Themes emerge as Congress works on separate energy bills

Activity at the US Capitol on June 13 centered on the full Senate's debate of the Democratic leadership's energy legislation and the House NRC's approval of a bill with several provisions that directly affect oil and gas producers.

Nick Snow
Washington Correspondent

WASHINGTON, DC, June 13 -- Republicans at each end of the US Capitol said Democrats' energy proposals would do nothing to increase domestic supplies. Democrats responded that it was more important to increase incentives for fossil fuel alternatives than to continue what some members consider giveaways to the oil and gas industry.

Activity on June 13 centered on the full Senate's debate of the Democratic leadership's energy legislation and the House Natural Resource Committee's approval by 26 to 22 votes of a bill with several provisions that directly affect oil and gas producers and federal regulators.

Those provisions include imposing a $1,700 processing fee for each drilling permit application, limiting categorical exclusions from the National Environmental Policy Act, regulating produced water disposal, limiting oil royalty in-kind payments to refilling the Strategic Petroleum Reserve, requiring the US Minerals Management to conduct at least 550 audits yearly by 2009, significantly increasing surface landholders' rights and compensation in split-estate situations on federal leases, and raising onshore oil and gas reclamation fees and bonds.

The bill, HR 2337, which will be reported to the House floor with a favorable recommendation, would preserve the 2005 Energy Policy Act's (EPACT) requirement for BLM to complete onshore drilling permit requests but it would extend the deadline to 90 from 30 days. Chairman Nick J. Rahall (D-W.Va.) supported the change, which emerged during the first day of markup on June 6.

Groups representing domestic oil and gas producers immediately criticized the bill that emerged. "One has to wonder why members of Congress would vote for legislation that will decrease domestic supplies of oil and gas at a time when consumers are already suffering from high prices," said Marc W. Smith, executive director of the Independent Petroleum Association of Mountain States in Denver.

'Strangling supplies'
"At a time when American consumers are bracing for record-high summer energy costs, why is Congress passing legislation that will ultimately increase their financial hardships by strangling American energy supplies?" questioned Barry Russell, president of the Independent Petroleum Association of America in Washington, DC. "There are still members of Congress who fail to recognize that energy legislation designed to limit American access to American energy will ultimately deplete supplies and boost consumer energy prices."

Efforts to substantially change the bill failed. The main attempt was an amendment by Rep. Stevan Pearce (R-NM) to strike all of Titles I and II, which contain most of the oil and gas provisions and which Rahall called "a killer amendment" that "would kill the entire bill." It was defeated by 27 to 21 votes.

More-specific amendments also did not pass. The committee rejected one by Rep. Bill Sali (R-Idaho) to strike Titles I and II if the US Energy Secretary determines that they would increase domestic energy prices by 25 to 17 votes. It also defeated, by 26 to 22 votes, a proposal by Rep. Chris Cannon (R-Utah) to delete Section 104 of HR 2337, which would repeal EPACT's provision dealing with federal oil shale and tar sand resource leasing and development.

"The potential for oil shale development in Utah to vastly decrease our dependence on foreign oil makes this bill not only bad policy, but bad for national security. Environmental hysteria never lit one light bulb or heated one home, and with [gasoline] prices at more than $3/gal, now is not the time to be turning off the spigots from promising resources," Cannon said in a June 13 statement.

House Republican leaders beyond the committee leveled a broadside against the bill on June 12. The new House Energy Action Team (HEAT), working through the office of Minority Whip Roy Blunt (R-Mo.), said that HR 2337's provisions would discourage development of domestic resources and increase reliance on imports.

Senate activity
In the Senate, debate continued on the legislative package which Democratic leaders announced on May 23. The bill aims to make oil product price manipulation a federal crime, mandate more efficient government offices and motor fleets, increase biofuel supplies, and bring other alternative fuels to market more quickly.

Discussion quickly centered on an amendment proposed by Sen. James Inhofe (R-Okla.) to provide additional incentives to build new US refineries, which he said the Democrats have failed to address. "Americans are starving for affordable energy, and the majority's bill tells them to go on a diet," he said on June 12.

Sen. Barbara Boxer (D-Calif.), who succeeded Inhofe as chair of the Environment and Public Works Committee following the 2006 election, immediately called his proposal "a total taxpayer giveaway to the oil industry." She said, "It would short-cut many environmental laws which protect our families." Not one oil company has opened a new US refinery since EPACT and its incentives became law, she said.

Other Republicans expressed support for Inhofe's amendment as debate continued on June 13. Mel Martinez of Florida said that the overall bill does nothing to remove barriers to building new oil refineries in the US. "We have not built a new one in this country for over 30 years because of burdensome regulations," he said, adding that the bill's attempt to make gasoline price manipulation a federal crime also is misguided.

"The price at the pump is affected by both a lack of refining capacity and a surplus of regulations on the fuels that are produced," said Mike Enzi of Wyoming. "Unless we get rid of this refinery constriction, we're going to face gasoline shortages twice a year, starting immediately."

But Maria Cantwell (D-Wash.), who has led efforts on the Senate side to make oil market manipulation a federal crime, agreed with Boxer that Inhofe's amendment would throw out important environmental requirements. Besides, said Cantwell, progress on increasing motor fuel production capacity is being made because in the last 4 years, 40 new alternative plants have been built or are awaiting permits.

The Senate defeated Inhofe's amendment by 52 to 43 votes at midday June 13. It then turned its attention to a proposal by Energy and Natural Resources Committee Chairman Jeff Bingaman (R-NM) to require electric utilities to get at least 15% of the power they sell from renewable sources by 2020.

Among other benefits, said Bingaman, this would reduce pressure on natural gas to generate electricity and reduce gas prices in the process.

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