Senate passes energy bill, drops two major provisions

The US Senate Dec. 13 passed an energy bill, which does less than many Democrats had hoped, but stands a greater chance of being signed into law.

Nick Snow
Washington Editor

WASHINGTON, DC, Dec. 18 -- The US Senate Dec. 13 passed an energy bill, which does less than many Democrats had hoped, but stands a greater chance of being signed into law.

Provisions that would have taxed oil and gas producers to finance renewable energy projects and research and that would have established a renewable portfolio standard for electric utilities were deleted before the 86-8 vote. But the heavily reworked HR 6 retained the first major increase in motor vehicle fuel efficiency requirements in 32 years and a significant expansion of the federal motor fuel ethanol mandate.

US House Speaker Nancy Pelosi said the House would pass the bill quickly and send it to President George W. Bush for his signature. "This legislation includes an historic increase in fuel efficiency to 35 mpg by 2020—the first such action in 32 years. It makes a major commitment to homegrown biofuels, sending our energy dollars to the Midwest, not the Middle East. It sets our nation on a new course, a new direction for energy security," she said following the Senate's vote.

Senate Democrats simultaneously applauded the surviving provisions while criticizing Republicans for opposing requirements that were deleted. Several leading Republicans praised Democrats for their willingness to compromise, while others said the bill would do nothing to increase available energy supplies.

'Good first step'
The senators who chair the two committees that affect oil and gas most directly said the approved bill was significant although fell short of what they wanted. "While it should have been a better and stronger bill with tax breaks for renewable energy and a requirement for electric utilities to use more solar, wind, and geothermal energy, it is still a good first step toward a cleaner future for America," said Barbara Boxer (D-Calif.), the Environment and Public Works Committee's chairwoman.

Energy and Natural Resources Committee Chairman Jeff Bingaman noted that the bill also would reduce energy consumption by increasing home appliance energy efficiency. "I'm disappointed that we were not able to move ahead with a renewable energy standard or provisions to extend and expand the tax incentives for renewable energy production and energy conservation. I hope in the next session of Congress we are able to revisit both of these issues and enact legislation," he said.

Other Senate Democrats were upset that a second vote to limit debate earlier that day fell one vote short, forcing removal of the oil and gas tax provisions. "Once again, President Bush and Senate Republicans have chosen to defend oil company profits instead of standing with consumers and moving toward a clean energy future. President Bush issued a veto threat because the energy bill would have eliminated oil company tax breaks in order to fund wind and other clean energy sources. Senate Republicans fell in line and blocked the bill," said Hillary R. Clinton of New York.

Maria Cantwell (D-Wash.) said an earlier veto threat led to removal of a provision that would have made gasoline price-gouging a federal crime. "Although I'm disappointed we weren't able to more completely break away from our over-dependence on fossil fuels, this is still the most important, and greenest, energy bill ever passed by Congress. It bets on American energy and investment rather than gambling our future on the good will of [the Organization of Petroleum Exporting Countries]," she said.

Russell J. Feingold (D-Wis.), while also expressing disappointment that the oil and gas tax and renewable energy requirement for utilities had to be removed, said the legislation's passage still was a positive step. "This year's bill finally moves past the misguided debates of previous Congresses and the fiscally and environmentally irresponsible proposals that were considered and passed in recent years," he maintained.

Ethanol expansion
Farm state senators applauded the surviving ethanol mandate expansion. Tim Johnson (D-SD) noted that it would ensure minimum production of 15 billion gal/year of ethanol by 2015, essentially doubling the amount currently produced in the US. "South Dakota's ethanol plants will have the capability to produce 1 billion gal of ethanol in 2008, and this bill will ensure a strong future for renewable energy in our state," he said.

"This new legislation will continue to allow for the growth of ethanol, while also promoting other biofuels such as those derived from cellulosic material. The bill will raise the Renewable Fuel Standard to 36 billion gal by 2022, more than half of which would have to come from advance biofuels. It also provides resources for more biofuels research," said Ben Nelson (D-Neb.).

