Within hours of the Senate voting out Democrat-crafted broad energy legislation late Thursday, Republican leaders vowed to make significant changes to tailor the bill to fit their views on energy issues, while Democrats warned they may filibuster a bill that emerges from conference committee radically altered.

The Republican-led Senate Thursday dusted off and voted out a Democrat-crafted bill — which first cleared the Senate in April 2002 by a vote of 88-11 — after failing to make any substantial headway with this year’s GOP-influenced measure (see Daily GPI, April 26, 2002). The revived bill was approved by 84-14 this time around, setting the stage for Congress to enact the first piece of major energy legislation in 11 years.

The resurrected energy legislation (now H.R. 6) offers loan guarantees for construction of an Alaskan natural gas pipeline to the Lower 48 states and tax credits for producers who use the pipeline, multi-billion dollar tax breaks for small oil and gas producers and extension of the Section 29 tax credits to cover wells drilled before Jan. 1, 2005, increased renewable fuel use and production, and reforms to bolster competition in electricity markets. It also includes more funds for low-income energy assistance and reduces from 20 to 15 years the tax depreciation period for new natural gas distribution lines.

The Senate bill, however, does not support the controversial issue of oil and gas drilling in the Arctic National Wildlife Refuge (ANWR), which puts it at odds with the ANWR-supportive House bill voted out earlier this year (see Daily GPI, April 14). Disagreement over ANWR forced lawmakers to halt work on an energy bill during a joint House-Senate conference last fall. The ANWR issue could be a deal-breaker this year as well.

Refusing to concede defeat, Senate Energy Committee Chairman Pete Domenici (R-NM) said he planned to include key provisions of the derailed GOP energy bill in the final legislation during the House-Senate conference in the fall. “This deal is not how I envisioned getting an energy bill to conference. But if it gets us close to our goal, I consider it a win,” he said.

“I promise you we will write many of this year’s energy provisions into the bill at conference,” noted Domenici, who will chair the conference committee along with House Energy and Commerce Committee Chairman W.J. “Billy” Tauzin (R-LA). “We will do more for production. We will do more for energy diversity. We will do more for research. The final bill will look more like what I produced in committee this spring than it will the bill we are passing tonight. [This] bill is just a vehicle to get us to conference,” he said.

Domenici had put aside his carefully crafted substitute electricity title (see Daily GPI, July 25 & July 31), which was being hotly debated, to embrace the more do-able Democratic measure.

Senate Minority Leader Tom Daschle (D-SD) hailed the Senate’s passage of the resurrected bill, saying it was a “vast improvement” over the scuttled GOP energy bill in the Senate and the Republican-crafted measure in the House.

The favorable vote on the Senate energy bill was a victory for both sides, said a legislative expert in the energy industry. But because Republicans will be in the majority on the conference committee, he believes the final conference report on the energy bill will resemble the House-passed measure, which is more reflective of Republican positions on energy issues.

“It’s our [Democrats] work product that’s going into conference, and the reality is they [Republicans] will have to stay within the scope of the conference,” said Bill Wicker, spokesman for the Democratic members of the Senate Energy and Natural Resources Committee, which voted out the GOP energy bill this past April.

“We have no delusion that things will remain unchanged” in the energy bill during conference, but he cautioned that Democrats may filibuster the legislation in the event a “bad conference report” emerges.

Charles Schwab energy analyst Christine Tezak doesn’t see “smooth sailing” ahead for an energy bill this year. With most of this year’s Senate energy proposals now on the cutting-room floor, this “could erode momentum behind the bill as…the Senate goes into conference with the necessity of re-introducing language that doesn’t have the validation of floor votes behind it,” she said.

“We now believe there is no more than a 60% chance that a bill can get to the president’s desk this fall. It is still feasible, but we think it will be tough,” according to Tezak. “Senate conferees will not go into the process with recent consensus in hand — they must now attempt to reconcile the deals that were negotiated this session with both last year’s language and the House measure. This works against bill passage.”

The “fisticuffs” in the Senate surrounding the energy debate and judicial nominations could take its toll on the bill, she believes. “The bill could yet fail as a casualty of pique in the Senate.”

The idea to revive the 2002 energy measure, which left many dumbfounded, arose during an exchange between the Democratic leadership and Senate Majority Leader Sen. Bill Frist (R-TN) early Thursday on the Senate floor and by Thursday night it was passed and the senators were off on their August recess.

Daschle led off the exchange asking, “What would have been wrong with taking [the] bill that 88 of us voted for last year and starting with that?” Frist responded, “if we have the opportunity to take that bill up…let’s do it and let’s pass it today and then we can move on.” Assistant Minority Leader Harry Reid (D-NV) followed up with “you’ve got yourself a deal.”

The decision to revert to last year’s bill was a big surprise. “This is a story that nobody could have possibly made up,” said a Capitol press aide. “This is new ground we’re breaking here,” said an energy source and close Capitol Hill observer. While “it’s not the way you want to do things…it might be the best thing” because it will move a Senate energy bill to the conference committee, where the real work is done, he noted.

“The law doesn’t get written on the Senate floor…All you’ve got to do is get [a bill] across the finish line and then you can get down to the details,” the source said. “I feel at this point the Senate needs to wrap something up and get it out of the chamber.” The energy bill has been on the Senate floor since mid-May, but only about 18 days have been spent debating it.

Last year’s Senate bill, now this year’s bill, includes none of the language that had been included in current legislation installing tough penalties for market manipulation and requiring FERC to set up a price monitoring system for electricity. Western Senate proponents of a crackdown on manipulation said the Senate leadership had promised them a chance later (possibly in conference) to push for manipulation penalties and to limit FERC’s SMD authority.

Both the House and Senate measures include electricity titles, but they don’t address standard market design (SMD) in a substantial way. The Senate bill extends the authority of FERC to public power and rural cooperatives, keeps in place the Public Utility Regulatory Policies Act’s mandatory-purchase requirement for qualifying facilities; and endorses the direction that FERC has taken on regional transmission organizations.

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