The mood on Capitol Hill last week was cautiously upbeat as the feuding tax writers made headway on the disputed items in the multi-billion dollar tax package of the broad energy bill, prompting widespread reports that a final conference vote on the legislation was likely to occur this week. By late Friday, however, Sen. Pete Domenici (R-NM), chairman of the conference committee, had not formally scheduled a vote.

“It’s clear the [Bush] administration’s involvement appears to have shaken a few things lose,” said a Senate Democratic aide. A conference vote on the energy measure could take place this week, but he conceded there have been a lot of “false starts” over the past couple of weeks. The Senate Republicans “have informally communicated to the Democrats that they are aiming toward having a final conference meeting on Wednesday morning,” he said Friday. “They told us not to expect the text [of the bill] any sooner than Monday.”

An energy bill “may be coming down [out of conference] before long,” noted an energy industry legislative analyst, adding that a conference vote could be imminent by the middle of this week. The mood is “very positive” on Capitol Hill right now.

Given the news about the progress on the tax package, “we continue [to] think odds are high that an energy bill will hit the president’s desk before Congress leaves this year,” said Charles Schwab energy analyst Christine Tezak last week.

House-Senate tax writers last Wednesday reached an agreement on the disputed ethanol portion of the $16 billion tax package. The compromise struck a bargain between the Senate position, which called for a change in the tax laws to support increased ethanol content in gasoline, and the House stance.

The progress on the energy bill came one day after the Bush administration forwarded a proposal to Capitol Hill to resolve the weeks-long tax standoff. The proposal, which was crafted by the staff of Vice President Dick Cheney, attempted to nudge Chairman Bill Thomas (R-CA) of the House Ways and Means Committee to accept the Senate side on ethanol. Senate Democrats, however, warned last week that a favorable ethanol provision was not enough to assure passage of an energy bill this year.

The prognosis last week was extremely poor for Congress awarding price guarantees to Alaska gas producers to support construction of a proposed $20 billion pipeline from the North Slope to the Lower 48 states. Domenici told reporters that the controversial price supports had been dropped.

“It appears to be on its way out. It was not part of the last two to three offers between the House and Senate” tax committees, said Donald Duncan, vice president for federal and international affairs for Alaska producer ConocoPhillips, last week. He noted that Thomas was responsible for the price supports being struck from the energy bill.

Thomas indicated he had a “philosophical problem” with providing price supports to Alaska producers, said Duncan, but the lawmaker made sure incentives would be awarded to heavy oil producers in Kern County, CA., which is part of his district. The White House, which objected to price guarantees for Alaska producers, “played a key role in killing it” as well, he told NGI.

An Alaska pipeline was first proposed in the 1970s, but it has been held up over the years because of the “huge price fluctuations for natural gas,” Duncan said, adding that lawmakers have failed to realize this. “Wellhead price volatility is driving whether the pipeline will be built.”

In another development on Capitol Hill, the House on Friday defeated an attempt to remove from the broad energy bill a proposal to expand a current exemption for producers from stormwater discharge regulations under federal clean water laws.

By a vote of 210 to 188, House lawmakers shot down a motion, offered by Rep. Bob Filner (D-CA), to instruct energy bill conferees to eliminate the proposed expansion of a permit exemption for oil and natural gas activities from the legislation (HR 6).

Under existing law, producers are not required to obtain stormwater discharge permits from the Environmental Protection Agency (EPA) for non-contaminated substances that may be emitted from their drilling operations into nearby water bodies. The EPA has limited the permit exclusion to the actual drilling activities.

The energy bill, however, seeks to clarify that the exemption extends to pre-drilling activities as well — such as preparing a site for drilling and the movement and placement of drilling equipment.

Rep. Joe Barton (R-TX) argued that the EPA has been doing a “back door, an end [run]” around existing law by requiring permits for pre-drilling construction activities, but not active drilling.

The statutory language of the Clean Water Act, which Congress passed in 1987, “seems clear that any matter of stormwater collection, whether it is a ditch, a culvert under a road, a diversion channel around an oil and gas well location, does not have to be permitted by the EPA. We could not be more clear. But the EPA has sought to regulate the building of oil and gas location sites by insisting on…stormwater discharge permits for the construction of the site,” he said.

“If you apply common sense to the plain meaning of the statute, [it] would show that activities necessary to prepare a site for drilling and for the movement and placement of drilling equipment are part and parcel of the operation. You cannot have one without the other. Therefore, a statutory exclusion for one totally encompasses the other as well.”

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