The House of Representatives on Friday passed by a wide margin broad-based energy legislation, which one House Republican leader called “the most important energy bill in the last 50 years.” But a dispirited Democratic lawmaker said it was a Republican-crafted bill that was “jammed down the throats” of others in Congress.

Surviving widespread Democratic opposition on a number of issues, the GOP-inspired measure would open up the coastal plain of the Arctic National Wildlife Refuge (ANWR) to oil and natural gas drilling, provide royalty relief for marginal oil and gas production and producers in the Alaskan frontier offshore areas, a royalty holiday for deep-gas drilling in the Gulf of Mexico, $18.7 billion in tax credits for traditional producers and alternative/renewable fuel production, $31 billion for energy research and development, would bolster the Federal Energy Regulatory Commission’s penalty and investigative authority over energy markets, and would establish a national electricity transmission system (See NGI, April 7).

The House approved H.R. 6, “The Energy Policy Act of 2003,” by 247 to 175. It marked the second time in less than two years that the House has voted out comprehensive energy legislation.

President Bush called the bill “a major step forward.” It will “increase America’s energy independence by diversifying our sources of energy, expanding new technology, and increasing environmentally responsible exploration.” He urged prompt Senate action.

The Independent Petroleum Association of America (IPAA), which represents independent and margin well producers, also praised the measure. The “decisive vote in the House…shows that policymakers and consumers are now demanding swift action on our national energy priorities,” said IPAA Chairman Diemer True.

The provision to allow drilling on up to 2,000 acres of ANWR’s coastal plain withstood a burst of attacks from Democrats. “Why would we take a Monet off the wall and burn it for our short-term energy needs?” asked Rep Ron Kind (D-WI). A proposal by Rep. Edward Markey (D-MA), an avowed critic of ANWR drilling, to keep the existing ban on resource development in the Arctic refuge failed by 228 to 197.

If ANWR is ultimately opened to energy exploration, the House bill would require $2.1 billion in bonus bids to be made available to the Low-Income Home Energy Assistance Program.

The Senate’s energy bill is not likely to include a provision on ANWR drilling, which means the issue will have to be reconciled in conference. The measure, which still is in committee, is expected to be ready for action by the full Senate in mid-May.

Kind also sought to gut the entire “Oil and Gas” title of the legislation, saying the royalty relief and royalty holidays for producers would put hundreds of millions of dollars into the “deep pockets” of oil and gas companies, such as ExxonMobil and ChevronTexaco. These are taxpayer-funded subsidies and give-aways for the energy industry, he argued, adding that lawmakers “[were] taking care of friends.”

The legislation is “more same old, same old,” Kind said. The House needed to take a “bolder vision” with respect to energy development, focusing on alternative fuels, renewables and hydrogen-based energy.

Rep. Jim McDermott called it an oil bill, saying it had a “greasy feeling to it.” Similarly, Rep. Lloyd Doggett (D-TX) said it was a bunch of “loopholes and dodges” that were “masquerading” as energy policy. It paid only lip-service to alternative fuel development, he said.

Rep. Barbara Cubin (R-WY) countered that the royalty relief wasn’t designed for major producers, but rather “we’re talking about mom and pop organizations that keep [oil and gas] flowing.” She noted marginal well producers provide one-third of the U.S. gas supply, and that without the royalty incentives their production would be shut in.

“This [Kind] amendment is typical of the reaction we get from the other side when we trying to produce a comprehensive…energy [bill],” said Rep. W.J. “Billy” Tauzin (R-LA), chairman of the House Energy and Commerce Committee. Without some kind of relief or incentives for producers, “where’s that gas going to come from? Do you think it’s going to come from the sky?” he asked. This measure, said Tauzin, “would shut down the pipelines.”

Kind’s amendment to strike the title was soundly defeated by 251 to 187.

