Washington (Electric Power Daily), Aug 8, 2005

President Bush on Aug 8 signed Energy Policy Act of 2005 into law against a backdrop of the Sandia National Laboratories in Albuquerque, N.M., triggering a number of rulemakings and other actions by the Federal Energy Regulatory Commission.

The legislation "will help ensure that consumers receive electricity over dependable modern infrastructure," said Bush at the ceremony outside the laboratory. "The bill removes outdated obstacles to investment in electricity transmission lines in generating facilities. The bill corrects the provision of the law that made electric reliability standards optional instead of mandatory."

The bill authorizes FERC to grant permits for lines deemed critical by the Dept. of Energy. "To keep local disputes from causing national problems, the bill gives federal officials the authority to select sites for new power lines," said Bush. "With this bill, America can start building a modern 21st century electricity grid, as well."

The bill offers a broad ban on manipulation of the wholesale power market and allows FERC to issue rules to set up an electronic information system to provide public access to wholesale power prices and availability while boosting civil and criminal penalties for violations of the Federal Power Act. But it allows utilities to use their transmission rights to protect their native load customers.

As part of its 10-year multi-billion dollar tax incentive package, the bill accelerates the depreciation schedule for transmission investment to 15 years, and allows utilities that sell their transmission assets to a FERC-approved independent company up to eight years to pay the tax on any gain.

Meanwhile, in a briefing with reporters on Aug 8, FERC Chairman Joseph Kelliher said the bill is the "most significant" change for federal energy regulatory policy in 70 years and marks a major vote of confidence in the agency.

Kelliher said the bill is "very significant in scope and breadth" and one that will result in several new rules and regulations for the commission.

The legislation demonstrates that Congress "still wants to see competition" in the wholesale electricity markets and gives FERC new tools to penalize companies that attempt to manipulate the market, Kelliher said. For example, he pointed to the agency's new jurisdiction over all generation-only acquisitions and stronger penalties to punish those who try to game the wholesale market.

Under the new law, "we're not so limited" in how the agency punishes violators.

He said the agency is currently assessing the many timelines for each new rulemaking and regulatory change the bill requires, and said he will ask Congress for additional funding and staff if needed.

Kelliher said he expects the creation of a new reliability organization and mandatory reliability rules to be particularly taxing. Although the electric industry has been clearing up the existing reliability standards, Kelliher said under the law, FERC has its hands full. It must certify an electric reliability organization and determine how that agency will be funded, he said. FERC must also determine how it will enforce the new rules, once finalized. "That's an area we have to spend some time on," he said.

Under the law, FERC must issue a final rule on mandatory reliability standards within 180 days. Also, the commission within four months must implement new standards reflecting a streamlined version of the Public Utility Holding Company Act; by the end of the year it must report to Congress on the status of its California refund proceeding; after 180 days it must sign a memorandum with the Commodities Futures Trading Commission on natural gas and electric market transparency provisions; and, among other things, establish within a year a rulemaking allowing for incentive-based rate treatment for interstate transmission.

Here is a roundup on the law's key provisions for the electricity industry:

• Streamlines the hydroelectric licensing process by allowing disputed issues raised by the licensee or any party to be considered in a single trial-type hearing process lasting no more than 90 days. Provisions also allow for consideration of alternative conditions and prescriptions in licensing a hydroelectric project.
• Frees electric utilities from having to enter new purchase and sale contracts with qualifying facilities under the Public Utility Regulatory Policies Act in cases in which QFs have access to independent real-time and day-ahead wholesale power markets.
• Allows, but does not mandate, FERC to consider "participant funding" plans to finance new generation interconnection or upgrades so that those that benefit from the projects are assigned costs. FERC already has the discretion to consider such plans, but the participant funding issue went through a number of contentious iterations and apparently simply ended up with this language as a compromise.
• Says FERC may issue rules to set up an electronic information system to provide public access to wholesale power prices and transmission availability to inject transparency in the market. This issue was also contentious, since some lawmakers wanted to require FERC to establish such a system.
• Allows transmission property rated 69 kV or greater to be treated as 15-year property; the provision is expected to provide a $1.2-bil benefit over the 10-year period.
• Extends the placed-in-service date by two years--to December 31, 2007--for renewable energy sources to qualify for a production tax credit; includes hydropower and Indian coal generation in the mix of wind, closed-loop biomass, open-loop biomass, geothermal, small irrigation, landfill gas and trash combustion as "Section 45" QFs. The renewable production credit was projected to cost $2.7-bil through 2015.
• Provides the first production tax credit for nuclear power facilities with a 1.8-cent/kWh credit for electricity generated during an eight-year period. The value is projected at $278-mil.
• Provides a 15% investment tax credit for low-emission advanced coal facilities and a 20% investment tax credit for integrated gasification combined-cycle projects. The tax break for the 10-year period comes in at $1.6-bil.
• Allows coal-fired generating units built after 1975 to amortize the cost of certified air pollution control equipment over seven years. That is a two-year extension from present law and is expected to provide a $1.1-bil benefit.

