Ending weeks of haggling over critical energy legislation, the Republican-led Senate threw in the towel last Thursday night, substituting last year’s Democrat-crafted energy bill for this year’s legislation and passing it by a vote of 84-14. The first time around — in April 2002 — the same bill cleared the Senate by a bipartisan vote of 88-11 (see NGI, April 29). Last week’s vote, which sets the stage for Congress to vote out the first piece of major energy legislation in 11 years, came as Congress prepared to leave for its August recess.

The resurrected energy legislation (H.R. 6) calls for construction of an Alaskan natural gas pipeline to the Lower 48 states, multi-billion dollar tax breaks for small oil and gas producers, increased renewable fuel use and production, reforms to bolster competition in electricity markets, and more funds for low-income energy assistance. The Senate bill, however, does not support the controversial issue of oil and gas drilling in the Arctic National Wildlife Refuge (ANWR), which puts it at odds with the ANWR-supportive House. Disagreement over ANWR forced lawmakers to halt work on an energy bill during conference last fall. The ANWR issue could be a deal-breaker this year as well.

Refusing to concede defeat, Senate Energy Committee Chairman Pete Domenici (R-NM) said last week he planned to include key provisions of the derailed GOP energy bill in the final legislation during the House-Senate conference in the fall. “This deal is not how I envisioned getting an energy bill to conference. But if it gets us close to our goal, I consider it a win,” he said.

“I promise you we will write many of this year’s energy provisions into the bill at conference,” noted Domenici, who will chair the conference committee along with House Energy and Commerce Committee Chairman W.J. “Billy” Tauzin (R-LA). “We will do more for production. We will do more for energy diversity. We will do more for research. The final bill will look more like what I produced in committee this spring than it will the bill we are passing tonight. [This] bill is just a vehicle to get us to conference,” he said.

Senate Minority Leader Tom Daschle (D-SD) hailed the Senate’s passage of the resurrected bill, saying it was a “vast improvement” over the scuttled GOP energy bill in the Senate and the Republican-crafted measure in the House.

The favorable vote on the Senate energy bill was a victory for both sides, said a legislative expert in the energy industry. But because Republicans will be in the majority on the conference committee, he believes the final conference report on the energy bill will resemble the House-passed measure, which is more reflective of Republican positions on energy issues.

“It’s our [Democrats] work product that’s going into conference, and the reality is they [Republicans] will have to stay within the scope of the conference,” countered Bill Wicker, spokesman for the Democratic members of the Senate Energy and Natural Resources Committee, which voted out the GOP energy bill this past April.

“We have no delusion that things will remain unchanged” in the energy bill in conference, but he cautioned that Democrats may filibuster the legislation in the event a “bad conference report” emerges.

Charles Schwab energy analyst Christine Tezak doesn’t see “smooth sailing” ahead for an energy bill this year. With most of this year’s Senate energy proposals now on the cutting-room floor, this “could erode momentum behind the bill as…the Senate goes into conference with the necessity of re-introducing language that doesn’t have the validation of floor votes behind it,” she said.

“We now believe there is no more than a 60% chance that a bill can get to the president’s desk this fall. It is still feasible, but we think it will be tough.”

Tezak believes the Democrats may have a harder time of blocking any bill that emerges from conference. “An important argument against the bill — that it is a Republican giveaway to the energy industries — has now been undercut by the Senate’s adoption of last year’s bill, advocated by the Democrats.”

The idea to revive the 2002 energy measure arose during an exchange between the Democratic leadership and Senate Majority Leader Sen. Bill Frist (R-TN) early Thursday on the Senate floor, which followed Frist’s filing of a substitute for the entire energy bill late Wednesday night and a petition for cloture to limit debate.

Daschle (D-SD) led off the exchange asking, “What would have been wrong with taking [the] bill that 88 of us voted for last year and starting with that?” Frist responded, “if we have the opportunity to take that bill up…let’s do it and let’s pass it today and then we can move on.” Assistant Minority Leader Harry Reid (D-NV) followed up with “you’ve got yourself a deal.”

