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House Committees Vote Out Republican Energy Bill

This year's omnibus energy bill sashayed through three major House committees last week, virtually unchanged from the Republican drafts which had been offered by committee chairmen. The bill that is expected to go to the House floor for consideration this week calls for drilling on the coastal plain of the Arctic National Wildlife Refuge (ANWR) and gives FERC sole authority over the siting of liquefied natural gas (LNG) import terminals.

Democrats unleashed much "sound and fury," but in the end it signified little. A drive by Rep. Edward Markey (D-MA) to strike ANWR was voted down, 30-13; and a similar attempt against the FERC/LNG authority lost by 35-18 in the Republican-weighted committees.

The bill emerging from three committee markups last week covered a wide range of energy initiatives, from oil and gas drilling incentives, to coal and nuclear, to renewables and electricity production and delivery. The measure has a $8.1 billion tax package, considerably smaller than the version that passed in November 2003. While it is likely to be approved on the House floor, there still is no committee bill on the Senate side. In past years, the reconciliation of Senate and House versions in conference has been the downfall of comprehensive energy legislation.

One potential deal-buster is the House energy bill's liability waiver for producers of the gasoline additive methyl tertiary butyl ether (MTBE). But House Energy and Commerce Committee Chairman Joe Barton (R-TX) expressed confidence last week that this time a deal could be reached with the Senate on the issue. He believes that three former House members who were elected to the Senate last November -- Republicans Richard Burr of North Carolina, David Vitter of Louisiana and Jim DeMint of South Carolina -- could make the difference this year, the Congressional Green Sheets reported.

LNG siting showed signs last week of replacing MTBE as this year's most contentious issue. But it was no contest in the heavily Republican-weighted House Energy and Commerce Committee. The vote was almost 2-to-1 to keep a provision in the measure giving FERC, not states or local communities, final authority over the siting of LNG import terminals.

Rep. Markey offered an amendment to strike the LNG provision, but Barton quickly opposed it. "To strip the language from the bill is extremely short-sighted...This is one of the most important elements in the bill," he said.

While the bill invests the Federal Energy Regulatory Commission with the final say in LNG terminal siting, it requires the Commission to consult with states during the approval process, and guarantees the states the right to inspect newly constructed LNG facilities once in operation. "I want the states involved" in this process, Barton said. FERC Chairman Pat Wood has expressed concern that the bill's language gives the states more authority than they have under current law.

By a vote of 29 to 19, the Republicans on the House energy panel also defeated an amendment, offered by Rep. Jim Davis (D-FL), that sought to strike a provision in the energy bill that would require states to base their appeals of energy project approvals on the record established during a FERC proceeding.

The existing provision in the energy bill is aimed at shortening the process when states appeal a FERC certificate ruling to the Department of Commerce, claiming that the project is inconsistent with their rights under the Coastal Zone Management Act. Barton opposed the Davis amendment, saying that any appeal should be based on the FERC record, and not "some new information that is thrown over the transom at the last minute."

Markey led the charge to strip out provisions authorizing oil and gas leasing in ANWR. This, he said, was just the first step on a "slippery slope," and warned the action would put the other 539 wildlife refuges under siege.

Markey was concerned that the energy bill included incentives for supplies, but would not include any new fuel economy standards for any vehicle, nor for appliances. He said he would look much more favorably on measures to develop additional supplies, if corresponding attention was given to saving energy. There is a tremendous "hypocrisy coefficient" in a bill that calls for drilling in ANWR and "a $35,000 tax break if you buy a Hummer II," he said.

The Massachusetts lawmaker's attempt to sink the ANWR provisions came near the end of the session before the House Resources Committee. That committee started off by rejecting 27-11 a Democratic substitute, which would have stripped most supply-side incentives, including ANWR, out of the bill.

Rep. Nick J. Rahall of West Virginia, ranking Democrat member and sponsor of the amendment, said "The Democratic alternative is about energy development, empowerment and endowment. It is about development because it proposes to facilitate over 35 Tcf of natural gas from developed fields in the North Slope and the Lower 48 states. This is at least a full year and a half of our total natural gas consumption. There are no misappropriated subsidies in this proposal, no kick-backs, no windfall profits."

Resources Committee Chairman Richard Pombo (R-CA) pointed out that ruling out drilling on the coastal plain of the Alaska refuge would be shutting off a sizeable potential resource.

An amendment to inventory available reserves in the Outer Continental Shelf (OCS) currently under a leasing moratorium was introduced by Rep. John E. Peterson (R-PA) but was later withdrawn, with the possibility that it would be reintroduced on the floor of the House. Federal Reserve Chairman Alan "Greenspan got it wrong," Peterson said, pointing out that relying on LNG imports is the most expensive solution and only increases this country's reliance on unstable countries. "We have ample natural gas in this country; at least we should inventory the OCS."

Democratic opponents labeled the OCS inventory measure "a backdoor attempt to undo the coastal moratorium." Another measure that would have limited protests to leasing and drilling permits was defeated in committee. A supporter of the provision pointed out that 10 protesters in Utah had filed 392 protests in opposition to oil and gas development.

Democrats failed 10-31 to dislodge a provision in the bill that would authorize the Secretary of Interior to set up a domestic offshore energy reinvestment fund to share excess royalties with coastal states in proportion to their offshore production. The fund would include royalties collected in excess of $7 billion in 2006, with the amount going into the federal treasury increasing each year through 2014 when only the excess above $9 billion would go into the coastal states fund.

Democratic opponents of the measure said it provided an incentive for coastal states to break the offshore moratoria and support leasing and drilling.

Among the myriad items in the bill affecting natural gas are new royalty collection rules and incentives, expedited permitting for drilling and removal of roadblocks to natural gas transportation. It also includes a mandatory price reporting provision for natural gas (see NGI, April 4).

Barton, who received a standing ovation at the end of mark-up last Wednesday, was given the credit for crafting much of the House bill, although the House Ways and Means Committee worked to pare down the cost of the various incentives to the U.S. Treasury.

Ways and Means completed its mark-up of a much-leaner energy tax package last Wednesday, accepting Chairman Bill Thomas' (R-CA) mark and rejecting most amendments, a committee aide said. The Joint Committee on Taxation has estimated the tax portion of the energy bill will cost the Treasury $8.1 billion between 2005 and 2015, which is less than one third of the $25.7 billion cost of the legislation that was passed by the House in November 2003.

The tax breaks and incentives primarily target natural gas, electricity, nuclear energy and crude oil. Key provisions for natural gas include: $17 million to treat natural gas gathering pipelines as seven-year property; $1.59 billion to treat natural gas distribution pipelines as 15-year property; $88 million to allow Section 29 credits for the production of non-conventional fuels to be treated as a general business credit through 2007; $53 million to exempt certain prepayments for natural gas from tax-exempt bond arbitrage rules; $384 million to amortize all delayed rental payments over two years; $982 million for the amortization of all geological and geophysical expenditures over two years; and $82 million to allow individual credits against the alternative minimum tax.

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