"This is the most robust renewable fuels standard we've ever had and will dramatically expand the use of renewable energy and drive the production and development of cellulosic biofuels. It will give a tremendous boost to ethanol and biodiesel producers who have suffered from lower prices," said Charles E. Grassley (R-Iowa).

Ethanol and agriculture lobbies also applauded the provision. The National Petrochemical & Refiners Association did not. "NPRA continues to oppose expanding the biofuels mandate, to say nothing of tying the nation's energy future to nonexistent technologies such as cellulosic ethanol. Both the Senate and House versions of HR 6 do very little to increase domestic energy supplies, but they do everything to choose winners and losers in the markets, which will ultimately mean instability and uncertainty for our businesses and consumers," NPRA Pres. Charles T. Drevna said.

New CAFE requirements
Backers of the higher average motor vehicle mileage requirement also were elated. Dianne Feinstein (D-Calif.) said that she and Olympia Snowe (R-Me.) "fought for 6 long years to get this bill passed." Approval would not have been possible without the efforts of Commerce Committee Chairman Daniel K. Inouye (D-Hi.) and Vice-Chairman Ted Stevens (R-Ak.) among others, she continued.

"I am elated that a strong bipartisan consensus has agreed that it is time to move our automobile fleet into the 21st Century. That both parties would come together to chart a new energy policy is a landmark moment for this institution and frankly, with [gasoline] prices continuing to skyrocket, comes not a moment too soon," Snowe said.

"This is the first statutory increase in fuel economy standards for cars since 1975. Our actions today will improve national security, create jobs, help consumers and protect the environment. At times, it is the government's responsibility to balance conflicting interests. Today, I believe we found that balance," Inouye said.

Stevens said that he became involved in the automotive mileage issue when he realized that a combination of initiatives was the only way the US could achieve energy independence. "Conservation, domestic production and the development of alternative energy are part of the broader solution," he said.

But Debbie Stabenow (D-Mich.) said she voted against the final bill because the deleted provisions also included a loan program to help automakers retool plants to meet more aggressive mileage standards and $1 billion of tax credits for consumers to buy advanced technology vehicles. "I could not support a new mandate on our auto industry without including the critical incentives and funding support needed to help it be successful and keep jobs in America," she said.

Republican reactions
Some Republicans also criticized against the final bill despite the deletion of provisions involving oil and gas taxes and a renewable energy requirement for electric utilities. "I simply could not support an energy bill that will further drive up the already high price of gasoline at the pump or the cost of energy in our homes," James M. Inhofe of Oklahoma, ranking minority member of the Environment and Public Works committee, said on Dec. 14. "Absent from this energy bill are domestic energy resources such as oil, natural gas, and clean coal technologies that are essential to securing an energy supply that is stable, diverse, and affordable," he said.

The bill also extends the Federal Unemployment Tax Act surtax on businesses that was first established in 1976 to repay loans from the federal unemployment tax fund, he said. "Even though this money was fully repaid in 1987, Congress has extended this temporary tax five times, imposing an annual $1.4 billion tax burden on America's workers and employers," he said.

Wayne Allard of Colorado also noted the absence of any provisions aimed at reducing gasoline prices or increasing gas supplies, but added that the bill extended a number of renewable energy tax credits. "I am relieved the Democrats sought compromise, allowing us to pass a reasonable energy bill," he said.

Both of Idaho's senators backed renewable energy and vehicle mileage provisions in the bill but opposed the oil and gas taxes. "This is not an 'either-or' proposition," said Mike Crapo. "We must address the growing energy demand of our country with both a long-term commitment to promoting investment in alternative energy sources such as wind, solar, geothermal and nuclear power with increased incentives, research and development. However, we must do this while maintaining strong domestic production of more traditional energy resources such as oil, natural gas and coal-based electricity," he said.

"The final product is not perfect, but it's vastly better than the version that was sent to us by the House. We recognized here in the Senate that the House bill couldn't pass the Senate and wouldn't be signed into law. So we fixed it, and now it will," Minority Leader Mitch McConnell of Kentucky said.

Contact Nick Snow at nicks@pennwell.com.

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