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Climate Change Clears House by Slimmest of Margins

The House went down to the wire Friday on the sweeping climate change and energy bill, with lawmakers passing it by the slimmest of margins. House Democrats managed to keep climate change alive in this Congress -- barely.

The bill (HR 2454), which cleared the House by 219-212, seeks to cap heat-trapping greenhouse gas (GHG) emissions that contribute to global warming. The legislation would substantially change the direction of the energy industry from conventional oil and natural gas to renewable fuels. Democrats needed 218 votes to pass the bill; 44 Democrats voted against the measure. The closeness of the vote in the House may portend problems for the bill in the Senate.

A compromise brokered last Wednesday by House Energy and Commerce Committee Chairman Henry Waxman (D-CA) and Agriculture Committee Chairman Collin Peterson (D-MN) cleared the way for the favorable vote before lawmakers left for the July 4th recess. Peterson represented a group of 40-45 rural Democrats who were prepared to vote against the bill if concessions were not forthcoming.

"This bill...is a true turning point," said Majority Leader Steny Hoyer (D-MD) on the House floor Friday. "It's a complex bill because it [deals with] a complex problem."

This legislation is a "real solution to our very real energy problems," said Waxman, the chief author of the bill. "Global warming is real and it's moving very rapidly."

The House measure, which calls for GHG emissions to be cut by 83% by 2050, is backed by President Obama. In the days leading up to the House vote, the White House joined House Speaker Nancy Pelosi (D-CA), Waxman and Rep. Edward Markey (D-MA), the bill's co-sponsor, in a blitz to convince "fence-sitters" in the House to vote for the bill. The vote was a setback for Republicans and the oil and natural gas industry. There is more support for climate change from the electric power sector.

House Republicans called the cap-and trade system in the climate change bill a "Pelosi global warming tax" and a "giant energy tax," and said it would result in large job losses in the U.S. "This is the biggest jobs-killing bill that has ever been on the floor of the House of Representatives," said Minority Leader John Boehner (R-OH). The "elaborate government structure" that will be needed to implement the climate change program "will cost Americans trillions of dollar," he said. But Democrats countered that it was a jobs bill -- it would create one million "green" jobs -- and would cut U.S. dependence on foreign oil.

The Independent Petroleum Association of America said the climate change bill discourages, rather than encourages, the production of domestic natural gas and oil. It especially took issue with a provision that would restrict producer access to over-the-counter markets.

In a letter to Congress earlier in the month, American Petroleum Institute (API) President Jack Gerard echoed the sentiment. "It...will create huge disincentives for the production of America's abundant natural gas resources and force jobs and productive capacity overseas," he said.

"API supports legislation to reduce emissions of greenhouse gases in lieu of ill-suited federal and state regulatory programs. The oil and natural gas industry is responsible for 44% of the $133 billion in total public- and private-sector investments in low-carbon energy technology since 2000. Unfortunately the approach taken by the Waxman-Markey bill is so fundamentally flawed."

Despite the outcome in the House, legislative observers are doubtful climate change legislation will clear Congress this year. "We continue to believe that the climate-related provisions face significant hurdles in the Senate," said energy analyst K. Whitney Stanco of Washington Research Group.

She believes the energy provisions of the bill -- national renewable electricity standard (RES), clean energy bank, federal transmission planning, natural gas vehicles incentives and biofuels changes -- have a better chance of being passed than the climate change provision by Congress this year. They "could be stripped off of climate legislation and possibly enacted in a stand-alone package later this year."

The centerpiece of the climate change legislation is a system that would set a cap on carbon emissions and allow polluting industries to purchase and trade emission credits to comply with the cap. The bill would allocate approximately 85% of emission credit allowances for free to affected industries -- natural gas distributors, electricity distributors, energy-intensive manufacturers (i.e. steel, aluminum, paper and chemicals), automakers and refiners -- to offset the costs during a transition to a lower carbon environment (see NGI, May 25).

It establishes an RES that would require 20% of an electric supplier's electricity to be generated from renewable fuels by 2020, and calls for significant investment in renewable energy.

And the measure would amend the Commodity Exchange Act to provide the Commodity Futures Trading Commission with greater oversight authority of energy commodity derivatives and credit default swaps. And the legislation would amend the Federal Power Act to give the Federal Energy Regulatory Commission (FERC) strict oversight of carbon allowances and offsets to protect market participants from speculation and manipulation of carbon prices.

Moreover, the House bill gives FERC the authority to issue "cease-and-desist" orders against companies and/or traders who "may be violating, may have violated or may be about to violate any provision" of the Natural Gas Act or any agency rule or regulation.

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