Washington (Platts)--4May2009

President Barack Obama will sit down Tuesday with key House Democrats to
attempt to iron out differences on major energy and climate change
legislation, according to White House aides Monday.

The meeting will feature all Democratic members of the House Energy and
Commerce Committee, which is slated to vote on an expansive energy and carbon
cap-and-trade bill over the coming weeks, the aides said. The meeting is to
involve health care and other topics facing the committee, they said.

Large rifts over how to tackle an energy and climate bill have emerged
over the past month as Chairman Henry Waxman, Democrat-California, put out his
draft measure in late March. Conservative and moderate Democrats, mostly
representing manufacturing and energy-producing districts, have called for
concessions to help their constituent industries ease into a low-carbon
economy mandated under the bill.

Waxman joined with another environmentalist, Energy and Environment
Subcommittee Chairman Edward Markey, Democrat-Massachusetts, to craft the
bill. Waxman has set a Memorial Day deadline for getting the legislation
passed.

His bill legislation caps greenhouse gas emissions 3% below 2005 levels
in 2012, 20% by 2020, and 83% by 2050. The 2050 goal in the same as Obama's,
but the initial target and interim targets are more aggressive than what Obama
envisions.

When Waxman and Markey wrote the legislation, it notably left out how
many emissions allowances would be doled out for free and how many would be
auctioned off.

The moderate Democrats, led by coal-district Virginian Rick Boucher, have
said that moving to a full auction of allowances should not happen until much
later. They have also sought concessions on a less-stringent renewable
electricity standard and "low carbon fuel standard" for liquid transportation
fuels, among other key areas of the broad-ranging bill.

Boucher predicted last week that the bill would pass if Waxman agrees to
his modifications.

RENEWABLE ELECTRICITY STANDARD

"I have a strong sense that if these recommendations are accepted,
industry support will come, and that there would be sufficient support on the
committee and in the House to pass it with a rather comfortable majority,"
Boucher said last week. "And I think Chairman Waxman thinks that's true,
also."

Obama envisions a 100% auction as early as 2012, an issue that
is likely to be brought up at the discussions Tuesday. Boucher has
called for 40% of any free allowances to be given to the power sector, which
is heavily dependent upon coal.

The renewable electricity standard in the bill envisions 25% of the
country's electricity to come from renewable resources such as wind and solar
power by 2025. Obama also supports this goal.

However, in the face of opposition to such a high total, committee
members said last week that Waxman is considering lowering that number to
17.5%. Many members also want new nuclear and hydropower to count toward the
mandate. Lawmakers from certain parts of the country, such as the South,
maintain that the RES would unfairly penalize them for not having as much wind
and other renewable sources as other regions.

The low carbon fuel standard in the bill mandates a 10% reduction in
lifecycle greenhouse gas emissions for new transportation fuel by 2030. The
measure is primarily meant to encourage biofuels production.

But according to committee members, Waxman has agreed to delay the
standard's launch date from 2014 to 2022 so it would not overlap with the
renewable-fuels standard that Congress passed as part of a major 2007 energy
bill. Waxman has also agreed to give oil refiners 5% of the bill's emissions
allowances for free in the early years, members said.

--Alexander Duncan, alexander_duncan@platts.com