Calling it the most comprehensive energy bill to be put before Congress in decades, House and Senate negotiators on Tuesday ended a four-year stalemate by wrapping up work on the sweeping measure that promotes expanded production of oil, natural gas, electricity and renewable fuels, as well as the construction of new liquefied natural gas (LNG) terminals, pipelines and gas storage facilities.

In completing their work, lawmakers cleared the way for both houses of Congress to vote on omnibus energy legislation before they depart for their August recess. However, the tax portion of the measure, which was expected to cost $11.5 billion, still had not been finalized at press time Tuesday. “We are trying to wrap it up as soon as we can” for inclusion in the energy bill this week, an aide for one of the tax-writing committees said. President Bush has asked lawmakers to have the bill on his desk by Aug. 1.

The two top negotiators, Rep. Joe Barton (R-TX) and Sen. Pete Domenici (R-NM), expect that the conference report on the energy measure will be met with strong bipartisan support in both houses. Barton and Domenici have said they see the conference report clearing both houses by the end of this week. The game plan calls for the energy measure to be on the House floor as early as Wednesday, a Capitol Hill aide said, with the Senate getting the bill by either Thursday or Friday.

The 1,000-plus page measure (HR 6) emerged from the conference committee after just five sessions largely because two of the most controversial energy issues, namely legal protections for producers of the gasoline additive methyl tertiary butyl ether (MTBE) and drilling in the Arctic National Wildlife Refuge (ANWR), were omitted.

Following intense negotiation sessions, lawmakers over the weekend said that a provision to shield MTBE producers from lawsuits over the contamination of groundwater would not be a part of the energy bill this year. The decision immediately improved the chances for passage of the energy bill in the Senate. Opposition to the MTBE provision in the Senate sank the energy bill in 2003.

In order to win bipartisan support, negotiators opted not to include provisions to open up the coastal plain of ANWR to oil and gas drilling. Rep. Richard Pombo (R-CA) offered an amendment to insert ANWR in the energy bill conference report, but then withdrew it. Although ANWR has the support of the House, it would have faced substantial opposition in the Senate. Lawmakers did not want to take that chance.

The measure approved by conferees is pro-producer, offering producers a wide range of financial incentives and royalty relief to spur oil and gas development in deep waters of the Gulf of Mexico, as well as streamlining the permitting process and providing more access to federal lands.

It clarifies that the Federal Energy Regulatory Commission has exclusive jurisdiction over the siting of new onshore LNG terminal facilities, but it also expands the role of the states to review and inspect new terminals. The states have challenged FERC’s claim of exclusive jurisdiction in this area, with one lawsuit currently pending in the Ninth Circuit Court of Appeals in California.

An amendment seeking to restrict FERC’s sole authority over LNG terminals was rejected by conferees, but the conference panel did accept a proposal offered by Rep. Cliff Stearns (R-FL) that would require the Commission to obtain the concurrence of the Defense Department before siting an LNG terminal near military facilities, a spokesman for Stearns said.

Also adopted by conferees was an amendment that would require all legal cases dealing with the siting of LNG terminals to be heard by the U.S. Court of Appeals for the District of Columbia Circuit, according to a House Energy and Commerce Committee aide.

Lawmakers retained Senate language that calls for the federal government to carry out an inventory of the oil and natural gas resources on the 1.67 billion-acre Outer Continental Shelf (OCS). Attempts to strike the OCS inventory provision were handily defeated. This was a setback for lawmakers from coastal states, who contend the inventory study is an attempt to undermine the congressional moratorium on drilling off Florida, and the West and East Coasts.

Challenges to both the LNG and OCS inventory provisions are likely to occur when the conference report reaches the House and Senate floors.

The bill did not contain any provisions calling for an upset of the existing moratorium on oil and gas drilling in the federal OCS, despite warnings by Sen. Bill Nelson (D-FL) last week that the Bush administration was pressing conferees to include a proposal to redraw sea boundaries giving energy-friendly Louisiana control over much of the Gulf of Mexico off Florida’s coast.

Nelson on Tuesday said negotiators chose not to consider the proposal after he discovered and publicly exposed the White House plan late last week. Even so, he said he will vote against the energy bill when it comes to the Senate floor. Nelson cited the OCS inventory as one of the reasons why he will oppose the measure.

The bill also provides $1 billion in coastal impact assistance funds over four years to six coastal states with oil and natural gas production on the OCS. The measure calls for $250 million annually in direct spending to be provided between 2007 and 2010 to four Gulf Coast states (Texas, Louisiana, Mississippi and Alabama), California and Alaska, with Louisiana receiving the lion’s share to restore its coastlines and wetlands. Louisiana is expected to receive about $540 million over the four-year period, or 54% of the total $1 billion.

The measure allows FERC to grant new storage capacity market-based rate treatment, notwithstanding the fact the applicants may have market power, if it is in the public interest, the storage capacity is needed, and customers are adequately protected.

Moreover, the bill would amend the Coastal Zone Management Act (CZMA) by establishing a 270-day period in which the secretary of the Commerce Department must close the decision record for appeals of state actions that block FERC-certificated gas projects. States are increasingly using their authority under the CZMA to halt unpopular gas pipeline projects. The bill seeks to streamline the process so that pipeline company appeals of states’ permitting actions will be decided more quickly by the Commerce Department.

The price transparency language reportedly was amended just before the conference session ended early Tuesday morning as part of a catchall bill manager’s amendment. It directs FERC “to facilitate price transparency,” saying it “may” set rules to collect information and data from any market participant. It “may” also establish an electronic pricing system but only “if it determines that existing price publications are not adequately providing price discovery or market transparency.” The bill directs FERC to “rely on such publishers and services to the maximum extent possible.”

A capital hill veteran suggested that to comply the with transparency measure FERC probably will have to do some kind of a survey of market confidence or participation in the publications’ price surveys, and it will be up to all concerned to make sure the system is “adequate” — or maybe even excellent!

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