the proposed and final rules effectively give refineries and power plants an unfettered ability to expand their operations without proper oversight.
EPA Administrator Christine Whitman rejected a request by state and local air pollution control regulators to delay by 1 year the effective date of the recent EPA changes; a dozen states and Washington, DC, must implement the finalized portion of the NSR rules by Mar. 3. Other states have 3 years to make changes to their air pollution control plans. The NSR plan is already under a legal challenge: Nine Northeast states sued EPA over the plan, saying it violates clean air rules. States also plan to ask an appeals court in Washington, DC, to suspend the NSR package until their pending lawsuit is resolved.
Other action
Another pending clean air item already in the Senate bill would require EPA to submit a report no later than Feb. 15, 2004, "on the practices and procedures by which states develop separate emission standards, including standards for nonroad engines or vehicles, as compared to the development by EPA of national emission standards under the Clean Air Act."
Opponents of the language say the measure would require EPA to perform legal work that industries could use to attack state pollution control standards. Industry proponents say the study would help EPA be more efficient in its enforcement of clean air rules on a state by state basis.
