Congress went home for the holidays last week with a massive $400 billion overhaul of Medicare under its belt, but passage of a comprehensive energy bill eluded it for the third year in a row. The bill became deadlocked in the Senate when Republican-led proponents were unable to find two additional votes to push the measure through, effectively stranding the bill in Congress until next year. GOP leaders vowed to pick up where they left off when they return for the second session in late January.
“We will not have time to do it [the energy bill] in this session. But we will be taking it up in January,” said a spokeswoman for Senate Majority Leader Bill Frist (R-TN). “We will be working over the recess to bring all sides to an agreement” on the measure. Both houses of Congress are expected to return in early December to act on one issue, the omnibus spending bill, and then will adjourn until late January.
Rising costs for natural gas, heating oil and gasoline, and rural America’s “displeasure” over losing favorable ethanol tax credits “will create [a] perfect storm for getting the bill passed in January,” said Marnie Funk whose boss is Sen. Pete Domenici (R-NM), the chief Republican architect of the broad energy bill (HR 6).
Senate Minority Leader Tom Daschle (D-SD), who supported the bill because of its favorable ethanol provisions, said the energy bill stalled because Republicans treated it like a Christmas tree. “I warned our Republican friends that they were going to load up the bill to a point [where it could] not pass.”
Capitol Hill experts and analysts generally believe that carrying the bill over to 2004 will sentence it to a “slow death” because lawmakers won’t want to tackle the hot-button issue of energy in an election year. “No one in Washington really thinks the bill has any chance for passage if it lingers into 2004,” said energy analyst Christine Tezak of Charles Swab Capital Markets.
But history could prove Tezak and other pessimists wrong. The first comprehensive energy bill, “The Energy Policy Act of 1992,” was passed by Congress in October of that year, just weeks before the presidential election which the first President Bush lost.
This year’s bill contained proposals and incentives that galvanized Democrats, Republicans and an Independent in their opposition, including an initiative offering retroactive protection to makers of the gasoline additive MTBE against lawsuits over MTBE-contaminated groundwater, too much pork-barrel spending and proposed rollbacks of federal clean air and water regulations.
Most analysts were predicting that despite the controversial issues, the legislation would clear the Senate and be sent to the president for his signature this year. Those issues might have slipped through under the radar, except for the almost universal editorial opposition to the Republican-crafted legislation by the nation’s leading newspapers, all of which voiced their opinions in the closing days of the Senate debate. The country’s conservative and liberal newspapers seldom ever agree editorially, but they came together on the energy bill. They urged senators to do everything in their power to stop the bill in its tracks. The House passed the measure by a wide margin earlier in November.
This may have been the turning point in the debate because it made Senate Republicans aware, probably for the first time, of the depth of the opposition to their bill, and it added fuel and credibility to the attacks of the Democratic-led opponents. They had the backing of the media, which they frequently cited in floor arguments.
The Wall Street Journal, in referring to the pork barrel spending in the bill, said “The GOP leadership has greased more wheels than a Nascar pit crew;” The New York Times urged Senate opponents to “launch this dreadful bill into the legislative netherworld where it belongs;” and The Atlanta Journal-Constitution said “This bill is about as bad as it gets.”
The Republican-led proponents called the bill the first major overhaul of energy policy in more than a decade, but the opponents saw it as a hodgepodge of tax incentives and credits and bad policy masquerading as energy legislation.
For the bill to clear Congress in 2004, analysts believe some type of compromise will have to be worked out on the MTBE liability waiver provision that will satisfy senators whose states are affected by MTBE-contaminated groundwater and House Majority Leader Tom DeLay (R-TX) and Rep. Joe Barton (R-TX), whose congressional districts include MTBE producers. Before giving up on the MBTE safe harbor, its backers would likely want to see the quid pro quo, ethanol tax credits, disappear also.
This will not be an easy task. President Bush personally called DeLay last week to try to persuade him to drop the liability waiver provision from the energy bill, but the Texas Republican was not in an accommodating mood.
In addition, many believe the lavish pork-barrel projects in the $31 billion measure will have to be significantly cut. Top candidates for the cutting-room floor are the tax-free bond incentives for a mall near Shreveport, LA, that would include a Hooters restaurant, and an aquarium for Iowa. The bill’s critics, and there were many, snickered when they saw these obviously non-energy items in what was supposed to be an energy bill.
There were some good policy calls and they should remain in the bill, analysts agree. These included mandated compliance with electric reliability standards, and for the petroleum industry, streamlined permitting for oil and natural gas producers, increased drilling access on non-park and federal lands and the Outer Continental Shelf, royalty relief to spur deep drilling in the shallow waters of the Gulf of Mexico, and initiatives to boost investment in the power transmission grid and gas pipeline network, just to name a few. Some of the energy efficiency/conservation, clean coal and nuclear waste incentive and research and development projects also deserve to stay.
Natural gas trade groups blamed the Democratic-led opponents, who blocked the energy bill from coming to the Senate floor for an up-and-down vote, for the measure’s failure this year. “We are extremely disappointed that a minority of senators used parliamentary tactics to block consideration of a bill that otherwise would have won approval of a clear majority of the Senate,” said David Parker, CEO of the American Gas Association, which represents local distribution companies.
Republican proponents needed 60 votes to force a roll call vote on the energy bill, but they fell short by two and were unable to convince any of the opponents to switch their votes by last Monday. That’s when Frist announced the measure would be delayed until 2004.
Parker accused the bill’s opponents of turning their backs on the nation’s gas customers. “I can assure you that this battle is not over,” he said in a prepared statement.
Likewise, “we will not rest,” said John B. Walker, chairman of the Independent Petroleum Association of America (IPAA), which represents independent oil and gas producers. “The majority of the Senate does support passage of the energy bill, and it deserves a fair vote. It’s unfortunate that Senate procedures have forced this bill off the table.”
Raymond James & Associates’ analysts, however, were highly critical of the energy measure last week, saying it included “all pork and no beef,” and had little to offer the oil and natural gas industries.
“This is a relatively meaningless piece of legislation for most [exploration and production] and oilfield service companies,” said analysts Wayne Andrews and J. Marshall Adkins in an energy “Stat of the Week.” The proposed extended and enhanced Section 29 tax credits “will add up to less than 2% of recent E&P capital spending. Is anyone really going to change their drilling plans based upon a couple of percentage points change in costs? We don’t think so.”
While the bill would offer incentives of around $560 million a year in the upcoming decade to E&P companies, the analysts noted these were “tiny” compared to the industry upstream spending of nearly $50 billion in 2002. “As a result, we don’t think that these incentives will result in meaningfully higher oil and gas production,” they said.
“We should also note that a full three-fourths of all of the proposed $23.5 billion in direct tax benefits [had] absolutely nothing to do with oil and gas production. One could even argue that the tax incentives for nuclear power plants, renewable fuels (primarily ethanol), clean coal and conservation-related measures could…have a negative impact on demand for oil and gas.” But the analysts conceded the more favorable provisions — such as increased drilling access for producers and a stepped-up permitting process — “could offset some of these negative issues.”
Some of the bill’s provisions — such as loan guarantees of up to $18 billion for a 3,500-mile natural gas pipeline from Alaska’s North Slope, and the ethanol mandates — “are pure pork barrel politics,” Andrews and Adkins said. They criticized the energy measure for mandating an Alaska route for the pipeline, rather than the “far more economical” Canadian route. “Clearly, this part of the bill reflects more the political influence of Alaska’s congressional delegation.”
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