Washington (Platts)--3Jun2011/509 pm EDT/2109 GMT

A provision in a package of energy bills backed by Republicans in the US House of Representatives that would use a portion of federal oil and natural gas royalties to fund renewable energy projects, won support Friday from a senior House Democrat and a Department of Energy official.

The measure (H.R. 909), introduced by California Republican Representative Devin Nunes, would, among other things, use royalty money to create a renewable energy trust fund from which grants would be distributed to companies with the lowest cost-per-megawatt bid proposals under a reverse-auction process. The bill also would expand oil and gas leasing on federal land and use the additional revenue to build the trust fund, which bill sponsors estimate could total $500 billion over the next 30 years.

At a hearing before the House Energy and Commerce Subcommittee on Energy & Power, Nunes said the market-based mechanism would ensure that the cheapest and most efficient technology thrives while opening the alternative energy market to greater innovation and competition.

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While Democrats have panned the broader Republican proposal for being too reliant on fossil fuels and nuclear energy, the idea of an auction for renewable energy project funding received some praise from California Representative Henry Waxman, the committee's senior Democrat.

"I do want to consider your idea because I have long believed that we need to have market mechanisms to try to drive the results that we want," he told Nunes.

Nunes suggested the reverse-auction proposal could be moved separately from more controversial aspects of the broader Republican energy package that would increase nuclear generating capacity and provide incentives for coal-to-liquid fuels, among other things. But the congressman told reporters after the hearing that he had not discussed with party leaders the possibility of moving a more limited bill.

DOE Assistant Secretary David Sandalow also welcomed Nunes' plan in testimony before the subcommittee, while adding that a number of details still need to be worked out. "We share Representative Nunes' view that reverse auctions are a useful tool for promoting renewable energy technology," he said. "From our experience with reverse auctions, it's important to protect the taxpayers by requiring adequate assurance from bidders that they'll perform.

--Nick Juliano, nick_juliano@platts.com