The energy industry was bracing last week for a sea change in the fate of energy legislation in the U.S. Senate as a result of the sudden Democratic take-over of leadership in that chamber that installs Sen. Jeff Bingaman (D-NM) as chairman of the Senate Energy and Natural Resources Committee and relegates Sen. Frank Murkowski (R-AK) to the post of ranking minority member.

Fall-out from the announcement by Sen. James Jeffords (VT) that he was leaving the Republican party, becoming an independent and would vote with the Democratic leadership, could include major portions of the Republican administration’s comprehensive energy plan. “I think it will lead to a dramatic turnabout on energy issues” in the chamber, said Jerald V. Halvorsen, president of the Interstate Natural Gas Association of America (INGAA). Bingaman’s insertion as committee chairman “will bring to a grinding halt any sweeping energy legislation. The White House wants one big [omnibus energy] bill. That’s where Murkowski was heading. Bingaman would do it piecemeal. He’s much more methodical.”

The chances of President Bush getting his energy plan through the Senate was a “long shot at best even before [the Jeffords] switch,” Halvorsen said, adding that Jeffords’ departure all but kills it now. Besides the change in committee chairmen, the control of scheduling items on the Senate floor shifts from Sen. Trent Lott (R-MS) to the new majority leader, Sen. Tom Daschle (D-SD). This will give a heavier hand to environmentalists seeking to derail incentive measures for new energy production.

Some sources believe Bingaman will strive for an omnibus energy bill, but fear it “may get bogged down over price caps” for wholesale power in California. There will be “big battles over that and maybe some close calls,” one said. Halvorsen agreed with that assessment, commenting early last week, that electricity price caps will “receive much more attention” under a Democrat-controlled Senate than they have previously.

In fact, Bingaman signaled his focus on western power prices late last week, advising in an energy policy conference call that he does not believe that writing price caps into law should be the first response of Congress to California’s power price problems. Instead, the New Mexico senator argued that Congress should be calling on the Federal Energy Regulatory Commission to fulfill its responsibilities to ensure just and reasonable wholesale power rates.

During the Deutsche Banc Alex. Brown conference call, the New Mexico senator was asked to clarify whether he is in favor of price caps, and whether this is something that he is comfortable leaving up to FERC to act upon, as opposed to including in legislation. Bingaman noted that the only legislation pending in the Senate relevant to price caps is legislation sponsored by Sens. Dianne Feinstein (D-CA) and Gordon Smith (R-OR). That bill directs FERC to “go ahead and take action to ensure that prices are just and reasonable, and talks not in terms of price caps, but in terms of cost-based rates that permit a reasonable rate of return for any company involved.”

“We should not be writing into law any kind of a price cap,” Bingaman went on to say. “I do think we should be calling on FERC, though, to carry out its responsibilities under the law, and FERC is much better able to step in and take action on a temporary basis and then change that action when circumstances require, and I hope that’s what will happen.” Bingaman mentioned the (then) pending appointments of Texas regulator Pat H. Wood III and Pennsylvania regulator Nora M. Brownell to FERC. The Senate on Friday approved the nominations of Wood and Brownell to the two vacant spots at FERC (see related story). “I’m very optimistic that they will step up to this responsibility and that we will not wind up having to pass any additional legislation,” Bingaman said.

Bingaman also addressed what energy issues he thinks are likely to get top priority in the Senate in the short term. “I think the list of items that really we can do a lot of good on quickly here — is pretty short.” Specifically, he said the Senate needs to authorize a higher level of funding for the low-income home energy assistance program. “We do perhaps need to look at this legislation Senator Feinstein and Senator Smith have put forward, and see if that’s going to be required in order to get FERC to do its job on wholesale prices of electricity in California,” he went on to say. “Those are the two areas which are clear to me that we should look at,” Bingaman said.

Gas industry sources also are concerned that Sen. Patty Murray (D-WA), who would become chairman of the Transportation Appropriations Subcommittee, would use her position to “elevate pipeline safety issues” as part of the budgetary process. Also, Jeffords — who is “about as green as they come” — would be named chairman of the Senate Environment and Public Works Committee, Halvorsen noted. Under Jeffords, there “certainly would not be as much enthusiasm for coal and nuclear.”

On the issue of drilling in the Arctic Natural Wildlife Refuge (ANWR), which is advocated by Murkowski and Bush, Halvorsen said “forget it. You might as well stop talking about it.”

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