House and Senate leaders have given up on plans for a formal conference this fall to reconcile their vastly different energy bills (HR 6, HR 3221), which were passed earlier this year. Instead the leaders intend to work out the differences informally.

"That's certainly what it looks like. It'll be worked on off-line" by Senate Majority Leader Harry Reid (D-NV) and House Speaker Nancy Pelosi (D-CA), said Bill Wicker, a spokesman for the Senate Energy and Natural Resources Committee.

Reid and Pelosi will engage in what is known as "ping-ponging" -- sending the bills back and forth between the two houses -- to work out the "hard stuff," including the tax provisions (only in the House bill), corporate average fuel economy standards, a renewable portfolio standard (RPS) and other issues, he noted.

Informal reconciliation of energy legislation has never occurred before, although it has been used on other measures, Wicker said. Reid had hoped to have a formal conference on the energy bill this fall. But to do so, the Senate would have needed to find 60 votes to overcome the objections of Republicans, and that wasn't likely.

"I think that the intent is to get it [a final energy bill] all done this fall," and sent to President Bush, Wicker said.

However, Sen. Pete Domenici of New Mexico, the ranking Republican on the Senate energy panel, believes leadership's decision to forego a conference could kill the energy bill this year. "I believe that the only way to pass an energy bill...is through a bipartisan conference committee. I remain hopeful that we can still go this route, and that the leadership will keep their word and hold a conference."

Key elements of the energy policy bill and auxiliary tax package passed by the House in early August -- notably a mandatory 15% RPS, increased taxes on the oil and gas industry, and the lack of increased fuel efficiency standards for autos -- were expected to spell trouble for a conference on the House measure and Senate bill passed in June (see NGI, Aug. 13; June 25).

The split on the critical issues is basically between the Democrats, attempting to rewrite portions of the Energy Policy Act of 2005, which had been passed by a Republican-led Congress, and business-backed Republicans, seeking to hold onto the recent gains for the oil, natural gas, coal and nuclear industries. The Democrats are pushing for conservation and development of renewable fuels to combat greenhouse gases and move the nation away from fossil energy.

The Senate version, put together with the help of Republicans, is lacking the mandatory RPS standard, while the House version is missing the higher miles per gallon standards for autos present in the Senate bill. Also, a tax package is absent in the Senate measure, while a $16 billion tax package, providing incentives for renewable energy and higher taxes for the oil and gas industry, is part of the House version.

The oil and gas industry has lobbied heavily against the House tax provisions, estimated to cost them $16 billion, which would go to pay for the development of renewable fuels. The measure includes tax and loan incentives for the development of wind, solar and geothermal power, while stripping incentives approved just two years ago for fossil fuels. The Bush administration has threatened a veto if the higher taxes on oil and gas production are in the final bill (see NGI, Aug. 6).

The House measure -- but not the Senate version -- also calls for the recovery of billions of dollars in royalties on production from the flawed deepwater leases that were issued by the Department of Interior in 1998 and 1999. It would force holders of the 1998-1999 Gulf leases to renegotiate their contracts with Interior or pay a hefty "conservation of resources fee" in order to bid on future government leases.

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