Leading Senate Democrats yesterday introduced two major bills -one addresses supply and demand policy shifts, while the otherproposes a mix of tax incentives – to tackle the escalatingproblems in the nation’s energy sectors.

The cornerstone of the Democrats’ legislative effort, theComprehensive and Balanced Energy Policy Act of 2001, goes muchfurther than the Republican omnibus energy bill in several areas:it requires FERC to set cost-based rates on utility electricitysales in western energy markets (and directs states to pass throughwholesale rates to customers); reimpose a rate ceiling ontransportation of natural gas to California; and order sellers inthe “gray market” to disclose the costs of gas and transportationseparately.

The bill calls for a review of FERC standards for assessingmarket power in the wholesale power and transmission markets,aswell as requires the Commission to conduct an interagency review ofpolicies, procedures and regulations to improve the certificationprocess for gas pipelines. Moreover, it directs the Federal TradeCommission (FTC) to issue regulations requiring power marketers tofully disclose the terms of service.

In addition, the legislation addresses an issue that theRepublican bill steered clear of — access to onshore public landsfor producers. It proposes additional funding for more personnel atthe departments of Interior and Agriculture to expediteenvironmental reviews related to oil and natural gas production. Itcalls on the Department of Energy (DOE) and the Interstate Oil andGas Compact Commission to review opportunities for increasingproduction of oil and gas on state and private lands as well.

Sen. Jeff Bingaman (D-NM), the chief architect of the bill,makes an usual request that the Interior Secretary proceed withLease Sale 181 that is planned for the Eastern Gulf of Mexico nolater than December of this year. The president’s brother, FloridaGov. Jeb Bush, is staunchly opposed to the lease sale off the coastof Florida, and has asked the Bush administration to put a halt toit.

Bingaman, Sen. Tom Daschle (D-SD) and other Senate leadersunveiled the energy bills during a press briefing on Capitol HillThursday. Other co-sponsors include Sens. Patty Murray (D-CA), TedKennedy (D-MA), Max Baucus (D-MT), Byron L. Dugan (D-ND), HarryReid (D-RI) and Charles E. Schumer (D-NY).

The Democrats’ companion bill, the Energy Security Tax IncentiveAct of 2001, proposes a mix of tax credits and incentives toencourage the use of energy-efficient technologies and appliancesby businesses and the public, promote distributed generation andrenewable energy, foster investment in new natural gas pipeline anddistribution facilities, increase production from marginal wells,and advance the development of remote gas supplies.

Of particular interest to natural gas, the bill seeks toexpedite the construction of a pipeline to transport gas from theNorth Slope in Alaska to the Lower 48 states. To encourage this, itproposes a production tax credit of 25 cents/MMBtu for gas producedand delivered into interstate commerce before Jan. 1, 2009.

The legislation also would make power transmission and gaspipeline/distribution facilities eligible for seven-yeardepreciation to encourage investment in new infrastructure; offer atax credit for marginal wells when the price of oil dips below$14/barrel and the price of natural gas falls below $1.56/Mcf;allow for the expensing of payments to hold a lease prior tostarting production, and the expensing of exploration (geologicaland geophysical) costs; revise the depreciation schedule to promotethe development of remote gas supplies; and offer tax credits toencourage developmental drilling and enhanced recovery work for gasand oil during periods of very low oil prices (below $11/barrel).

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