The House on Thursday passed by a wide margin Republican-crafted omnibus energy legislation that gives energy companies multi-billion dollar tax breaks, clarifies that FERC has sole authority over the siting of liquefied natural gas (LNG) import terminals and lays the groundwork for oil and natural gas exploration and production to begin on the coastal plain of the Arctic National Wildlife Refuge (ANWR). The House bill is a major victory for President Bush, who has backed drilling in ANWR as part of his national energy policy.

By a vote of 249 to 183, House Republicans — with the help of a handful of Democrats — prevailed in their drive to push through The Energy Policy Act of 2005 (HR 6), an amalgamation of four different committee bills that offers $8.1 billion in tax breaks and incentives, and promotes electricity reliability, conservation, energy efficiency, environmental safeguards, renewable fuel production and traditional energy production initiatives, as well as removes roadblocks for natural gas transportation, LNG terminaling and storage and would open a 2,000-acre area of ANWR to drilling.

The House bill mirrors a number of the president’s national energy policy proposals. However, Bush “doesn’t believe that with the price of oil at $55 [a barrel] that oil and gas companies need any [financial] incentives at this point” to explore for oil and gas, said White House spokesman Scott McClellan Thursday. The president does think that incentives for renewable fuels and increased energy efficiency are “appropriate.”

Rep. Raul Grijalva (D-AZ) agreed with Bush and proposed removing a provision to suspend collection of royalty payments from Outer Continental Shelf oil and gas production in the Gulf of Mexico, but it was shot down in the House by 227 to 203. Grijalva called the proposed royalty holiday “corporate welfare” for the oil and gas industry, and added “there is no rational justification” to give companies “special treatment.”

But Rep. Bobby Jindal (R-LA) argued that Grijalva’s proposal would block investment in exploration and production in deep waters, robbing the Treasury Department of revenues and limiting domestic energy supply.

The House rejected by 237 to 194 a controversial amendment, sponsored by Reps. Michael Castle (R-DE) and Edward Markey (D-MA), to delete a provision giving FERC the primary authority over the siting of LNG terminals. “I support natural gas. I support liquefied natural gas,” but the bill “tramples on the rights” of states and localities with respect to the siting of LNG terminals, Castle said on the floor. “We are taking the absolute wrong step…I think that we [states] need to do more than just consult” with the federal government on LNG siting.

“I’m not aware of any major accident” involving LNG terminals and tankers that would justify the alarm by the states, said Rep. Joe Barton (R-TX), chairman of the House Energy and Commerce Committee. He noted that he tried to craft the bill’s language so that states would have a “stronger role, not a weaker role.” He further noted that he would be open to further strengthening the states’ role in conference committee.

“I actually think the bill is better than what was passed by the House last year” because it gives the Federal Energy Regulatory Commission lead authority over the siting of LNG facilities, said Martin Edwards, vice president of legislative affairs for the Interstate Natural Gas Association of America.

He noted that the House measure also contains several pro-pipeline provisions, including requiring states to base their appeals of energy project approvals on the record established during a FERC proceeding. The measure is aimed at shortening the process when states appeal a FERC certificate ruling to the Department of Commerce, claiming that a project is inconsistent with their rights under the Coastal Zone Management Act.

“The provisions on improving the process for natural gas pipeline reviews and permitting will allow for more efficient and timely decision-making” for pipeline projects, Edwards said.

The American Gas Association, which represents local distribution companies, said the House legislation would promote the expansion of gas distribution systems by changing the depreciation period for new gas distribution facilities to 15 years from 20 years. The new bill also would treat natural gas gathering pipelines as seven-year property.

Despite two attempts by House Democrats to strike the provision, the final bill contains controversial language to protect manufacturers of the gasoline additive methyl tertiary butyl ether (MTBE) from product liability lawsuits, and phases out production of MTBE by 2015, a measure that was strongly supported by House Majority Leader Tom DeLay (R-TX) and Rep. Barton, and widely opposed by House Democrats.

By a close vote of 219 to 213, House Republicans on Thursday defeated an effort by Rep. Lois Capps to eliminate the MTBE provision from the measure She argued that it violated the Unfunded Mandates Act of 1995 because it would impose mandates on states and localities without providing adequate federal funding. Instead, she said it would transfer the costs of the MTBE cleanup from producers to the states.

House Minority Leader Nancy Pelosi (D-CA) urged Congress to strike the “disgraceful MTBE giveway” to producers. She estimated it would cost $12-$63 billion to clean up the groundwater and drinking water contamination in the states caused by the gasoline additive.

On the first day of debate Wednesday, the House by 231 to 200 voted to keep a provision that opens the coastal plain of ANWR to oil and gas drilling; approved a manager’s amendment to add a provision on natural gas market reform from the HR 6 conference report of the 108th Congress to this year’s bill; and rejected a substitute electricity amendment seeking to deter and punish fraud and manipulation in the natural gas and electricity markets, increase penalties for Federal Power Act violations, and authorize FERC to refund all electricity overcharges.

Nearly all Democratic attempts (22 amendments) to reshape the bill were defeated on the floor. The bill that was approved Thursday was very similar to the energy legislation that the House adopted in the 108th Congress, but which stalled in the Senate.

The Senate, which has yet to release a draft of its energy bill this year, is expected to be the most important part of the process. Sen. Pete Domenici (R-NM), chairman of the Senate Energy and Natural Resources Committee, has indicated that a Senate energy bill will be voted out of his panel in late May. This could lead to a Senate floor vote in June, and a House-Senate conference committee on the bill in July.

President Bush signaled on Wednesday that he wants Congress to deliver an energy bill to the White House before it takes its summer recess in August.

The conference committee will seek to reconcile critical differences in the House and Senate energy bills — such as drilling in ANWR and protecting MTBE producers from product liability claims for groundwater and drinking water contamination. Neither ANWR nor MTBE are expected to be in the Senate energy bill. MTBE liability protection likely will be a primary sticking point in conference, and could result in the collapse of the bill again. The conference on the energy bill is expected to be very difficult.

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