US Senate approves comprehensive energy legislation
House vote expected July 28 on energy bill, tax incentives
Key lawmakers praise energy bill, expect final Congress approval
House-Senate negotiators meeting Monday to complete energy bill
House-Senate conference debate electricity title
Senate passes energy bill, 85-12, MTBE solution sought
Senate concludes debate after climate, OCS fights
US Senate defeats bid to boost vehicle fuel-efficiency
Democrats say MTBE waiver, ANWR would doom bill
Senate reaches consensus on need to combat climate change
Domenici says he won't support Bingaman's climate change legislation
Senate leaders push for energy bill the week of June 20
Senate votes 52-48 for 10% renewable energy mandate
Senate Finance Committee unveils tax incentive package

US Senate approves comprehensive energy legislation
Washington (Platts Global Alert), July 29, 2005
The US Senate on July 29 passed by a 74-to-26 margin a $12.3-bil compromise comprehensive energy bill designed to boost domestic energy supplies, encourage conservation and bolster the nation's electricity grid. The House passed the measure the day before on a 275-to-156 vote.

The legislation now makes its way to President Bush, who has said he will sign the bill into law before Aug 1. The measure is the first comprehensive energy bill passed by Congress in over a decade.

The Senate earlier on July 29 voted 71-29 to beat back an effort by Senator Russ Feingold (Democrat-Wisconsin) to halt Senate passage of comprehensive energy legislation over concerns that it violates budget rules. Feingold, in a speech on the Senate floor, said the bill, estimated to cost between $11.5- and $12.3-bil, "digs us deeper into a budget black hole."

House vote expected July 28 on energy bill, tax incentives
Washington (Electric Power Daily), July 28, 2005
An $11.5-bil energy tax incentive program agreed to by House and Senate negotiators on July 27 allocates the bulk toward the electric power sector, with tax breaks for renewable energy production, low-emission coal facilities and electric transmission sales.

The House is expected to vote on the comprehensive bill, H.R. 6, on July 28 and the Senate would take it up the following day. President Bush wants a national energy policy bill--the first since 1992--for his signature by Aug. 1.

Senate Finance Committee Chairman Charles Grassley, R-Iowa, said the conference on the legislation was a success and resulted in a "final tax package that's well-balanced among renewable energy, conservation and traditional energy sources."

"Renewable energy and conservation got a very big slice of the pie," he said. "Now that MTBE liability is out of the picture, it looks like the Senate will pass this bill with no problem and the president will have it on his desk next week."

House Energy and Commerce Committee Chairman Joe Barton, R-Texas, agreed. Barton, who chaired the energy bill conference this year, relinquished his effort to include a provision to grant MTBE makers limited liability in cases involving water contamination from leaky underground storage tanks--language that was credited to sinking the bill in the Senate during the previous Congress. Barton told CNBC that he was "not aware of any sticking point."

"It's almost a done deal," said Barton. "I have every expectation that it will pass overwhelmingly."

Key provisions of the Energy Tax Incentives Act of 2005 include those that would give electric transmission assets a 15-year recovery rather than the current 20-year period, and allow utilities that sell their transmission assets to an independent transmission company approved by the Federal Energy Regulatory Commission eight years to pay the tax on any gain. Allowing transmission property rated 69kV or greater to be treated as 15-year property is expected to provide a $1.2-bil benefit over the 10-year period.

The package extends the placed-in-service date by two years--to Dec. 31, 2007--for renewable energy sources to qualify for a production tax credit and includes hydropower and Indian coal generation in the mix of wind, closed-loop biomass, open-loop biomass, geothermal, small irrigation, landfill gas and trash combustion as "section 45" qualifying facilities. The renewable production credit was projected to cost $2.7-bil through 2015.

The bill provides the first production tax credit for nuclear power facilities with a 1.8 cts/kWh credit for electricity generated during an eight-year period. The value is projected at $278-mil.

Low-emission coal facilities will get a 15% investment tax credit and integrated-gasification combined-cycle projects that produce power get a 20% investment tax credit. The bill allocates up to $800-mil for IGCC projects and up to $500-mil for other advanced coal technologies. The tax break for the 10-year period comes in at $1.6-bil.

Coal-fired generating units built after 1975 can amortize the cost of certified air pollution control equipment over seven years. That is a two-year extension from present law and is expected to provide a $1.1-bil benefit.

The bill also allocates $411-mil in tax credits to "clean renewable energy bonds" whereby Indian tribes and electric cooperatives or other qualified entities can issue bonds to pay for capital costs for section 45 facilities.

Key lawmakers praise energy bill, expect final Congress approval
Washington (Platts Global Alert), July 26, 2005
After a House-Senate conference committee early on July 26 effectively wrapped up a compromise energy bill, key lawmakers said they expected both the House and Senate to sign off on the measure, possibly later in week. "We have just passed the most comprehensive energy bill that's been put before the Congress probably in the last 30 to 40 years. That's a significant accomplishment," Rep Joe Barton (Republican-Texas) who led the negotiations, said after the committee ended a nine-hour session to reconcile House- and Senate-passed versions of the bill. Critics said the bill fails to address rising gasoline prices or reduce US oil imports.

Negotiators included an amendment that would require the Energy Secretary to select sites that would allow the Energy Department to expand the US Strategic Petroleum Reserve to 1-bil bbl. The underlying bill mandates that DOE increase the emergency crude oil stockpile's capacity from the existing 727-mil bbl to 1-bil bbl as quickly as possible as long as the fills do not cause a big increase in oil or oil product prices. The amendment, offered by Rep. Chip Pickering (Republican-Mississippi), calls for the Energy Secretary to give preferance to SPR sites that have already been studied--one in Texas, one in Louisiana and one in Mississippi--but gives the secretary discretion to evaluate other sites. Some 695-mil bbl of crude oil is currently stored in the SPR.

