Following three nonconsecutive days of markup, the House Natural Resources Committee Wednesday passed a controversial energy policy reform bill (HR 2337) that would impose a number of new restrictions on oil and natural gas producers and pipelines, as well as repeal benefits that were offered to the energy industry in the Energy Policy Act of 2005 (EPAct).

By 26 to 22, the panel voted out the Democrat-sponsored energy bill to the House floor. The measure is expected to be part of a broader energy package requested by Speaker Nancy Pelosi (D-CA).

Efforts by Republicans to weaken the bill, particularly Titles I and II that deal with oil and gas issues, were soundly defeated. By 27 to 21, the committee rejected an amendment by Rep. Stevan Pearce (R-NM) that sought to strike the two titles. Committee Chairman Nick Rahall (D-WV) conceded that if the vote had gone the other way, it would have killed his bill.

By 25 to 17, the committee also voted against an amendment by Rep. Bill Sali (R-ID) that would have given Titles I and II "no force or effect" if the secretary of the Department of Energy determined that they would increase the price for domestic oil, natural gas or petroleum products.

The measure, sponsored by Rahall, drew fire from a number of energy sectors, including oil and natural gas producers, natural gas pipelines, industrial energy consumers, wind energy developers and the gas-intensive chemistry industry. The Independent Petroleum Association of America, the Interstate Natural Gas Association of America and the Natural Gas Supply Association cited their objections in a joint letter to Rahall last month (see Daily GPI, May 24). They said the measure would thwart oil and gas production and the development of pipeline and power transmission infrastructure and would raise energy prices. The bill also is opposed by the Bush administration.

"We are dismayed that members of the House Natural Resources Committee chose to approve a bill that contains rollbacks to key domestic energy supply provisions of the Energy Policy Act of 2005," said Jack N. Gerard, president and CEO of the American Chemistry Council. "These provisions had just begun to do some good by streamlining the process for developing domestic energy supplies on federal lands, resulting in more permits and production." He called on House lawmakers to remove the rollback provisions contained in Titles I and II when the bill comes to the floor.

"We need to increase supply of natural gas -- not decrease it. Rep. Rahall's bill...will decrease supply," said Paul Cicio, president of the Industrial Energy Consumers of America. "[The] December 2007 natural gas futures price is already priced 23.75% above today's level and FERC is forecasting electricity prices to rise across the country from 19% to as high as 32% because of high natural gas prices."

The Independent Petroleum Association of America (IPAA), which represents independent oil and gas producers, echoed that sentiment, saying the bill was a "step backward" for domestic energy production. It "will increase bureaucracy, snarl the permitting process and limit the ability of American producers to invest in American energy," said IPAA President Barry Russell.

The American Gas Association (AGA), a gas utility group, said the bill had "serious flaws" and fell short of addressing the needs of U.S. energy consumers. "HR 2377, if enacted into law, would result in a decrease in natural gas supply and an increase in natural gas prices to consumers," remarked AGA President David Parker.

Although industry scored some victories, many of the more troubling provisions for oil and gas remain in the bill. These calls for audits of royalty payments by 2009, penalties for companies that fail to pay all of their royalties, repeal of the "categorical exclusion" under the National Environmental Policy Act, an extension of time for the Commerce Department to rule on industry appeals related to the Coastal Zone Management Act, limiting the royalty-in-kind program to filling the Strategic Petroleum Reserve, the establishment of fees for the Interior Department to recover costs of processing oil and gas permits, and the repeal of EPAct provisions with respect to energy right-of-way corridors across federal lands.

On Wednesday, the committee also defeated an amendment offered by Rep. Bobby Jindal (R-LA), which would ensure that states are given their share (37.5%) of back royalties if the federal government opts to extend the terms of the flawed 1998-1999 oil and gas leases to entice producers to pay back royalties. The Congressional Budget Office scored Jindal's amendment as budget "neutral," but Rahall said he had "some policy issues" with the proposal.

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