President Bush last Wednesday signed into law energy legislation (HR 6) that contains a lot of Christmas goodies for proponents of energy conservation and renewable fuels production, but oil and natural gas producers and consumers got a lump of coal in their stockings.

The Democrat-crafted bill, which was signed by Bush during a ceremony at the Department of Energy, includes provisions to increase fuel economy standards, boost the production of renewable fuels and promote greater energy efficiency. And while some of the provisions will increase the demand for natural gas in the years ahead, the measure does nothing to increase producer access to gas-rich offshore and onshore regions.

The 822-page “Energy Independence and Security Act of 2007” mandates an increase in the fuel economy standards for cars and light trucks to 35 miles per gallon by 2020, marking the first increase in the standard for passenger cars since 1975. The current standard is 25 miles per gallon.

It also would expand the renewable fuels standard to nine billion gallons in 2008 and progressively increase it to 36 billion gallons by 2022. The bill makes a commitment to develop cellulosic ethanol by requiring that by 2022 the United States produce 21 billion gallons of advanced biofuels. The U.S. currently produces approximately five billion gallons of ethanol from more than 130 ethanol plants.

The legislation would effectively phase out most common types of incandescent light bulbs by 2012-2014, increasing the energy efficiency standards of light bulbs by 30%. Within 18 months of full implementation of the first energy efficiency standard, analysts estimate savings of more than 65 billion kWh of electricity, according to the Senate Energy and Natural Resources Committee.

HR 6 also accelerates the implementation of new energy efficiency requirements for federal buildings, primarily through new requirements on the General Services Administration, which owns and leases in excess of 340 million square feet in more than 8,900 buildings located in every state. It calls for federal buildings to reduce their energy consumption by 30% by 2015, saving an estimated 60 trillion Btus of energy.

In addition, the bill aims to further develop carbon capture technology and expand funding for geothermal energy development. With advances in technologies and favorable tax policies, it estimates that 5,500 MW of geothermal energy could come online and be brought to market.

Bush signed the legislation only after two hotly disputed items were dropped — the $21.8 billion tax package and a renewable electricity mandate. The House, by 314-100, voted out the bill last Tuesday; the Senate passed it last on Dec. 13 by a vote of 86-8 (see NGI, Dec. 17). The bill the House approved was significantly changed from the one that it sent the Senate earlier this month (see NGI, Dec. 10). Senate Democratic leaders were forced to drop the contentious tax title and renewable electricity standard, which would have required utilities to produce at least 15% of their electricity from renewable fuels by 2020, due to intense opposition from Republicans. The tax part of the bill drew strong objections because it would have been funded by repealing existing oil and natural gas tax breaks.

While the measure offers no significant benefits to the natural gas and electricity industries, it is a victory of sorts for them because the two controversial provisions were dropped.

Sen. Jeff Bingaman (D-NM), chairman of the Senate Energy and Natural Resources Committee, vowed last Tuesday that the stricken renewable electricity mandate and tax package “will not be blocked forever” on Capitol Hill. “We will be back next year to vote on them, and we will keep up our advocacy until Congress finally catches up to the American people.”

The American Gas Association (AGA), which represents natural gas utilities, and other trade groups were disappointed that the bill failed to open up more areas to gas development. While “greater production, more efficiency and clean technologies will improve the nation’s energy outlook now and in the future, AGA is disappointed that [the] bill did not address the need to encourage increased natural gas supplies from America’s land and waters,” said AGA President David N. Parker.

“Hopefully the Congress will address this shortcoming in the near future.”

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