A broad energy policy reform bill and tax package are scheduled to come to the House floor Friday to be debated and voted on separately. The House leadership has made some changes to the contentious policy measure to win over Democrats from producing states, but producers, pipelines and large industrial customers say the revisions have not changed their minds one iota — they still oppose it. Some say the changes have made a bad bill even worse.
“We are opposing both bills because they undermine the production of oil and natural gas,” said Jeff Eshelman, a spokesman for the Independent Petroleum Association of America (IPAA), which represents independent producers. “There is strong opposition even with the changes that have been made.”
He noted that independent producers are not alone. They are joined by the National Association of Manufacturers, the Chamber of Commerce, the Industrial Energy Consumers of America, the Interstate Natural Gas Association of America (INGAA), the Natural Gas Supply Association (NGSA), the American Chemistry Council (ACC) and others.
“We continue to have a number of concerns about it and are, therefore, opposed to it,” said Martin Edwards, vice president of legislative affairs for INGAA, which represents interstate natural gas pipelines. “We believe, as do a number of others in the natural gas industry, that the legislation would reduce natural gas supply availability at the same time Congress is considering climate change legislation that will increase natural gas supply demand. The legislation is setting the country up for an energy train wreck.”
In a joint letter Wednesday, the heads of IPAA, INGAA and NGSA called on House Speaker Nancy Pelosi (D-CA) to “reconsider the elements of this legislation” that would thwart the production of natural gas and development of delivery infrastructure. “Despite the efforts of a number of Democratic members to limit the harmful effects that this legislation will have on American natural gas production, the bills to be debated this week remain an enormous step backwards in terms of energy independence,” they said.
New anti-supply language in Title VII of the revised energy policy bill “is far worse than the already deeply flawed language that passed out of committee last month,” said ACC President Jack Gerard, who represents gas-intensive chemical companies. “House leadership took with the right hand what they tried to give with the left — and the result is that it’s worse than where it started,” he noted.
The ACC plans to begin running advertisements Thursday in several major Washington publications strongly opposing Title VII of the House energy package.
In response to pressure from Democrats from producing states, Pelosi and Rep. Nick Rahall (D-WV), chairman of the House Natural Resources Committee, softened or dropped several provisions from the energy reform bill that came out of Rahall’s committee in mid-June (HR 2337), which was widely opposed by the energy industry, CQ Today reported.
The revised energy policy bill (HR 3221) that will come to the floor Friday is the product of a number of committees. It will be joined by a $16 billion tax package (HR 2776). The estimated tax hit on domestic oil and gas producers and refiners from Section 301 of the tax bill is expected to be $11.4 billion over 10 years, according to the Joint Committee on Taxation. Section 301 would deny deductions for income attributable to domestic production of oil, natural gas or primary products. The House Ways and Means Committee approved the tax package in late June (see Daily GPI, June 22).
Pelosi has agreed to a separate vote on the tax provisions. This would allow opponents of the tax package to vote against it while supporting the energy policy legislation, CQ Today reported.
In a concession to some Democrats, the House leadership has agreed to maintain the royalty-in-kind (RIK) program as is, giving producers the option to pay their royalty bills with product (oil and gas), rather than in cash. The bill voted out by Rahall’s committee last month would have severely restricted the RIK program — allowing the federal government to buy oil from producers only to fill the Strategic Petroleum Reserve (see Daily GPI, June 14).
The revised measure also would cut the Bureau of Land Management’s (BLM) time to process drilling permits to 45 days from the previously proposed 90 days. But even with this change, the IPAA’s Eshelman noted that permit processing would take 15 days more than under the current law, which requires permits to be processed in 30 days.
To producers’ dismay, the House energy bill would cut funding for some federal offices, the BLM in particular, that oversee permitting, according to Eshelman. New language also would increase some of the royalties for deep gas production in the shallow waters of the Gulf of Mexico.
In addition, the measure calls for the recovery of billions of dollars in royalties on production from the flawed deepwater leases that were issued by the Department of Interior in 1998 and 1999. It would force holders of the 1998-1999 Gulf leases to renegotiate their contracts with Interior or pay a “conservation of resources fee” in order to bid on future government leases.
“Those leases were signed in good faith, and industry is being blamed for what the federal government wrote in those contracts,” Eshelman said, in opposing the provision.
The bill also includes a new provision, sponsored by Colorado Democratic Reps. March Udall and John Salazar, that would prohibit natural gas well drilling on the Roan Plateau in western Colorado. This “undermines a year-long effort that local governments have gone through to look at that plateau” and the prospects for drilling, Eshelman said.
The ACC contends that blocking access to the Roan Plateau will deny the country of nearly 9 Tcf of new natural gas supply, enough gas to heat nine million homes for nine years.
Gas pipelines remain concerned over a provision that gives the Commerce Department more time to rule on industry appeals of state decisions blocking pipe projects under the Coastal Zone Management Act.
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