Patrick Crow
Washington Editor
The U.S. energy agenda for 1992 consists mainly of one bill in Congress, and it may be too large for Congress to swallow.
Inspired by the Bush administration's program to revamp U.S. energy policy, congressional committees last year dumped all their energy legislation into single packages.
Now those omnibus bills are in jeopardy. The Senate bill was derailed, largely over the issue of leasing the Arctic National Wildlife Refuge (ANWR) Coastal Plain. A House energy subcommittee has drafted an energy package, but the full energy and commerce committees will defer action until the Senate passes a bill.
Congress' agenda of environmental bills is almost as short, mainly reauthorizations of the Resource Conservation and Recovery Act (RCRA) and the Clean Water Act, both of prime interest to the oil industry. But they are moving slowly, too.
The most pressing issue on the legislative calendar is tax legislation designed to ease the economic recession.
The oil industry will be jostling to get in line to ask legislators for relief from alternative minimum tax (ATM) provisions that are hampering drilling (see Watching Washington, p. 32).
ENERGY POLICY
Sen. Bennett Johnston (D-La.), chief architect of the derailed Senate energy bill, tried to draft a bill that would increase energy conservation and energy production in every industry sector.
Although environmentalists strongly opposed ANWR leasing, Johnston hoped their objections would be eased because of the bill's tougher energy conservation and Corporate Average Fuel Efficiency (CAFE) standards for motor vehicles.
They were not. And because senators opposed to ANWR feared they would lose in an up or down vote on the issue, they filibustered to keep the bill from coming to the floor.
They won a critical vote to continue that filibuster, forcing Johnston to withdraw the bill (OGJ, Nov. 11, p. 17).
Johnston hopes to salvage the bill and resubmit it early in 1992. He will delete ANWR and CAFE provisions and soften sections on nuclear reform and Public Utilities Holding Company Act reform to reduce other opposition (OGJ, Nov. 25, p. 29).
Oil industry support will be lukewarm for the reduced bill. William O'Keefe, vice-president and chief executive officer of the American Petroleum Institute, said, "In terms of a national energy strategy, any legislation that virtually ignores production of oil and gas can't be considered an energy strategy bill. When you take ANWR out, there is not a lot in the short run that is going to be very beneficial."
API is concerned the Senate might amend the legislation with a bill by Sen. James Jeffords (R-Vt.) that would require refiners to produce alternative fuels. O'Keefe said, "That would raise the cost of energy in this country and not decrease dependence on oil imports."
The auto industry is ready to fight an amendment by Sen. Richard Bryan (D-Nev.) that would require auto manufacturers to increase their CAFE by at least 20% of its 1988 average beginning with the 1995 model year and 40% beginning with the 2001 model year.
Bryan, who nearly won passage of the measure in the last Congress, said the standards would result in a fleet fuel economy average of 34 mpg for passenger cars and light trucks by 1995 and 40 mpg by 2001.
LINGERING PROBLEMS
Johnston's streamlining of his energy bill may not resolve the underlying problem of ANWR.
All amendments are germane on the Senate floor, and even a scaled down energy bill would be vulnerable to an amendment calling for ANWR exploration.
Alaska's senators, Ted Stevens and Frank Murkowski, both Republicans, want to force a vote on that issue. So anti-ANWR senators will continue to have a strong motive to keep the energy bill off the floor, even if it opens them to accusations of being obstructionists.
The legislative calendar also is a creeping threat to passage of omnibus energy policy legislation. Time is growing short, and the bills have far to go.
Congress won't resume work until the last week of January, and legislation that does not make it to a House-Senate conference committee by July probably is dead.
In July, legislators take long breaks for the Independence Day holiday and the Democratic party convention, then they recess for all of August.
They will sit again in September, but by that time they will consider only crucial or noncontroversial legislation.
POLITICAL MORASS
Energy policy legislation also may have some political baggage.
Some oil lobbyists suspect Senate Majority Leader George Mitchell (D-Me.) took 5 months to bring the energy committee's bill to the floor because the legislation was inspired by the Republican administration.
And Johnston was chastised last fall by fellow Democrats for not promoting a "Democratic bill."