One of the biggest disputes--over a provision to give makers of gasoline additive MTBE protection from defective-product lawsuits--was resolved when House Republicans decided to omit the language after it became apparent that the measure could kill the entire bill in the Senate. A provision requiring an inventory of oil and gas resources in the Outer Continental Shelf could still prove a sticking point because of strong opposition by some coastal state lawmakers, but Senator Pete Domenici (Republican-New Mexico) said he believed there would not be enough oppositon to kill to the bill.

Lawmakers agreed to add to the bill a permanent ban on oil or natural gas drilling in or under the Great Lakes. The amendment, sponsored by Bart Stupak (Democrat-Michigan), would make permanent a drilling ban that currently is in effect through 2007.

The legislation now will go to the House on July 27 for final approval and could be voted on by the Senate as early as July 28. Sen Pete Domenici (Republican-New Mexico), a key author of the bill, said he was concerned that royalty provisions giving coastal states $1-bil in revenues for drilling could draw some opposition in the Senate, but he expressed confidence that the bill ultimately would pass.

House-Senate negotiators meeting Monday to complete energy bill
Washington (Natural Gas Alert), July 25, 2005
US House-Senate negotiators plan to meet on July 25 and work into the night with an eye toward completing work on a joint energy bill. Negotiators met in a rare Sunday session on July 24 in an effort to get legislation to President George W Bush by the end of the week, as he had requested. Lawmakers appeared to leap a major hurdle on July 24 by apparently agreeing to remove from the negotiated bill a controversial provision to grant makers of gasoline additive MTBE protection from defective product lawsuits. The House bill included such a provision, but the Senate bill did not. Senators have said all year that the inclusion of the liability language would doom the compromise bill in the Senate, as it did to last year's bill when senators from states with MTBE-contaminated water threatened to filibuster. But Rep. Joe Barton, the chairman of the energy conference, and House Majority Leader Tom DeLay, both Texas Republicans, had insisted that the provision stay.

Barton on Friday proposed to settle the impasse by establishing an $11.8-bil fund, financed jointly by industry and the federal and state government, to pay to clean up for MTBE-contaminated water. His proposal would have kept the MTBE liability language in the bill, but have carved out an exception for New Hampshire. The proposal was panned by industry and many in the House and Senate, causing Barton to agree to pull the MTBE liability measure from the bill, congressional aides said. Senator Charles Schumer (Democrat-New York), in a statement, said he was pleased that the MTBE liability language was eliminated from the compromise bill. "It is good that the MTBE boondoggle is now out of the energy bill," Schumer said in a statement Monday. "It doesn't have support in the Senate and we will do everything we can to kill it no matter where it appears."

Barton told reporters Sunday that only a handful of difference between the House and Senate versions of energy legislation have yet to be resolved. Those issues, he said, are: a proposal to encourage construction of new oil refineries; a renewable energy generation standard; a provision supporting "participant funding" of new electricity transmission; and language related to China National Offshore Oil Corp's bid for Unocal Corp. Those issues will be on the agenda during the meeting on July 25, as will various issues related to oil and gas, climate change, ethanol and fuels, studies and other matters upon which consideration had been deferred. The joint tax title of the bill, on which negotiators will have to work a compromise between the Senate's $16-bil bill and the House's $8-bil legislation, is being handled by another committee, Barton said Sunday, and would likely be filed separately.

House-Senate conference debate electricity title
Washington (Electric Power Daily), July 22, 2005
House and Senate members negotiating a comprehensive energy bill took up the wide-ranging electricity title on July 21 that would repeal the Public Utility Holding Company Act, create a grid watchdog and expand federal energy regulators' authority in transmission siting and merger review.

Led by House Energy and Commerce Committee Chairman Joe Barton, R-Texas, the conference is expected to wrap up negotiations on the bill the week of July 25 with the goal of getting a final bill through Congress and to the president by Aug. 1.

Text of the electricity title agreed upon by conference leaders in preparation for the conferees' meeting on July 21 reflected the Senate-passed energy bill in key areas: expanding the Federal Energy Regulatory Commission's ability to review generation transactions worth $10 million or more; allowing but not requiring FERC to set up an electronic platform to improve market transparency; and saying the commission may approve participant funding plans to finance new transmission.

The proposed title does not contain certain provisions related to regional transmission organizations that were included in the House and Senate version of the energy bills. Absent from the proposed conference electricity title is House language providing a "sense of Congress" that all transmitting utilities should voluntarily become members of RTOs and requiring that FERC report to Congress on RTO applications, their approval status and why the commission has decided not to approve certain applications.

Senate provisions less friendly to RTO formation were also omitted. They included provisions banning FERC from conditioning a merger or other orders on whether a utility joins an RTO and requiring the commission to audit RTOs and independent system operators each year while authorizing FERC to place additional requirements on the entities.

The conference draft title also lacks language attacking the long-moribund "standard market design" proposed by FERC in July 2002 to restructure the market for competition nationwide with a handful of RTOs expected to reduce obstacles to wholesale market transactions. The Senate energy bill terminated the SMD while the House bill remanded the proposal to the commission. Under new Chairman Joseph Kelliher, FERC earlier this week put a formal end to its SMD proposal.

The conference text also excludes the House provision that eliminated FERC authority to abrogate or modify any power or gas contract set at market-based rates except when it is in the public interest.

In addition to increased civil and criminal penalties for Federal Power Act violations, a blanket ban on market manipulation on companies under FERC jurisdiction, as drafted in the Senate bill, also appears in the conference title.

