Web Extra Wednesday, November 26, 2003

Energy bill blocked in Senate

After more than two months of closed-door negotiations with the Senate, the House of Representatives passed a comprehensive energy bill on Nov. 18, and the bill seemed headed for a quick trip to the president's desk. In the Senate, Midwestern Democrats were poised to vote with the Republican majority thanks to large ethanol subsidies in the bill that benefited farmers. But the momentum vanished almost overnight, when an unlikely coalition of Republican senators from New England and the rest of the Senate's Democrats refused to end debate on the bill and take a final vote.

Some of these legislators clearly had concerns about the budgetary implications of passing a $31.1 billion bill. Others objected to a provision that would shield manufacturers of the gasoline additive MTBE, which has been linked to groundwater contamination, from liability.

The fractious nature of this debate was indicative the bill itself, which included many singular provisions to garner support of a region or, in several cases, one lawmaker. But even with these "sweeteners" the bill could not get through the Senate. With freezing temperatures absent throughout much of the country and no spike in fuel prices, there is no public outcry to pass energy legislation. Instead, the bill will stay exactly where it is — teetering on the edge between passage and ultimate defeat until sometime early next year when Congress resumes and the Senate again begins to talk about the merits of the bill, including those aspects that affect the geosciences.

Arctic gas

In many ways, what is most notable about the bill is what it does not include. When President Bush first called for a national energy policy three years ago, a key goal was to reverse the increasing U.S. dependence on crude oil imports. But the final bill does not include some of the main provisions that the president sought to help achieve that goal.

First and foremost, exploration in Alaska's Arctic National Wildlife Refuge (ANWR) was left out of the bill. Indeed, opposition to oil drilling was so strong that lawmakers dropped a provision that would have accounted for and taken stock of offshore energy resources in areas currently under moratorium. This legislation does provide federal financial support for a proposed $20 billion trans-Alaska natural gas pipeline — a major potential source of new gas supplies. But these incentives may not be enough to get the project off the ground.

BP spokesman David MacDowell told Environment and Energy Daily that the bill "represents a meaningful step in the right direction." However, he cautioned that it does not amount to a green light for the pipeline. Industry analysts echoed this sentiment by predicting that the gas will not make it to the lower 48 states for at least 10 more years, regardless of the financial scenario.

Research opportunities

Although the bill does not mention ANWR, several other provisions deal with encouraging domestic oil and gas production. The bill requires the Secretary of Energy to research, develop, demonstrate and find commercial applications for oil and gas exploration and production, including gas hydrates, reservoir life extension, and ultraclean fuels.

The bill also provides new marginal property production tax incentives for oil and gas wells that produce an average of less than 25 barrels per day, in addition to the royalty relief those properties also receive. The bill also increases tax credits for coalbed methane extraction.

Also included in the legislation is a 10-year, $2-billion research and development program for obtaining natural gas from ultra-deep waters of the Gulf of Mexico and from unconventional sources onshore such as coalbed methane. Envisioned as an academic-industry-government partnership, the program will, according to sponsor Rep. Ralph Hall (D-Tex.), "go a long way toward filling the projected gap in natural gas production and consumption that will exist between now and 2015."

One provision in the final energy package with a direct impact on geoscientists is the National Geological and Geophysical Data Preservation Program Act, which authorizes a cooperative program between state geological surveys and the Department of the Interior to archive and support geologic data. The legislation authorizes up to $30 million over five years for this effort. As is the case with nearly all other programs created in the bill, however, such spending levels will only come to pass if the money is provided in annual appropriations bills.

Tax incentives to promote wind power generators, energy-efficient homes and hybrid passenger cars were among the conservation provisions added to the bill. Research-related provisions in the bill provide the Department of Energy's Office of Science with a 65 percent increase over the next five years. Although dominated by physics, the office does support fundamental geoscience research as well.

Rather than address climate change head-on with greenhouse gas reporting provisions as Democrats had sought, the conferees instead decided to fund additional research into coal mining and coal-related technologies — placing special emphasis on research and development that explores the "minimization of contaminants in mined coal that contribute to environmental concerns."

MTBE and Ethanol

In earlier versions of the energy bill, the Senate sought to ban the fuel additive MTBE and replace it with ethanol as a means of achieving Clean Air Act mandates. Environment and Energy Daily reported that the ethanol provisions in the energy bill, a major sticking point during conference negotiations, add 5 billion gallons per year of ethanol and other renewable-based fuel to the nation's gasoline supplies.

At the same time, the bill phases out MTBE use by 2015 and authorizes funds for producers making the transition from MTBE to other additives. But there's a catch, as bill language allows governors to override the phase-out for their individual states and the president to do so for the nation.

With the presidential election around the corner, House and Senate Republicans may strike a deal to remove the controversial MTBE provisions and pass the bill — giving the president another legislative win in the domestic policy arena. But the future of this legislation may depend most on "Old Man Winter." If this winter is particularly harsh and the price of home heating oil or natural gas drastically increases, lawmakers will feel more pressure to finish the job. Regardless, there is dealing to be done when Congress reconvenes in January.

Emily M. Lehr
American Geological Institute Government Affairs Program

For more on these and other provisions of the energy bill, visit the following links:

AGI Government Affairs Special Update

Conference Report
Senate Energy and Natural Resources Committee majority press releases
Senate Energy and Natural Resources Committee minority press releases

"Drilling on North Slope," Geotimes, May 2003

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