To get his revamped bill to the Senate floor, Johnston has promised to take the unusual step of submitting it to the Democratic caucus first for a stamp of approval.
Political dynamics will be strong in 1992 because it is an election year, and the longer the energy bill lingers into the year the greater the risk it will become snared in Democrat-Republican preelection wrangling.
At the point the energy bill appears dead, lobbyists expect a free-for-all: Various groups will try to lop off the chapters they want passed and seek to push them as separate legislation.
A number of the noncontroversial chapters might be passed that way, including natural gas reform sections the oil industry wants.
SENATE BILL
The Senate bill requires the Department of Energy to inventory the nation's fuel resources and recommend the least costly mix for the country, taking economic factors into consideration.
The bill requires nine of 10 gasoline powered vehicles acquired for federal fleets and states by 2000 to use alternative fuels, as well as seven of 10 vehicles acquired for private fleets. DOE must promote the development and use of domestically produced alternative and replacement (blendable with gasoline) fuels.
It sets tighter energy standards for federal buildings, promotes a voluntary code for private industry, and funds efficiency research and development for energy intensive industries and industrial processes.
The legislation includes a program to commercialize advanced nuclear reactor technologies, reforms nuclear licensing, and reorganizes the government's uranium enrichment program.
It exempts companies formed to generate wholesale electricity from the Public Utility Holding Company Act and facilitates hydroelectric permitting.
The bill has research programs for gas, oil shale, tar sands, advanced oil recovery, in situ coal gasification, and other coal technologies.
It would share as much as 37.5% of federal revenues from Outer Continental Shelf leasing with states and coastal communities.
It sets the goal of a 1 billion bbl Strategic Petroleum Reserve, up from 750 million, and authorizes creation of a 10 million bbl Defense Department petroleum products reserve.
It contains a number of provisions reforming regulation of natural gas pipelines.
It transfers from DOE to the Federal Energy Regulatory Commission authority to approve gas imports and orders FERC to consider the anticompetitive effects of those imports on U.S. gas producers.
It gives independent producers who form cooperatives to pool gas for sale to pipelines a limited antitrust indemnity. Independents are defined as those with less than 6 MMcfd of production.
HOUSE MEASURE
The House energy and power subcommittee's bill has provisions to update building codes for energy efficiency and requires federal facilities to increase their energy efficiency.
It toughens appliance efficiency standards for lighting, electric motors, showerheads, and commercial heating and cooling equipment. DOE would work with appliance manufacturers to promote production of ultrahigh efficiency appliances.
The bill requires FERC to issue and review its orders faster, streamlines replacement pipelines and priority projects, and permits small producers to collectively market gas.
It requires 10% of federal fleet vehicles purchases to be alternative fuel cars in 1993, increasing to 50% in 1998. Private fleets of 10 or more vehicles will have to buy 20% alternative fuel vehicles in 2002, increasing to 70% in 2005 if DOE finds that necessary.
It has sections prompting electrical power generation, disposal of high level radioactive waste, uranium enrichment, coal production, renewable energy production, and coalbed methane production.
It requires refiners and importers to place 1 % of their oil in the SPR or pay the cash equivalent. They will retain title to the oil and receive the proceeds if the oil is ever sold. That would permit a 150,000 b/d fill rate toward the goal of a 1 billion bbl SPR.
The bill also contains provisions reforming regulation of crude oil and products pipelines, allowing pipelines and shippers to resolve rate disputes and avoid FERC procedures. And it requires FERC to reform its rate methodology within a year to minimize the costs and burdens of regulation.
TAX LEGISLATION
Lobbyists expect proposals to jump start the economy with tax incentives to preoccupy Congress much of the early part of the year.
The oil industry considers that review good news. If Congress explores how taxes are hurting the economy, it may listen to the oil industry's plea that the AMT be reformed.
Independent producers say the AMT is a disincentive to drilling and will lobby tax writing committees to remove intangible drilling costs and percentage depletion as preference items under AMT.
A lobbyist for a large independent says, "It's hard to believe any economic reform proposals would not include the energy sector. Revising the AMT is an issue of equity.,,
API's O'Keefe agrees that the AMT should be included as part of a package to encourage investment and help the economy. But he adds, "The issue is highly political, and Congress apparently does not perceive the oil industry as being in trouble."