The conference report carries the significant components of both the House and Senate energy bills. In addition to repealing PUHCA within six months of enactment, it establishes an electric reliability organization to develop and enforce grid standards without the 10-year, $50-bil budget cap called for by the House. The draft conference report language also frees electric utilities from having to enter new purchase and sale contracts with qualifying facilities under the Public Utility Regulatory Policies Act in cases in which QFs have access to independent real-time and day-ahead wholesale power markets.

FERC also gains "backstop" siting authority for transmission projects deemed critical by the federal government in instances in which states cannot or have not sited such facilities. Unregulated utilities also would be required to provide transmission services under nondiscriminatory rates and conditions.

Barton said the electricity title would have a section for a renewable portfolio standard, but that language was not available July 20. The Senate approved an RPS in its energy bill to mandate utilities get 10% of their power from renewable sources by 2020. Barton has said he preferred including "clean" energy sources such as low-emission coal rather than strictly renewables such as wind or solar.

Senate passes energy bill, 85-12, MTBE solution sought
Washington (Electric Power Daily), June 29, 2005
By a bipartisan vote of 85-12, the Senate on June 28 passed its comprehensive energy bill and began preparing to negotiate a final bill with the House, where leaders propped open the door to removing a major hurdle to completing the bill: the MTBE liability waiver.

During a news conference, House Republican Leader Tom DeLay of Texas said the way to resolve the conflict over the MTBE liability waiver is up to House Energy and Commerce Committee Chairman Joe Barton (Republican-Texas). Depending on the solution, the provision could wind up being attached instead to the pending massive highway bill.

"We'll look at what the solution is and when we figure out where to put it, that's where we'll put it," said DeLay. Barton, who will chair the energy bill conference, has been working on a way to make the waiver for makers of the gasoline additive based in his home state palatable to the Senate. The provision is blamed for killing the legislation in the Senate in the last Congress.

Following the Senate vote, President Bush on June 28 reiterated his request that the lawmakers resolve their differences and get a bill to his desk before the August recess.

Senate Energy and Natural Resources Committee Chairman Pete Domenici, R-N.M., said he pledged to work with the House to get an energy bill to the president's desk. "We have disagreements, but they are less important than getting an energy bill done. That's urgent," Domenici said.

Senator Jeff Bingaman, (Democrat-New Mexico), the committee's ranking Democrat, called the bill a "substantial improvement over current law." Bingaman succeeded in inserting a 10% renewable energy mandate by 2020 for utilities and a resolution stating that mandatory steps will be necessary to curb greenhouse gas emissions -- areas that were unwelcome by the House.

Key electricity provisions in both bills include a mandate for enforceable grid standards, repeal of the Public Utility Holding Company Act and authorization for the Federal Energy Regulatory Commission to site critical transmission lines when states fail to do so. The bills also crack down on manipulation in the wholesale power markets, lessen the purchase and sell obligations of utilities under the Public Utility Regulatory Policies Act, and help open access to the grid while allowing utilities to protect their native load.

In addition to the renewable portfolio standard and the MTBE provision, other significant differences in the two bills include their energy tax incentive packages. The $8 billion House bill focuses on domestic oil and natural gas production, while the Senate passed $14 billion in energy tax incentives plus $4 billion in revenue raisers.

Bingaman said some members were pleased to see some things added to the energy bill and that there were "things added to the bill [lawmakers] would not like to see added, but that is the nature of the process." While he looked forward to the conference, Bingaman said he hoped the Senate can prevail "on important items the Senate has gone on record with today."

Senate concludes debate after climate, OCS fights
Washington (Inside Energy), June 27, 2005
Senators in both parties the week of June 20 expressed satisfaction after putting the chamber's energy bill on the cusp of passage, likely to come on June 28, and they looked ahead to a potentially bruising battle in what will be a House-led conference to craft final legislation.

Both chambers need to approve a final House-Senate bill, known as a conference report, before it can be sent to President Bush for his signature.

The Senate late on June 23 wrapped up its two-week energy debate, but delayed a vote to approve the measure because the primary sponsors, Senators Pete Domenici (Republican-New Mexico) and Jeff Bingaman (Democrat-New Mexico) had to leave town to tend to a proposed military base closing in their state. The Senate is expected to pass overwhelmingly, in large part because Domenici and Bingaman crafted the bill with other senators over the course of five months, earning the measure bipartisan praise.

The Senate has been debating the bill, which would set energy policy for the first time since 1992, since June 7. Majority Leader Bill Frist (Republican-Tennessee) on June 24 called the Senate's completion of the energy debate after dealing with 230 amendments "a tremendous success for this body."

Two years ago, Republicans were unable to push through a Domenici energy bill, and had to go to conference with a Democratic measure that had passed the year before.

A vote in favor of the bill was all but sealed on June 24 when the Senate voted 92-4 to end debate. That move prompted senators to look back on the week's fiercest debate over climate change and ahead to the prickliest issue likely to face the conference committee: a House-backed provision prohibiting defective-product lawsuits against manufacturers of the gasoline additive MTBE.

Underpinning both issues is White House involvement. On MTBE, Alex Flint, staff director for the Senate Energy and Natural Resources, said June 17 that the Congress may need the White House to help resolve the MTBE proposal.

The House is likely to insist that the liability waiver, known as a "safe harbor," be included in a final bill if lawmakers cannot find a way to pay for cleanup of MTBE, which has fouled water in many parts of the country. The safe harbor provision was a primary reason the Senate failed to send Bush a bill in November 2003.

