Capping off two grueling days of markup, Rep. Nick Rahall (D-WV), chairman of the House Natural Resources Committee, announced last Thursday that the “last and most important votes” on his controversial energy policy reform bill (HR 2337) would be delayed for nearly a week — until this Wednesday. The delay offered the energy industry the chance to make one last pitch to committee members to change their minds and votes on a measure that has the potential to significantly impact oil and natural gas supply and prices.
Rahall cut the markup session short last Thursday in part because Rep. Don Young of Alaska, the ranking Republican on the panel, had to return to the House floor to control debate on another legislative item. But before doing so, the House committee voted on a number of amendments. The panel is expected to resume voting on critical amendments and the overall bill when it meets again Wednesday morning.
The substitute bill, sponsored by Rahall, has drawn fire from a number of energy sectors, including oil and natural gas producers, natural gas pipelines and wind energy developers. The Independent Petroleum Association of America, the Interstate Natural Gas Association of America (INGAA) and the Natural Gas Supply Association voiced their opposition in a joint letter to Rahall last month (see NGI, May 28). They contend the measure will thwart oil and gas production, the development of pipeline and power transmission infrastructure and raise energy prices.
The bill imposes a number of new requirements on the oil and natural gas industry, and repeals benefits that were offered under the Energy Policy Act of 2005 (EPAct). The measure is expected to be part of a more comprehensive energy package requested by Speaker Nancy Pelosi (D-CA). But it first will be reviewed by other House committees.
“If this big turkey ever gets wings, it’s going to go to four other committees,” said Young, a major critic of the Rahall bill. He called the measure “national energy suicide,” CQ Today reported.
Capitol Hill watchers believe the measure will clear the committee, but by a close vote. “Ultimately, I think it will be” voted out, “but I don’t know in what form,” said Martin Edwards, vice president of legislative affairs for INGAA.
The energy industry scored some victories during the initial markup session last Wednesday. The committee approved an amendment, offered by Rep. Jim Costa (D-CA), that would establish a 90-day deadline for the Bureau of Land Management to carry out an environmental review after a producer has filed for a drilling permit. In addition, the committee approved a proposal, offered by Rep. Neil Abercrombie (D-HI), that would cut to six months the amount of time required for study of energy transmission corridors on public lands, CQ Today said.
Some of the more troubling provisions for the oil and gas industry appear to still be in the bill. These include the increased use of audits of royalties payments, penalties for companies that fail to pay all of their royalties, repeal of the “categorical exclusion” under the National Environmental Policy Act, an extension of the time for the Commerce Department to rule on industry appeals related to the Coastal Zone Management Act (CZMA), and provisions addressing right-of-way corridors across federal land.
Only a handful of oil and gas-related amendments were voted on last Thursday. The committee defeated a measure, proposed by Rep. Rob Bishop (R-UT), that attempted to ensure the federal government would recover the costs for processing protests of drilling permits. It would have required protesting parties to pay a user fee to offset the Interior Department’s costs for processing protests.
Also defeated was a proposal, offered by Rep. Stevan Pearce (R-NM), that would have amended a provision in the Rahall bill that calls for fines and penalties to be assessed for failing to pay oil and gas royalties. It would have directed a portion of the recaptured oil and natural gas revenues to go towards coal-to-liquids pilot projects funded in whole or part by the federal government.
Pearce also offered an amendment to strike the most contentious titles of the Rahall bill (Titles I and II), which would subject oil and gas producers to more regulation and repeal benefits in the 2005 energy policy law. A vote on this is expected Wednesday. The two titles “are a solution in search of a problem,” Pearce said. They assume that there’s “too much” production of energy, particularly natural gas, on U.S. public lands.
Titles I and II contain “several modest reforms” to the federal government’s oil and gas programs, Rahall countered. There are “no provisions in HR 2337 [that would] limit any company’s access to federal lands for oil and gas activity.”
In addition, Rep. Bill Sali (R-ID) seeks to weaken Titles I and II with an amendment that would give the titles “no force or effect” if the secretary of the Department of Energy determines that they would increase the price for domestic oil, natural gas or petroleum products. “It seems that this bill will almost entirely cut off our domestic production. That would be a move in the wrong direction,” he said.
Rahall objected to Sali’s proposal. “This particular amendment sets an impossible standard,” he noted. But Pearce backed the measure, saying that “there is a tremendous amount here that is going to affect the availability of oil and gas,” and thus prices. “Let’s not do things that drive the price of energy up.”
The vote on the Pearce and Sali amendments will be closely watched by the natural gas industry, said INGAA’s Edwards. He noted that Title I seeks to repeal about five or six provisions that are favorable to oil and gas in EPAct, while Title II focuses almost entirely on production on federal lands.
Also awaiting a vote by the committee is an amendment offered by Rep. Bobby Jindal (R-LA), which would ensure that states are given their share (37.5%) of back royalties if the federal government opts to extend the terms of the flawed 1998-1999 oil and gas leases to entice producers to pay back royalties. The Congressional Budget Office scored Jindal’s amendment as budget “neutral,” but Rahall said he had “some policy issues” with the proposal.
“First, the secretary of Interior currently does not have the authority to extend the duration of the leases, and this amendment appears to give him that authority, which we do not support. Second, to give the secretary the authority to extend leases as a way to renegotiate the 1998-99 [contracts] is a fundamental policy shift…This amendment would be a repudiation of HR 6,” Rahall said.
HR 6, which the House passed in January, would force holds of the flawed 1998-1999 leases to renegotiate their contracts or pay a hefty “conservation of resources fee” in order to continuing bidding on future government leases (see NGI, Jan. 22). Although lengthening the terms of the leases has been proposed by some as a carrot to get producers to renegotiate the leases, the House measure is silent on this issue.
“There is nothing in this amendment that actually gives the secretary the authority to extend the leases,” Jindal said in defense. “All we’re saying is if they do that [extend the leases], that the states [should] not lose out on their share of the royalties.”
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