Defying the predictions of political pundits, the Republican-led House yesterday passed landmark energy legislation that gives small producers multi-billion dollar tax breaks and lays the foundation for oil and natural gas exploration and production to begin in Alaska’s Arctic National Wildlife Refuge (ANWR) within the next decade. The House bill was a major victory for President Bush, who has backed drilling in ANWR as part of his national energy policy.

Political observers had booked odds that House lawmakers wouldn’t be able to vote out an omnibus energy bill that contained the hot-potato ANWR issue prior to leaving for their traditional August recess this week, but they were proved wrong. The next big hurdle is in the Democrat-controlled Senate, where most agree that ANWR doesn’t have a prayer. “I don’t think it [ANWR] will even be in the Senate bill,” but the issue will be debated, said a Capitol Hill watcher. ANWR will be a “very large challenge” in the Senate, another observer remarked.

In hindsight, “I was more surprised by the good vote in the House on the bill” than by the win on ANWR, said Martin Edwards, director of legislative affairs for the Interstate Natural Gas Association of America (INGAA). It was a “pretty impressive victory” all around. “I think it was an extraordinary accomplishment to pull it together and get it done,” agreed Lee Fuller, vice president of government relations for the Independent Petroleum Association of America (IPAA).

By a vote of 240-189, House Republicans — aided by a handful of Democrats — prevailed in their drive to push through H.R. 4, Securing America’s Future Energy Act of 2001, an amalgamation of four different bills that offers producers and consumers $33 billion in tax incentives, and promotes conservation, energy efficiency, environmental safeguards, renewable fuel production and traditional energy production initiatives. Fuller estimated that about $8 billion of the incentives are aimed at mostly independent producers, making it in all probability the biggest tax package for the industry in nearly a decade. The remainder of the tax breaks are devoted to conservation and efficiency improvements.

While some of the producer-oriented tax benefits in the House bill also are proposed in Bush’s energy policy, Fuller acknowledged that many are not. He said he didn’t know whether the president might oppose the House measure because of the higher dollar amount of the tax incentives. This issue has become a lightning rod for many of the bill’s critics, especially Democrats.

The massive 510-page legislative package did not address the complex issue of electricity deregulation, but House leaders have pledged to take it up separately in September.

The bill’s victory was all but assured when House Republicans prevailed on ANWR. By 223-206, they defeated an amendment, cosponsored by Reps. Edward Markey (D-MA) and Nancy Johnson (R-CT), that would have prohibited any drilling in the Alaska refuge. The House floor debate over the controversial issue turned into a regional dispute, with pro-ANWR lawmakers from producing states (Texas, Louisiana and Alaska, for example) pitted against anti-ANWR lawmakers from large consuming regions (New England and California).

“I think it’s odd that when they [California] cry out for energy that they tell us where energy can’t come from,” said Rep. Ralph Hall (D-TX). Rep. Don Young of Alaska attacked the ANWR opponents, asking “How dare you” oppose drilling in ANWR “when [most of] you have never been there?” Young was joined by Rep. W.J. “Billy” Tauzin (R-LA), who called the Markey-Johnson amendment “awful” and urged lawmakers to defeat it.

Markey, in a pitch for anti-ANWR votes, told House lawmakers that “this is the most important environmental vote of this Congress.” Hall shot back, saying, “I could say it’s the most important energy vote that we’re going to cast this year,” or even “the most important vote.”

Many credited the Republicans’ victory on ANWR to two “perfecting amendments” that preceded the vote on the contentious issue. They played a “big part in solidifying the support” in the House for drilling in ANWR, said IPAA’s Fuller. The amendments sought to make it easier for lawmakers who still were undecided on the Markey anti-ANWR measure to vote against it. One of the proposals limits future oil and gas drilling in the coastal plain of ANWR to 2,000 acres, while the other amendment sets aside the federal government’s share of royalties from drilling activity in ANWR to fund renewable energy research and development, and to maintain and preserve the nation’s public lands and parks. Both measures, which were sponsored by Reps. John Sununu (R-NH) and Heather Wilson (R-NM), passed due in large part to support from Democrats.