Bush has been pushing publicly for an energy bill by Aug. 1, and industry lobbyists said privately last week they believed he would back his words up with action to resolve the MTBE disagreement, if necessary.

The Senate Democratic leader, Senator Harry Reid (Democrat-Nevada) called the MTBE provision a "poison pill" and indicated he would lead a filibuster on the final energy bill if it includes the liability waiver. "I just think it's a poison pill to any legislation that would come," he said. "I think there are enough senators to stop whatever would come."

A House aide familiar with negotiations on a highway bill said last week that Representative Joe Barton (Republican-Texas) is pushing for the MTBE waiver to be included in that measure. Barton, who will lead the energy bill conference, is the chief proponent of the MTBE waiver.

Bingaman and Reid pointed fingers at the White House for killing mandatory limits on greenhouse gas emissions believed responsible for global warming, which the Senate rejected Wednesday. Reid accused Republicans, many of whom acknowledged the effects of global warming, of caving to Bush administration pressure.

"It's obvious that global warming legislation is something the oil companies don't want, and if it's left to the administration, there will be no global warming legislation," he said.

In an extended climate change debate, the Senate sent a strong signal to Bush, committing in a nonbinding resolution to pass a bill by the end of the year establishing mandatory carbon dioxide emissions limits.

Proponents of climate change legislation were pleased that the matter had gotten serious consideration, but were unhappy that the Senate did not take stronger action.

The Senate did vote 66-29 in favor of an amendment -- offered by Senator Chuck Hagel (Republican-Nebraska) -- that would provide direct loans, loan guarantees and other financial aid for projects that deploy technologies that reduce greenhouse gas intensity. Hagel's bill, cosponsored by six Republicans and two Democrats, would also empower the State Department to assist international demonstration projects. Environmental groups said the measure would have no impact on climate change.

Advocates of climate change legislation had some hope early in the week on June 20 that the Senate would approve binding CO2 curbs. But Domenici, after meeting with Vice President Cheney and other Senate Republicans, announced late on June 20 that he would not support a Bingaman proposal that would have required emissions intensity to fall 2.4% a year starting in 2010.

The Energy and Natural Resources Committee announced on June 24 that Domenici would hold a hearing on the Bingaman language, modeled after National Commission on Energy Policy recommendations.

Domenici on June 21 called the Bingaman proposal, which would require a 5% cut in greenhouse gas emissions by 2020, "a total failure" when it came down to working out the details of legislative language.

Domenici, who environmental groups accused of choosing politics over principal, told Inside Energy he wanted Bingaman's mandatory caps to kick in later so that they would be more in line with the Bush administration's voluntary initiative to reduce greenhouse gas emissions intensity.

Energy Secretary Samuel Bodman said the White House did not derail Bingaman's proposal. "The White House didn't kill anything," he told reporters. "...I believe that the Senate made a wise choice in dealing with a more narrow set of issues with respect to the energy bill. A single bill can't solve all the problems of the world."

Sensators John McCain (Republican-Arizona) and Joseph Lieberman (Democrat-Connecticut) offered an altered version of a carbon-cap bill that failed in 2003, but it was soundly defeated. The bill would have required CO2 emissions to be 18% lower by 2020 than they are today. This time around it also included incentives for new nuclear power generation.

"Politically, we haven't spoken" on climate change, Senator Larry Craig (Republican-Idaho) said during a news conference extolling the energy bill. He argued the bill's emphasis on nuclear energy, energy efficiency and renewable energy would reduce global warming.

The bill, which when finalized will be over 1,000 pages in length, now must be matched with a House measure. There are a number of significant differences, especially between the two tax packages.

The Senate's $14-bil bill would provide a $4.5-bil tax credit for renewable energy production. The $8-bil House version offers nothing to renewable producers and emphasizes traditional energy infrastructure. The White House has asked for the bill to cost no more than $6.7-bil.

The House and Senate bills are also 3-bil gallons apart on a requirement for ethanol in gasoline. The House called for a 5-bil-gallon "renewable fuels standard;" the Senate voted for 8-bil gallons of ethanol to be used by 2012.

The Senate bill also includes a renewable portfolio standard, which requires 10% of electricity to be produced by renewable sources by 2020. Bingaman called the RPS "a bargaining chip" after its narrow passage two weeks ago.

In addition to MTBE, Reid designated three other measures as "poison pills" that would stymie the energy bill: an Arctic National Wildlife Refuge drilling provision; President Bush's Clear Skies proposal, which sets limits on mercury, nitrogen oxides and sulfur dioxide; and any measure that would lead to drilling in off-limits areas of the Outer Continental Shelf.

Although last week's Senate debate was highlighted by climate change, the OCS development issue was testy, even though there were no votes on changing current policy.

Domenici and supporters of allowing new OCS drilling in an attempt to cut oil and gas imports were forced by Florida's senators to withdraw amendments giving states the option to waive a federal ban on most offshore drilling. Senator Lamar Alexander (Republican-Tennessee) on June 22 submitted and then at Senator Bill Nelson's (Democrat-Florida) insistence withdrew an amendment to the energy bill that would have permitted states to "opt out" of offshore areas barred from exploration and production off their coasts.

Nelson last week delayed the bill with a mini-filibuster, much like he had done the previous week, until senators who wanted drilling agreed to withdraw their amendments.

