The closeness of the House vote Friday on climate change and energy legislation (HR 2454) presages a tough battle ahead over the controversial issue in the Senate, Capitol Hill observers say.

“It’s going to be an uphill battle” in the Senate, said Martin Edwards, vice president of legislative affairs for the Interstate Natural Gas Association of America. “It has a chance. It’s going to be very challenging in the Senate…but it’s not impossible.”

The climate change measure is opposed by nearly every Senate Republican and about a dozen Senate Democrats. The Senate leadership doesn’t yet have the 60 votes that will be needed to bring a climate bill up on the floor, but Edwards said “they didn’t have 219 votes in the House until the very last minute.”

The climate change bill cleared the House by a slim margin Friday — 219 to 212 (see Daily GPI, June 29). It needed at least 218 to pass. While Democrats and a handful of Republicans were busy passing the bill, an onslaught of phone calls opposing the bill came into the Capitol Hill switchboard, causing it to crash. That’s not an uncommon experience with controversial bills, Edwards said.

While the House victory has emboldened Capitol Hill Democrats and President Obama, Edwards doesn’t expect to see climate change legislation emerge from Congress this year. “Maybe next year a conference agreement will come out,” he said.

“We continue to believe that climate provisions will face an uphill battle in the Senate where regional and trade disparity issues will weigh heavily on senators who generally must balance a broader range of constituent interests than their colleagues in the House,” said energy analyst K. Whitney Stanco of Washington Research Center.

“Furthermore, if the economy continues to lag and energy prices increase over the summer, the Republican argument that a cap-and-trade program is really just a ‘cap and tax’ may resonate more deeply with the public than the Democrat’s ‘green jobs’ talking point.”

It’s unclear at this stage if Senate Majority Leader Harry Reid (D-NV) will try to attach climate change provisions to the broad energy bill that was passed by the Senate Energy and Natural Resources Committee earlier this month (see Daily GPI, June 18). If Reid takes this approach, it could be the death-knell for an energy bill this year.

Reactions from industry and other stakeholders with vested interests in climate change were mixed. Some echoed the words of the bill’s congressional backers, who called it a “turning point” and a much-needed response to global warming, while others called it a jobs-killer and a drag on the U.S. economy.

San Francisco-based Pacific Gas and Electric Co., whose CEO has put climate change at the center of the utility’s strategic plans, said through a spokesperson that the House passage Friday “moves the nation closer to adopting responsible strategies to head off the climate crisis.”

California Gov. Arnold Schwarzenegger acknowledged that the bill “is not perfect,” but called its passage “a significant step” in a national fight against climate change. He said it “puts the United States in a position of leadership in international climate negotiations that must produce a global solution.”

Schwarzenegger pledged to work with Senate and Obama administration officials “to improve and strengthen” the House-passed bill.

Another California energy company with renewable energy development tied to climate change at the center of its corporate strategies, Edison International and its utility, Southern California Edison Co. (SCE), said the House bill took “the right approach” by supporting “emissions allowances instead of an auction” approach.

“It is important for the nation to achieve meaningful reduction of greenhouse gas [GHG] emissions while minimizing disruptions to our economic recovery,” said Ted Craver, CEO at Edison and SCE.

Environment California’s chief lobbyist Dan Jacobson said the bill was “an historic step toward a new clean energy economy,” although he believes the House could have gone further. Jacobson ultimately is looking for what he called “a dramatic shift in energy policy” that meets more completely the “dire scientific predictions regarding global warming demand.

“The first step is always the hardest and Congress should be applauded for taking it,” Jacobson said.

Thomas Pyle, president of the Institute of Energy Research in Washington, DC, said working-class families would be adversely impacted by the House measure. Pyle called it “an unprecedented piece of legislation that will fundamentally alter [the working class families’] way, quality and station of life.” He called cap-and-trade provisions in the bill a “scheme that will increase the cost of energy for every single American.”

Oilman T. Boone Pickens, who is promoting natural gas for vehicular transportation and wind for power generation, commended the bill’s sponsors, House Energy and Commerce Committee Chairman Henry Waxman (D-CA) and Edward Markey (D-MA), for taking a first step “in advancing the use of renewable energy.”

The American Energy Alliance, a Washington, DC-based nonprofit concerned about regulation of global energy markets, called the House bill a “job-killing” measure that is “bound for defeat in the Senate.”

Many long-time proponents of a national measure on climate change and renewable energy, such as PG&E, would not speculate on HR 2454’s fate in the Senate. “What we have been saying all along is that we look forward to seeing a final bill come out of Congress this year,” said a San Francisco-based PG&E spokesperson. Other western energy stakeholders said the Senate will be a “big showdown” and determine if anything gets passed this year.

The Washington, DC-based National Association of Regulatory Utility Commissioners (NARUC) was critical of what it perceives as “unnecessary restrictions” on state regulators on the distribution of emission credits, but it praised the House-passed measure more generally for recognizing the role state regulators need to play in “protecting consumers by allocating a significant percentage of no-cost emission allowances to regulated local distribution companies.”

“NARUC also remains opposed to the allocation of any electric-sector allowances to unregulated merchant generators,” said NARUC President Federick Butler, a New Jersey state regulator. “There is no way to prevent such entities from reaping windfall profits, which contradicts the legislation’s goal of distributing [credits] in a way that benefits consumers.”

NARUC liked the hands-off approach to building more explicit federal authority over transmission siting, but a Michigan-based merchant transmission company, ITC Holdings Corp., raised concerns about the House measure’s “lack of needed comprehensive electricity transmission policy reforms.”

ITC CEO Joseph Welch acknowledged that the House leadership, under pressure to bring the measure to the floor quickly, was unable in the limited time available to craft the needed transmission provisions to be included.

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