Washington (Platts)--29Apr2008

The top Republican on the US Senate Energy and Natural Resources
Committee Tuesday called for the repeal of a recent requirement that prohibits
the military from using high-emissions alternative fuels.

Senator Pete Domenici asked the Senate Armed Services Committee to
include the repeal in a defense authorization bill for fiscal 2009, saying the
move would make it easier and less costly for the military to obtain fuel.

The New Mexico senator also asked the Armed Services Committee to support
provisions allowing military and other federal agencies to sign longer-term
contracts for renewable sources of energy and making sure military
installations are subject to regulation of retail electricity.

The Energy Independence and Security Act of 2007, enacted in December,
prevents federal agencies from purchasing "alternative or synthetic" fuels
whose lifecycle greenhouse gas emissions are higher than conventional
petroleum.

"This provision is part of an effort to prevent the Air Force from
procuring coal-to-liquid fuels, but by prohibiting the development of some of
our nation's most promising resources--not only coal-to-liquids, but also oil
shale and tar sands--it will increase America's reliance on foreign oil,"
Domenici said in a letter to Armed Services Committee Chairman Carl Levin,
Democrat-Michigan. "As we continue to face record oil and gasoline prices,
[the law's provision] can be seen for what it is: a counterproductive measure
that threatens our national security, our energy security, and the strength of
our economy."

On renewable energy, Domenici asked the Armed Services Committee to
support a provision waiving for military agencies a federal 10-year limit on
contracts. The senator said the limitation prevents military bases and other
agencies from taking advantage of longer-term contracts that would better
protect them from price volatility.

Lawmakers have attempted to strike the contract limit before, Domenici
noted. The House passed an energy bill last year that would have allowed
energy contracts of up to 50 years, and a House-Senate conference committee
working on the legislation provided for up to 30 years. But the issue was
dropped when Congress enacted the energy law in December.

"In my opinion, this contracting authority should be extended for all
federal agencies, especially the largest energy consumer within the federal
government, the Department of Defense, to at least a 20-year period," Domenici
said.

"I also ask that you uphold state electricity laws and oppose attempts to
create a military exemption from retail regulation," Domenici said. "As you
know, the Department of Defense has long been considered a retail electric
customer for which local utilities have an obligation to serve. A military
exemption could result in stranded costs for those utilities and significant
cost-shifting onto homeowners and small businesses already strained by
increased energy prices."

A spokesman for the Armed Services Committee declined to comment on
Domenici's letter, saying Levin does not comment on bills while they are being
marked up by his panel.
--Bill Loveless, bill_loveless@platts.com