Democrats even attacked a provision in the bill that would give the Interior secretary permanent authority to continue the agency’s royalty-in-kind (RIK) program, which allows producers to pay part of their royalty bills with production. Rep. Carolyn Maloney (D-NY) called RIK an “anti-taxpayer, pro-industry provision.”

The Democrats did score a key victory on an amendment, offered by Rep. Lois Capps (D-CA), to prevent the federal government from conducting an inventory of all oil and gas resources in coastal waters, including areas that currently are off-limits to producers. Capps, who was backed by the Florida delegation, viewed a resource inventory as the first step toward drilling in prohibited offshore areas.

“This is a strange amendment,” remarked Tauzin. “What are you afraid to know?,” he said, asking lawmakers from coastal states would they “rather hide in the dark,” and keep their “head in the sand.”

In addition, the House passed an amendment, sponsored by Rep. Thomas Reynolds (D-NY), to continue the ban on offshore drilling in the 94,000-square-mile Great Lakes system.

It defeated (237-193) a substitute amendment offered by Rep. John Dingell (D-MI) to give FERC broad anti-fraud authority in both electricity and natural gas markets. Among other things, it sought to increase penalties for civil and criminal offenses to levels in the Sarbanes-Oxley Act of 2002, an accounting reform law. Also, the proposal would have required FERC to issue rules to prevent affiliate abuse, authorized the Commission to refund electricity overcharges back to the date they commenced and required FERC to reform its policy on market-based electricity rates.

The House bill does bolster the Commission’s enforcement authority somewhat — it gives the agency more penalty authority, stronger investigative tools and the ability to conduct more price discovery — but the Democrats would have preferred to have seen more — a lot more. “Regulatory overkill is not the answer,” Tauzin said of Dingell’s proposal.

The bill’s electricity title “[would] create a national transmission system for the 21st century without violating states’ rights,” said Rep. Joe Barton (R-TX), who was the principal drafter of the title. It would protect those states (mostly in the Southeast) who do not want to subject their native loads to federal jurisdiction, he noted.

Grumblings from lawmakers in the Southeast over FERC’s plans to overhaul the nation’s electricity grid prompted the addition of the native-load provision in the electricity title when it came before the House Energy and Commerce Committee earlier this month (see Power Market Today, April 4).

At that markup session, Barton noted that a number of members on both sides of the aisle were concerned their constituents and their states might somehow be disadvantaged without some explicit protection for native load. One of the most vocal members on this subject was Rep. Charles Norwood (R-GA), who claimed that under its standard market design proposal, FERC “seeks to assert and exercise jurisdiction that is currently exercised by the states as it’s always been.”

But lawmakers from other parts of the country where electric power markets have advanced further in terms of regional transmission organizations (RTOs), were not seeking protection for their native loads, and believed, in some respects, it could hinder their regions. Thus, the bill would exclude from the native-load protection those regions overseen by PJM Interconnection, the New York Independent System Operator, ISO New England, the Midwest Independent Transmission System Operator and the California Independent System Operator.

Meanwhile, the bill also directs FERC to establish a transmission infrastructure improvement rulemaking within one year of the legislation’s enactment. Specifically, the Commission would be required to establish incentive-based transmission rate treatments “to promote capital investment in the enlargement and improvement” of transmission facilities.

The Department of Energy (DOE) also would be required within a year of H.R. 6’s enactment to conduct a study of electric transmission congestion. The DOE secretary would subsequently issue a report designating one or more parts of the U.S. experiencing transmission congestion as “interstate congestion areas.” After the initial study, the secretary would then have to execute additional studies in this area every three years. The measure would give FERC the authority to issue permits for the construction or modification of power lines in interstate congestion areas identified by the secretary.

Moreover, the bill would ban the use of “round-trip” trading in U.S. energy markets. Rep. Markey griped over the fact that while the electricity title bans round-trip trading, it was silent on several other types of questionable trading practices, such as “Death Star,” “Fat Boy” and “Get Shorty.” Markey noted that FERC has referred to these and other practices as the “seven deadly sins” of Enron.

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