Starting off on the wrong foot, Republican and Democratic congressional conferees directed to come up with a comprehensive energy bill reached the end of their first week of negotiations deeply divided over how to proceed in the second and third weeks. In addition, Senate leader Pete Domenici, R-NM, said he would stand by his deal to hold off FERC standard market design (SMD) action through 2006, and the administration published its energy bill wish list.

The Republicans, who lead both the House and the Senate and consequently the conference committee, announced Thursday they would come up with a Republican draft that would be made public and then be opened to discussion and amendment. The conferees include 13 senators and nearly 60 members of the House of Representatives.

Domenici, chairman of the Senate Energy and Natural Resources Committee, told reporters in an afternoon briefing that a single text would be compiled by Republican staff from both sides of the Congress, using H.R. 6, which passed the House, S. 14, which was voted out of the Senate committee, and the previous year’s Senate bill, which was substituted and voted out (again) on the Senate floor.

For ranking minority member Sen. Jeff Bingaman (D-NM), “this is a deeply flawed strategy,” he said, noting that Democrats would be denied initial input into the conference document. Attempting to push through amendments after the fact “is no substitute for actually being involved when key decisions are first made; no amount of labeling of the resulting text as draft or provisional can mask this fact.”

The Republican draft will be made public incrementally over the next two weeks, Domenici and staff aide Alex Flint told reporters, with less controversial provisions being released first starting Monday, Sept. 15. Meetings will then be held to consider proposed changes. Domenici defended the process, saying he is reversing the procedure of last year’s conference committee, which failed to produce a bill. While that conference committee had broad participation early on, those allowed into the negotiations became increasingly restricted as the process continued.

In this case the opening rounds will be exclusive, and succeeding debate will be inclusive. Domenici said that purely for organizational purposes the three bills should be reduced to one or the situation could become chaotic.

And for those of you in RTO [regional transmission organization] land, Domenici said he was standing by his commitment to Sen. Richard Shelby (R-AL), (and the South and Far West) and including restrictions against FERC implementing its SMD until Dec. 31, 2006. Nor will the bill say whether Congress believes FERC has the authority to mandate RTO participation or not. That will be left to the courts.

Domenici also pointed out that on the Republican side there is not even agreement on electricity measures, with DOE Secretary Spencer Abraham’s letter to the committee a day earlier differing from FERC Chairman Pat Wood’s stance on power. Abraham’s letter, while urging action to “help complete the transition to effective competitive wholesale power markets,” offered no guidance on how and when the transition should proceed.

The administration Wednesday urged congressional energy bill conferees to include in their final draft a provision that would dictate the opening of “a small portion of the Arctic National Wildlife Refuge (ANWR) to environmentally responsible oil and gas exploration and development,” as well as an 80% loan guarantee for a natural gas pipeline from Alaska.

The message was part of an overall administration energy wish list that was sent to the House and Senate conferees last Wednesday.

Along with the loan guarantee for the Alaska pipeline, the administration also would support accelerated depreciation for the project and an enhanced oil recovery tax credit. What the administration doesn’t want to see in a final bill is the Senate proposal for a price floor tax credit provision “because it would distort markets, could undermine fiscal responsibility, and would likely undermine Canada’s support for construction of the pipeline and thus set back broader bilateral energy integration.” Also, the administration doesn’t want any strings tied to its financial support since it “believes market forces should select the route of the pipeline,” Abraham said.

In addition to the Alaska initiatives, the administration supports provisions in the House and Senate bills designed to increase production on the Outer Continental Shelf, and federal onshore and tribal lands — particularly those provisions “that will work to address shortages in the natural gas market and help maintain low prices and adequate supplies for consumers.”

Also on the administration’s list are measures to expedite permitting for new natural gas supplies, expedite handling of appeals on siting of interstate pipelines and provide appropriate incentives for the production of oil and gas.

The letter to conferees wound up by admonishing conferees to cut the tax losses and spending increases in the bill, noting the president’s Fiscal 2004 budget includes tax incentives of just $8 billion over 10 years. The bills under consideration would add up to considerably more.

Abraham railed against “excessive and new authorizations for appropriations and loan guarantees….including numerous unnecessary, duplicative and costly research and development authorizations….These authorizations will create unrealistic expectations of future funding that are extremely unlikely given competing fiscal priorities, including deficit reduction.”

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