The Senate voted 52-44 to keep a provision in the bill that would require the Interior Department to inventory all oil and natural gas reserves on the OCS, including areas currently off-limits to drilling. Nelso said in an interview on June 21 that seismic testing necessary for the inventory in the nine moratoria areas alone would cost $1-bil.

Senators voted to provide $1.25-bil in federal royalty money over five years to states with offshore production. Budget Committee Chairman Judd Gregg (Republican-New Hampshire) raised a budget point of order against the measure, which would fund a new "coastal impact assistance program."

Louisiana's congressional delegation lobbied for the provision for years, arguing that it would help that state pay to repair coastal damage resulting from offshore drilling.

On fuel economy, the Senate voted 67-28 to reject Democratic Senator Richard Durbin's proposal to raise the fuel efficiency of both passenger vehicles and light trucks to 40 mpg over 11 years.

Current Corporate Average Fuel Economy standards are 27.5 mpg for passenger cars and 21 mpg for light trucks. The light truck standard will rise to 22.2 mpg for model year 2007 vehicles.

Centrist senators tried to develop a compromise fuel economy proposal, and on June 22 planned to offer an amendment. But they ran out of time.

Lieberman and Sensators Evan Bayh (Democrat-Indiana) and Ken Salazar (Democrat-Colorado) did file an amendment that would have given automakers incentives to build fuel-efficient cars.

The Senate approved 64-31 a measure offered by Senator Christopher Bond (Republican-Mossouri) that would require the National Highway Traffic Safety Administration to study options fuel economy standards.

Senators withdrew many of the amendments when it became clear they could not win, or had their amendments ruled non-germane to the energy bill after cloture was invoked.

Other amendments adopted would guide the administration of the Strategic Petroleum Reserve; require a Federal Trade Commission investigation of gasoline prices; establish hydrogen and fuel cell studies; create incentives for ocean wave energy; and authorize $1.4-bil over seven years for the Clean Coal Power Initiative.

US Senate defeats bid to boost vehicle fuel-efficiency
Washington (Natural Gas Alert), June 24, 2005
The US Senate late June 24 voted down 67-28 an amendment to the comprehensive energy bill that would have raised the fuel efficiency of both passenger vehicles and light trucks to 40 miles per gal over 11 years.

The amendment, sponsored by Senator Richard Durbin (Democrat-Illinois), was opposed by the White House, which said drastic increases in fuel efficiency could make vehicles less safe.

Current Corporate Average Fuel Economy Standards are 27.5 mpg for passenger cars and 21.0 mpg for model year 2005 light trucks. The light truck standard will rise to 22.2 mpg in model year 2007 vehicles. The Senate at about 9:30 pm wound up work on the energy bill, and scheduled a vote on the overall bill for 9:45 am on June 28.

The delay was a nod to the chief architect of the legislation, Senate Energy Committee Chairman Pete Domenici (Republican-New Mexico), who was out of town because of base-closing hearings in his home state, and not able to vote.

The House and Senate are expected to meet in the coming weeks to work out differences in their respective bills to form one cohesive bill, known as a conference report. Both chambers need to approve that conference report before it can be sent to President Bush for his signature. Bush has said he wants a completed bill on his desk before the Congress recesses later this summer.

Democrats say MTBE waiver, ANWR would doom bill
Washington (Natural Gas Alert), June 23, 2005
US Senate Democrats, anticipating a House-Senate conference to reconcile competing versions of a broad energy bill, on June 23 identified four issues that if included in a final bill would kill the legislation. At a news conference in Washington, Senate Minority Leader Harry Reid (Democrat-Nevada) said Democrats would oppose efforts to add the Bush administration's "Clear Skies" proposal to cut power-sector air emissions and a liability waiver for manufacturers of gasoline additive MTBE to a final energy bill.

Reid also said his party would oppose the inclusion of language opening the Arctic National Wildlife Refuge to oil and gas drilling or allowing energy development on areas of the Outer Continental Shelf now off-limits to drilling. Reid described the MTBE waiver--which was blamed for the Senate's failure to pass an energy bill in the last Congress--as a "poison pill" for the energy bill. "I think there are enough senators to stop whatever would come," he told reporters.

Clear Skies, which would set industry-supported emissions limits on mercury, nitrogen oxide and sulfur dioxide, failed to reach the Senate floor earlier this year after the Senate Environment and Public Works Committee deadlocked on the bill. Sen Jeff Bingaman (Democrat-New Mexico) blamed the Bush administration for killing his climate change proposal to set mandatory limits on carbon emissions. "The White House has been heavily lobbying the Senate and they made their position clear that they opposed anything relating to global warming," he said.

During a news conference, Democrats urged House and Senate energy bill negotiators to include energy conservation and renewable energy measures from the Senate bill in the final measure, known as a conference report. The Senate bill is expected to complete its bill by Friday at the latest, an action that would lead to a House and Senate conference to reconcile their bills. The House passed a bill in April. Bush has called for a bill by Aug 1.

Senate reaches consensus on need to combat climate change
Washington (Electric Power Daily), June 22, 2005
The Senate on June 22 voted to add to its broad energy bill an amendment in which they agreed that greenhouse gases are accumulating in the atmosphere, that there is "a growing scientific consensus that human activity is a substantial cause" and that "mandatory steps" are necessary to slow or stop the emission of greenhouse gas emissions.

The amendment offered by Senator Jeff Bingaman (Democrat-New Mexico) and backed by Senate Energy and Natural Resources Committee Chairman Pete Domenici (Republican-New Mexico) passed on a voice vote after an attempt to kill it by Senate Environment and Public Works Committee Chairman Jim Inhofe (Repubicaln-Oklahoma) failed 43-54.

