United States: New Congressional Energy Legislation: The Cuts And Compromises

Late last week, Congress took significant steps towards enacting important energy legislation. The U.S. Senate passed legislation that would, among other things, raise automobile efficiency standards, require increased use of biofuels, penalize gasoline price-gouging, improve appliance and lighting efficiency, and encourage both carbon sequestration testing and the production of advanced technology vehicles.

While many components of the bill enjoyed broad bipartisan support throughout the committee process, the larger measure proved to be contentious on the Senate floor, raising doubts at some points about whether a final agreement would be reached at all. Late Thursday night, after reaching a bipartisan compromise on an amendment to raise auto fuel economy standards, Senators narrowly agreed to cut off debate and went on to approve the final bill by a 65-27 vote.

Last week, the House Subcommittee on Energy and Air Quality sent similarly broad legislation to the full Energy and Commerce Committee for consideration. On Wednesday, June 27, the full Committee is scheduled to consider the legislation, which is expected to be the largest portion of an energy bill the full House of Representatives will consider sometime next month. If the House passes its own energy legislation, Members from the House and Senate will likely meet sometime later this summer or early fall to craft a compromise measure to send to the President.

Major Provisions of the Senate Bill

The Senate-passed energy bill touches on a wide range of issues. A summary of the legislation’s major provisions follows.

• A last-minute compromise over the Corporate Average Fuel Economy (CAFE) standards was the key to Senate passage of the energy bill. Senators Ted Stevens (R-AK) and Dianne Feinstein (D-CA) offered an amendment, which was adopted unanimously, to increase CAFE standards by 10 miles per gallon over 10 years for all passenger cars and light trucks to 35 miles per gallon by 2020. The amendment dropped language requiring that the standards rise 4 percent per year after 2020 and replaced it with a provision that allows the federal government to set the standard at the highest level feasible, making it more palatable to lawmakers concerned that the standards would be too severe.

• In addition to new CAFE standards, the Senate bill includes loan guarantees for plants that make fuel-efficient cars and auto parts. It also authorizes funding for automakers in an effort to lessen the costs of upgrading plants for the manufacture of advanced technology vehicles.

• The Senate measure mandates an increase in consumption of renewable fuels, requiring the use of 36 billion gallons of ethanol by 2022.

• The Senate legislation incorporates several energy efficiency measures, including the creation of new energy efficiency standards for household appliances such as residential gas, oil and electric boilers; a mandate for reduction in energy use in federal buildings; and the reauthorization of weatherization assistance programs. The bill also promotes new energy savings technologies, including efficient lighting technologies.

• The final measure promotes the research and development of methods to capture carbon dioxide from industrial sites and sequester greenhouse gases underground. It also requires an inventory of potential U.S. areas for storing carbon dioxide underground and authorizes the Department of Energy to conduct tests for carbon sequestration.

Defeated Provisions

The final Senate package is as notable for the measures left out as it is for those it includes. The following issues figured prominently into the Senate debate but were ultimately defeated.

• The $32.1 billion tax package introduced early last week by Finance Committee Chairman Max Baucus (D-MT) was not included in the final energy bill. Senators defeated the motion to cut off debate on the tax title, which would have raised taxes on oil and gas production to establish or extend and expand certain incentives for energy technologies, including renewable sources such as solar, wind and biomass. Supporters of the tax provisions, including Senate Majority Leader Harry Reid (D-NV), plan to bring the measure before the Senate again and are also hopeful a similar tax package will be included in any House energy bill.

Renewable Portfolio Standard

Coal-to-Liquid Fuels

Veto Threat

During the Senate debate, the Bush Administration outlined its opposition to two provisions in the underlying legislation:

1. Prohibition on Gasoline Price Gouging: The final Senate bill imposes civil and criminal penalties for the sale of gasoline at excessively high prices during presidentially declared emergencies and grants the FTC the power to investigate and enforce the ban; and
2. "NOPEC": The so-called "NOPEC" provision subjects the Organization of Petroleum Exporting Countries (OPEC) to U.S. antitrust laws and authorizes the Department of Justice to bring antitrust actions against OPEC nations in U.S. courts.

If a final energy bill from the House and Senate includes either of these provisions, the President is expected to veto the legislation.

Outlook in the House of Representatives

Earlier this year, the House of Representatives—led by its new Democratic leadership—passed an initial energy bill as one of the first acts of the new 110th Congress. Since that time, numerous House committees and subcommittees have worked to draft a more comprehensive energy package. Speaker Nancy Pelosi (DCA) is expected to announce the elements of a House energy bill this week and the full House of Representatives is likely to debate and vote on the measure sometime after Members return from the July 4th recess.

There had been some uncertainty whether committee chairmen and other key House members would make enough progress to meet Speaker Pelosi’s deadline. However, developments in the House Energy and Commerce Committee, Ways and Means Committee and others, indicate her goal is likely to be met.

In recent days, House Energy and Commerce Chairman John Dingell (D-MI) and Energy and Air Quality Subcommittee Chairman Rick Boucher (D-VA) announced that they will drop several contentious provisions from their Committee’s portion of the energy bill, including language opposed by Speaker Pelosi that would restrict the authority of the U.S. Environmental Protection Agency and the State of California to limit greenhouse gas emissions from automobiles under the Clean Air Act. Dingell and Boucher also agreed to drop provisions to promote coal-to-liquids technology and an increase in federal CAFE standards. The two members have pledged to address these issues when the House considers broader global warming legislation in the fall. However, key members of the House Representatives have criticized the Dingell/Boucher proposal and are expected to offer amendments during the House debate to increase CAFE standards and incorporate other energy conservation provisions.

Any comprehensive energy legislation could include the work of at least 11 House Committees. It is expected to include a $16 billion tax measure recently approved by the House Ways and Means Committee. In addition, the provisions that the Energy and Air Quality Subcommittee sent to the full Energy and Commerce Committee include increases in energy efficiency standards for appliances, a "smart" electricity grid to promote energy savings by electricity consumers, provisions clarifying loan guarantees for innovative energy technologies passed in the Energy Policy Act of 2005, renewable fuels infrastructure incentives and hybrid vehicle promotion.

As the lengthy and contentious Senate debate made clear, though, any effort to move energy legislation in the full House of Representatives—even with the removal of some controversial provisions—is likely to be a challenge.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.