The Cutting Edge – January 2004

Public Policy

By John Satagaj, WMMA® Legislative Counsel (email@jsatlaw.com)

Having failed to break a filibuster at the end of 2003, Congressional leaders have pledged to revisit the issue of establishing a national energy policy. Senate leaders hope to persuade two Senators to switch their votes to end the filibuster. I think it will be a tall order. The bill itself has its problems, but there is also the political reality. Democrats have given the President a big win with the passage of the Medicare prescription drug subsidy bill. It is hard to imagine they would be willing to give him another victory in a presidential election year.

The energy bill is more than 1,000 pages in length. The estimated cost of just the tax incentives portions of the bill is $23.5 billion over 10 years. As a fiscal conservative, I am beginning to get nervous about the spending spree upon which this Congress has embarked. In addition to the Medicare bill, the omnibus spending bill Congress is to wrap up this month has billions of dollars in "earmarked" special projects that will contribute to the deficit. It would have to take one incredible rate of economic growth to produce the tax revenues to offset the spending and tax cuts already in place. Here are a few examples of the items in the energy bill.

• The bill allows for more oil and natural gas exploration and development by providing royalty relief for deep and ultra-deep gas wells in the shallow waters of the Gulf of Mexico
• A major project established by the bill is the construction of a natural gas pipeline from the Alaskan North Slope to the lower 48 states. Eighteen billion dollars in loan guarantees are authorized for the construction.
• The legislation renews Price-Anderson nuclear liability protections for 20 years, including provisions to encourage the development of advanced modular reactors.
• It provides a $1.8 billion authorization for the Secretary of Energy to carry out the Clean Coal Power Initiative, which will provide funding to those projects that can demonstrate advanced coal-based power generating technologies that achieve significant reductions in emissions.
• The bill is designed to promote investment in critical electric transmission capacity and efficiency measures by directing the Federal Energy Regulatory Commission (FERC) to do an incentive rate rulemaking and provide for participant funding; providing for expedited siting processes on both Federal and private lands; and, providing for the use of advanced transmission technologies. The hope is it will improve the operation and reliability of electric transmission networks by providing for open access to transmission lines not previously subject to the same open access requirements; authorizing Federal utilities to participate in Regional Transmission Organizations (RTOs); providing for continued reservation of transmission capacity needed to serve “native load” customers; and, establishing an electric reliability organization to develop and enforce reliability standards for the bulk transmission system.
• The bill launches a program to get hydrogen-powered automobiles on the road by 2020 along with the necessary infrastructure to provide for the safe delivery of hydrogen fuels. The program is authorized at $2.15 billion over five fiscal years.
• The bill reauthorizes the Renewable Energy Production Incentive program to provide renewable energy production incentives for solar, wind, geothermal, biomass and other renewables. It authorizes $300 million for solar programs, starting with a goal of installing 20,000 solar roof-top systems in Federal buildings by 2010, as well as a separate $210 million program for concentrating solar power for hydrogen production and authorizes $550 million in grants for biomass programs.
• One hundred million dollars is allocated for increased hydropower production through increased efficiency at existing dams and modernizes the nation’s hydropower laws to allow increased production.

Two items not included in the bill are permission to conduct oil and gas drilling in the Arctic National Wildlife Refuge and mandated increase vehicle fuel efficiency standards.

At the end of the last session, the chief stumbling block was the provision waiving liability for the producers of methyl tertiary butyl ether (MTBE), a gasoline additive. Members of Congress, led by House Majority Leader Tom Delay (R-TX), from MTBE production states insisted on the waiver. Senators, such as Judd Gregg (R-NH), who had concerns about the use of MTBE in their states, found themselves on the opposite side.

The President pushed hard to convince the House to give in on the MTBE provision in 2003 and they would not. I think the bill would probably have passed on reconsideration in 2003 with that change. However, I think it is a different story in 2004.

Click here for last month’s Public Policy article, Setting an Ambitious 2004 Public Policy Agenda.

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