At press time, the Senate was on track to vote for the comprehensive energy bill on June 23. Once approved, the Senate will go to conference to negotiate a final energy bill with the House, where the majority opposes mandatory action to address climate change.

The Bingaman amendment put the Senate on record as finding that Congress believes global warming is occurring and market-based mandates must be laid down to stop it. The amendment also said that such a national climate change program should not "significantly harm" the US economy but should encourage comparable action by "major trading partners" and key contributors to global warming.

Domenici told his colleagues the amendment "says that there is problem [and] we ought to do something to reduce the problem." He noted that the amendment did not say when Congress should enact a comprehensive mandatory program with market-based incentives or at what level. "It is making a statement," said Domenici. "I think the time has come for us to make a statement on this issue. I choose this one."

The Bingaman-Domenici amendment also followed a second unsuccessful bid by Senator John McCain (Republian-Arizona) and Senator Joseph Lieberman (Democrat-Connecticut) to require industries, including electric power, to cap their carbon dioxide emissions at 2000 levels by 2010. The Senate voted 38-60 for the amendment, which was opposed by the environmental community because it provided loans for three new nuclear reactors and three integrated gasification combined cycle as alternatives to high carbon-emitting fossil energy. In 2003, the McCain-Lieberman proposal attracted 43 supporters on the Senate floor and did not contain the technology incentives for nuclear or coal.

Domenici says he won't support Bingaman's climate change legislation
Washington (Coal Trader), June 21, 2005
Senator Pete Domenici (Republican-New Mexico) said that he would not support Senator Jeff Bingaman's (Democrat-New Mexico) climate change legislation.

After trying to develop details on how emissions credits would be allocated under a climate change bill, "it became clear that we do not have something ready to be added to the energy bill," Domenici said.

In a statement released the night of June 20, Domenici said that he expects that the Senate will have hearings on climate change and hopes an accommodation can be made on all aspects of a climate change proposal. But, he added, crafting a proposal would take time, time that the Senate doesn't have right now.

Bingaman said he was disappointed in Domenici's view that there wasn't enough time during the energy bill debate to seriously deliberate climate change.

"I expect that the discussion on the need to address this problem will be an important part of the floor debate this week. I hope that the Senate will not miss this opportunity to show strong leadership by enacting a consequential proposal that will provide low-cost insurance to protect our nation's economy and environment from the threats triggered by climate change," Bingaman said.

Bingaman's proposal has not fared well among representatives of the coal industry.

"We think [Domenici] has exercised very good judgment because of the impacts the bill would have, particularly on coal states. It's further evidence of his leadership in steering the energy bill. Domenici's withholding of support was damaging to the credibility of the legislation," a spokesman for the National Mining Assn. told Platts Coal Trader.

With crucial support from Domenici gone and no mention of co-sponsors to the bill, it remains to be seen if Bingaman will present the amendment on the Senate floor.

A Domenici spokeswoman said the Senator wasn't sure if he was going to offer the amendment.

On the floor on June 21, the Senate voted 66-29 to add a comprehensive climate change amendment sponsored by Senator Chuck Hagel (Republican-Nebraska). The bipartisan amendment focuses on the role of private and public partnerships to reduce greenhouse gas emissions and the need for shared responsibilities between developed and developing countries to reduce emissions and expands research on climate change.

By press time on June 21, the Senate had begun debate on a climate change bill sponsored by Senators John McCain (Republican-Arizona) and Joe Lieberman (Decmocrat-Connecticut). In his opening statement, McCain said he was going to offer scientific evidence that climate change was happening and that the country needs to take action.

Senate leaders push for energy bill the week of June 20
Washington (Oilgram News), June 20, 2005
The top Republican and Democrat in the US Senate June 20 reiterated their commitment to finish work on comprehensive energy legislation by the end of the week and encouraged senators to offer amendments for debate.

Majority Bill Frist (Republican-Tennessee) and Minority Leader Harry Reid (Democrat-Nevada) lamented the dearth of amendments offered to the bill.

Reid noted some senators appear to be waiting until more senators are available to vote before offering amendments. "The convenient times are over," Reid said on the floor. "We will not have 100 senators [on the floor] any time this week" because of a series of base closure hearings being held across the country. There is no reason to wait to offer amendments, he said.

Both leaders suggested a "finite list" of amendments be drawn up soon. Frist said he would like to close debate by the end of the week. Reid responded he would be "totally opposed" if it appeared to be an effort by the majority to limit" the debate on amendments, although he said "that does not appear to be the case."

Three competing amendments on US global warming policy are expected to be offered the week of June 20 and take up much of the Senate's time. There has been discussion about amendments on fuel efficiency, the tax provisions in the bill and federal oversight of LNG facilities, but they have not yet been submitted.

Reid said there is "no way" the Senate will compromise on the issue of MTBE liability. Asked at a press briefing if he would filibuster any attempt to include MTBE liability language in the bill, Reid replied, "We will do whatever it takes" to keep it out.

The House-passed energy bill includes a provision shielding MTBE manufacturers from defective product liability lawsuits, while a majority of senators is opposed to the measure. Differences between the House and Senate on the issue were a factor in Congress's failure to pass energy legislation in the last session.

Reid said the opposition remains bipartisan and "Republican members are with us every bit as strongly this time." The House Republican leadership appears just as adamant about including MTBE liability in the energy bill.

