Senate Majority Leader Harry Reid (D-NV) last Thursday scrapped plans to move forward with a broad-based climate and energy bill, but said he planned to bring to the floor a “narrower bill,” minus the controversial cap-and-trade element, before the Aug. 6 recess.

The limited energy bill would be primarily directed at BP plc for its role in the mammoth oil spill in the Gulf of Mexico. Reid indicated that he would push later this year for an omnibus energy bill. “We are not putting forth this bill in place of a comprehensive bill…but we will not pass up the opportunity to hold BP accountable,” Reid said.

The narrower bill would have four components: offshore drilling safety provisions (removal of the current $75 million cap on a producer’s liability for economic damages from an oil spill on the federal Outer Continental Shelf; and enhanced equipment safety initiatives); promotion of natural gas vehicles and refueling; a home energy efficiency program; and a permanent authorization of $900 million annually for the Land and Water Conservation Fund.

Reid “assumes all of these [less contentious] proposals will have strong bipartisan support” in the Senate and “will be passed with virtually unanimous support,” said Martin Edwards, vice president of legislative affairs for the Interstate Natural Gas Association of America.

But energy analyst Christine Tezak of Robert W. Baird & Co. isn’t as certain that the limited bill will clear the Senate before recess. “Passage of Reid’s bill in the Senate before the August recess is not guaranteed (although as Majority Leader, Reid controls a lot of the process). We would not be surprised if the effort slides into September if an avalanche of amendments can’t be controlled,” she said.

Republicans have objected to Demcrats’ proposal to eliminate the cap on oil companies’ liability for damages related to oil spills, saying the proposal would make offshore drilling unaffordable for all but the largest oil firms and foreign-owned nationalized oil giants. And industrial end-users are pressing for the Senate to shoot down provisions related to natural gas.

The House is working on its own spill-related legislation. “That’s shaping up to be much more aggressive than the Senate’s bill. Conference may not be easy or quick,” Tezak said.

Senate Democrats have not given up the possibility of pursuing a more comprehensive bill after the November election, but some say a debate in the fall is unlikely. “I don’t want to rain on anyone’s parade here, but my sense is it’s going to be really hard to pass a comprehensive bill right now that includes climate change,” Sen. Mark Prior (D-AK) told CQ Today. He noted that past energy bills typically consumed three to six weeks of floor time. “We just don’t have that kind of time this year.”

It’s not likely that any Senate energy bill will have a carbon cost or cap-and-trade component this year. The chamber’s climate change bill has been in limbo ever since Sen. Lindsey Graham of South Carolina — the only Republican sponsor of the legislation — withdrew his support in April (see NGI, May 3).

In a letter to Reid and Minority Leader Mitch McConnell (R-KY) last Thursday, 67 industrial and agriculture energy users called on the Senate not to artificially create power and transportation sector demand for natural gas in legislation, which they said would boost volatility and drive up prices. “Our economy needs a diverse base of price-sensitive natural gas consumers — and a diverse energy supply — in order to reduce price volatility in all energy sectors,” said Peter Molinaro, vice president of federal and state government affairs for Dow Chemical Co.

The coalition of end-users said gas demand has been steadily rising over the past decade without incentives and in the absence of carbon caps, which would increasingly shift more power generators from coal to natural gas. The power sector’s gas demand has grown by nearly 30% since 2001, estimated the end-users, some of which included the American Forest & Paper Association, Dow Chemical, Kimberly-Clark Corp., Steel Manufacturers Association and The Fertilizer Institute.

Industrials also fear promoting expansion of demand with a whole new market for natural gas vehicles will pressure prices up across the board.

The letter urged the Senate to allow the market to set supply and demand for natural gas instead of picking “winners” and “losers” through legislation. The coalition acknowledged that there is great hope that large shale gas reserves will materialize as recoverable supplies.

“However, history has shown that unforeseen circumstances, including the potential for both federal and state regulations to be placed on shale drilling, can either slow its production, increase its costs or otherwise dramatically alter these types of future projects,” the coalition said.

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