Before committing himself, Frist first consulted with Domenici, floor manager of the energy bill, and spent much of the day lobbying Republicans to support resuscitating the 2002 bill. The entire Senate, Democrats and Republicans alike, was in a holding pattern throughout much of last Thursday awaiting word on the leadership’s decision.

Sen. Kent Conrad (D-ND) said while he would have preferred to pass this year’s energy bill, “if the best that we can do is pass last year’s bill, let’s do it.” It’s not a “perfect” measure, but it has bipartisan support, he noted.

Congress last year failed to reconcile the House and Senate versions of what was proposed as the Energy Policy Act of 2002. A major sticking point was and continues to be future oil and drilling in ANWR. The Senate bitterly opposes ANWR development, while the House in its energy bill passed in April supports future exploration and production in a small area of the coastal plain of the Arctic refuge (See NGI, April 14). Both houses back an Alaskan gas pipeline, with the Senate measure offering a loan guarantee of up to $10 billion to encourage the line’s construction — something that the Bush administration opposes. The two bills also propose billions of dollars in tax credits and incentives for independent oil and natural gas producers, alternative energy/renewable fuels and energy research and development.

The 2002 Senate bill does not call for federal regulation of over-the-counter derivatives trading, which had been pushed by California legislators. The House bill, however, bolsters FERC’s enforcement authority somewhat — it gives the agency more penalty authority, stronger investigative tools and the ability to conduct price discovery.

Last year’s Senate bill, now this year’s bill, does not include tough penalties for market manipulation or require FERC to set up a price monitoring system for electricity, as had been advocated in the failed Republican-crafted legislation. Western Senate proponents of a crackdown on manipulation may have an opportunity later (possibly in conference) to push for stricter market manipulation penalties.

Charles Swab’s Tezak indicated that a deal has been brokered between the Republican and Democratic leadership to allow consideration of strict anti-manipulation provisions this fall in exchange for concessions on repeal of the Public Utility Holding Company Act (PUHCA).

Both the House and now-revived Senate measures include electricity titles, but they don’t address standard market design (SMD) in a substantial way. Domenici, however, is expected to make a full-court press to include his compromise electricity title in the conference bill, which seeks to delay FERC finalization of SMD until July 2005.

The Senate bill also extends the authority of FERC to public power and rural cooperatives, keeps in place the Public Utility Regulatory Policies Act’s mandatory-purchase requirement for qualifying facilities; and endorses the direction that FERC has taken on regional transmission organizations.

The decision to revert to last year’s bill was a big surprise, and was the result of some “unusual parliamentary gymnastics,” noted Tezak. “This is a story that nobody could have possibly made up,” remarked one Capitol Hill aide. “This is new ground we’re breaking here,” echoed the legislative expert in the energy industry. While “it’s not the way you want to do things…it might be the best thing” because it will move a Senate energy bill to the conference committee, where the real work is done, he noted.

“The law doesn’t get written on the Senate floor…All you’ve got to do is get [a bill] across the finish line and then you can get down to the details,” he said. “I feel at this point the Senate needs to wrap something up and get it out of the chamber.” The GOP’s nearly 500-page, 11-title energy bill had been on the Senate floor since mid-May, but only about 18 days were spent debating it.

Congress has been trying for more than two years to pass energy legislation and send it to the president.

Senate progress on the now-scuttled Republican energy bill was extremely slow-going last week, with lawmakers jumping from issue to issue and squeezing in the debate on energy. By Thursday, the so-called energy debate had deteriorated into a war of words between Republicans and Democrats, and it became clear that the bill would not clear the Senate before the August recess.

Frist accused Democrats of engaging in “obstruction, flat out obstruction” to prevent passage of an energy bill before the Senate recess. But Democrats and other Capitol Hill observers faulted Frist for scheduling votes on controversial judicial nominations and trade agreements during the week of the energy bill debate.

“A lot of people are angry the Senate is wasting time on something [a judicial nomination] that will go nowhere,” said the legislative source. There was “a lot of frustration” and it was directed at Frist for diverting attention to issues other than energy, he noted.

It’s almost as if the Senate has “attention deficit disorder,” said Sen. Byron L. Dorgan (D-ND). “We are fiddling while our energy is burning,” intoned Sen. Trent Lott (R-MS).

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