“If you’re at all on the fence” about whether to drill in the Arctic refuge, the amendment to limit activity to 2,000 acres “should put you on the side of ANWR,” said Rep. James Hansen (R-UT), chairman of the House Resources Committee. “This should be the one that should make this an easy vote for a lot of folks.” This was a good amendment for lawmakers who viewed ANWR as a “difficult vote,” agreed Rep. Mark Souder (R-IN). The amendment squeaked by with a 27-vote margin (228-201), with the Democratic vote proving critical (41 voted in favor of it).

The amendment setting a 2,000-acre limit on ANWR drilling activity was a “wolf in sheep’s clothing,” argued Rep. Johnson, saying it did not take into consideration the support infrastructure — roads, waste disposal facilities and airports, for example — that would have to be constructed as well.

Angry over their defeat on ANWR and having been denied the opportunity to offer a Democratic substitute to the Republican-controlled energy bill, Democrats in a last-ditch effort tried to send the legislation back to the House Ways and Means Committee to be further amended. They wanted the $33 billion in tax credits offered in the bill to be made contingent on the Office of Management and Budget (OMB) declaring that there was a sufficient budget surplus to pay for them, without dipping into the Social Security and Medicare trust funds.

Republicans successfully defeated the Democrats’ attempt to send the legislation back to committee by 223 to 206, despite an emotional claim by Markey that the majority was “setting up oil rig[s] on top of Social Security.”

The House “is going to have to grapple with the budget consequences of their decision” on tax incentives, said the IPAA’s Fuller, although he believes lawmakers have provided “adequate flexibility” to pay for them without raiding the Social Security and Medicare trust funds. He expects the Senate in its bill to increase revenues to offset any tax breaks to producers and energy consumers.

INGAA’s Edwards dismissed Democrats’ claims that the House energy tax breaks will be funded by the Social Security and Medicare trust funds, calling the accusations a “triumph of hyperbole.”

Markey stepped up his attack on the pro-ANWR forces after earlier losing a crucial vote on his amendment to boost the corporate average fuel efficiency (CAFE) standard for passenger automobiles and light trucks to 27.5 miles/gallon beginning in 2007, with an intermediate rise to 26 miles/gallon in 2005. The amendment was co-sponsored by Rep. Sherwood Boehlert (R-NY), chairman of the House Science Committee.

House lawmakers, led by representatives from producing states, also soundly defeated (273-154) an amendment by Rep. Henry Waxman (D-CA) to impose cost-of-service rates for 18 months on existing power generators that sell into the western markets.

Waxman argued that his proposal was an “insurance policy” against further blackouts and price gouging in California. He said the price mitigation order issued by the Federal Energy Regulatory Commission to rein in wholesale power costs wasn’t doing the job, claiming it gives a “green light to manipulation and…gouging.”

“I hate to keep beating a dead price-cap amendment,” countered Rep. Joe Barton (R-TX), reminding House lawmakers that the Waxman measure already had been defeated at the subcommittee and committee levels.

In an attempt to provide price relief in the longer term, however, the House did pass an amendment that calls for the secretary of the Department of Energy and chairman of the Federal Energy Regulatory Commission to jointly study the location and extent of anticipated growth in gas demand in the West, along with the need to expand the existing energy infrastructure — power generation plants, interstate gas pipelines and in-state gas pipelines. The measure was sponsored by Tauzin, chairman of the House Energy and Commerce Committee.

House lawmakers defeated an attempt by Rep. Gene Green (D-TX) to strip California regulators of their ability to designate certain in-state gas pipelines as exempt from FERC jurisdiction under the Hinshaw law. He argued that the state’s over-reliance on the Hinshaw exemption was largely responsible for the wide disparity between the level of interstate gas pipeline capacity to the state’s border and California’s in-state pipeline capacity, which some critics say has been at least partly to blame for the abnormally high gas prices in Southern California.

The House signed off on an amendment, offered by Rep. Mike Rogers (R-MI), to join the governors of the Great Lakes’ states in their effort to drive out Canadian producers who are drilling in the lakes. It also incorporated into the bill an amendment that directs the secretary of the Department of Interior to study every two years the availability of natural gas and oil deposits at existing drilling sites located off the coasts of Louisiana and Texas.

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