The other side of the coin is that even if Congress does consider relief for the oil industry or others the 1990 budget guidelines require it to replace any money it spends. That would open the possibility of additional taxes on the industry or an increase in fuel taxes.
Congress also may be persuaded to extend the "Section 29" credits for coal seam gas drilling. They are due to expire at the end of the year.
RCRA BILLS
The key environmental issue before Congress is reauthorization of RCRA, which controls the disposal of hazardous wastes. Congress attempted to take up RCRA reauthorization last session, but it was preempted by work on the Clean Air Act reauthorization.
The oil industry is concerned Congress will toughen regulation of drilling muds and produced fluids under RCRA, although the Environmental Protection Agency advises against that (OGJ, Sept. 16, p. 41).
The Senate environment committee plans to begin marking up a RCRA bill early in 1992.
Rep. Al Swift (D-Wash.), chairman of the House hazardous materials subcommittee, has filed a bill covering part of the RCRA reauthorization and plans to introduce another one covering the remaining sections, including oil and gas wastes and recycling of used oil, by the end of January.
Swift plans to hold hearings on the legislation in February and markup sessions by late March. But he will have trouble pushing the bill through the full committee and to the House floor before July.
O'Keefe said, "The petroleum industry generates a large volume of low toxicity wastes, and what Congress does concerning corrective action is very important to us.
Some analyses indicate tighter controls on exploration and production wastes could shut down 70% of U.S. wells and 20% of production."
He hopes Congress will continue to leave regulation to the states, noting the Interstate Oil and Gas Compact Commission has published guidelines on handling of oil field wastes.
A lobbyist for a major company expects Congress to pass a RCRA bill. "But I think industry will make its point that you can improve RCRA without devastating the domestic oil industry."
O'Keefe said API also is concerned Congress will classify used motor oil as a hazardous waste, which would complicate its collection and disposal.
WETLANDS
RCRA will be ahead of the Clean Water Act (CWA) reauthorization in line for attention, so the latter may not be considered until the next Congress.
Wetlands permitting affects oil operations in all coastal areas, pipeline construction nationwide, and even oil development on Alaska's North Slope.
Congressmen from coastal states pressed the administration to relax wetlands permitting under CWA Section 404, and the Bush administration did so through new guidelines.
But Congress could undo that in its CWA reauthorization.
The major bill filed in the Senate environment committee did not contain a wetlands provision, but one could be filed later.
The House public works committee has held hearings on whether to more narrowly define wetlands but has not been able to agree on an approach.
Meanwhile, Congress amended a spending bill to bar enforcement of the former wetlands definition through the end of September 1992.
OTHER ISSUES
Senate and House committees have passed bills to reauthorize federal safety programs for oil and gas pipelines, giving more emphasis to environmental protection. The next hurdle for the legislation is the House public works committee.
The bills would require the Transportation Department to take environmental protection into account, as well as potential threats to human safety and property, when drafting pipeline safety rules.
The bills also require gas pipelines to install excess flow valves in new or rebuilt pipelines to minimize leaks in the event of rupture.
Congress may pass wilderness bills for Montana and Colorado this session.
Montana Sens. Max Baucus, a Democrat, and Conrad Burns, a Republican, agreed on the state's first wilderness protection bill. It locks up 1.2 million acres of roadless areas in national forests but opens another 4 million acres to multiple use, including oil exploration.
The Senate has yet to pass the Montana bill but approved a Colorado wilderness bill that places 700,000 acres of forest off limits for development.
The Petroleum Marketers Association of America is pushing legislation to prevent refiners from charging wholesale customers more than the price at their own direct operated stations (minus the cost of doing business), and tighten bans against refiners influencing retail prices set by their dealers. Prospects for passage are uncertain.
Congress is likely to give the Environmental Protection Agency cabinet status. The Senate has passed a bill to that effect, and Rep. John Conyers Jr. (D-Mich.), chairman of the House government operations committee, plans to report out a bill early in 1992.
Copyright 1991 Oil & Gas Journal. All Rights Reserved.