Senator Ron Wyden (Democrat-Oregon) offered an amendment on June 20 that would prevent the energy secretary from filling the Strategic Petroleum Reserve if prices exceed $58.28/bbl and remain above that level for 10 consecutive trading days.

Wyden chose the $58.28/bbl price because, prior to June 17, it had been the previous front-month high for sweet crude traded on the New York Mercantile Exchange. That record was broken June 20.

Under the amendment, SPR fills would be suspended until the NYMEX price dropped below $40/bbl. Wyden said the amendment "prevents the Energy Department from taking oil out of the market when prices are at record levels and driving up the price even higher."

The House-passed energy bill includes a provision suspending SPR fill until the price drops down below $40/bbl. The issue of filling the SPR regardless of price levels may be moot. The 727-mil bbl capacity stockpile is nearly full, holding 695.6-mil bbl as of June 20. However, language in the House and Senate energy bills directs the Energy department to expand and fill SPR to 1-bil bbl.

Senate votes 52-48 for 10% renewable energy mandate
Washington (Oilgram News), June 17, 2005
Following a close vote for a 10% renewable portfolio standard amendment Thursday, the chief sponsor of energy legislation in the Senate said he would work during a conference with the House to modify the provision and ensure that states lacking renewable sources are not penalized.

Senate Energy and Natural Resources Committee Chairman Pete Domenici, R-N.M., who opposed the RPS amendment that passed the Senate 52-48, said he would work with members during the energy bill conference "to ensure that each state is treated fairly and that no one is penalized by an overly rigid mandate."

The House passed its energy bill, H.R. 6, without an RPS and House Energy and Commerce Committee Chairman Joe Barton (Republican-Texas) who will chair the conference committee, last week spoke out against such a provision. Earlier this week, the Bush administration also came out against an RPS as an added cost on consumers, but praised the Senate proposal to extend the renewable energy production tax credit.

Under the RPS provision approved by the Senate, utilities that sell more than 4-mil MWh a year would be required to get 10% of their power supply from renewable sources by 2020. The RPS ramps up in four stages, and utilities unable to meet the goal by producing renewable generation would either buy such power from other producers or purchase credits from the Dept. of Energy at a cost of up to 1.5cts/kWh.

The Senate is expected to debate its comprehensive energy bill, S. 10, through the week of June 20 and consider other key amendments, including those to address climate change. Also on June 16, the Senate Finance Committee completed its work on a $14-bil energy tax incentive package that will be folded into S. 10. Provisions include production tax credits for renewable energy sources and a 20% investment tax credit for 7,500 MW of clean coal technologies.

RPS amendment sponsor Senator Jeff Bingaman (Democrat-New Mexico) the ranking member on the energy committee, said the renewable energy mandate would place pressure on natural gas prices and save ratepayers money while creating a national market for domestic renewable technologies.

But Domenici and other Republican members said the measure was an added cost to consumers on top of the $2-bil in production tax credits given to wind and other renewable energy sources in the bill. Domenici said the RPS would pit "wind poor" states against "wind rich" states and that the energy bill is "doing enough right now with this enormous credit." Senator Lamar Alexander (Republiclan-Tennessee) said the Bingaman amendment would cost consumers $18-bil and subsidize the construction of gigantic, unsightly wind turbines.

Bingaman countered that although the Dept. of Energy's Energy Information Administration found that the RPS would cost the electric sector about $18-bil from 2005-2025, the proposal would actually save all end-use sectors $22.6-bil in natural gas expenditures for that period. The EIA in a June 15 letter to Bingaman also said that cumulative residential expenditures on electricity would be $2.7-bil less, while spending on natural gas is reduced by $2.9-bil for that period.

Opposing senators also raised concerns that some 20 states are already establishing their own renewable energy mandates on utilities and that the federal program could adversely impact their efforts. Bingaman said his RPS is less aggressive than those favored by many states, but the federal approach will "hopefully get us to a nationwide market in demand for these technologies."

Bingaman's amendment was co-sponsored by Republican Senators Susan Collins and Olympia Snowe of Maine and Norm Coleman of Minnesota, and Democratic Senators Hillary Clinton of New York, Barack Obama of Illinois, Byron Dorgan of North Dakota, Maria Cantwell of Washington, Dianne Feinstein of California and Ken Salazar of Colorado.

Other significant provisions in the energy bill include the repeal of the Public Utility Holding Company Act while expanding the merger review authority of the Federal Energy Regulatory Commission, imposing FERC backstop authority to site critical transmission projects and mandating electric reliability standards for the grid.

Senate Finance Committee unveils tax incentive package
Washington (Oilgram News), June 15, 2005
The US Senate Finance Committee Tuesday unveiled a $16-bil package of tax incentives that would extend a popular renewable energy production credit and create programs to spur the construction of nuclear power plants and oil refineries. The legislation, once passed by the committee, will eventually become part of a broad energy bill the Senate began debating earlier on June 14.

One quarter of the cost of the ten-year bill is taken up by an extension of the 1.8 ct/kWh credit for renewable generation. Another $2-bil would go toward firms building coal gasification power plants and $1.6-bil would be available to consumers buying hybrid-electric vehicles.

Supporting two of President Bush's top energy priorities, the legislation would also provide $740-mil in tax breaks to expand US refining capacity and $277-mil to aid nuclear plant build. It differs significantly from the House of Representatives version, which offered $8-bil in tax credits to improve the power grid and oil and gas pipeline systems. This version would cost $10-bil more than Bush's version.