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.

Climate technology incentives OK'd

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.

OCS inventory retained

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.