Energy Policy Legislation in the 109th Congress

There has been a flurry of committee activity in the Senate since Congress returned from its Presidents' Day recess. Before the break, Florida Senators Martinez (R-FL) and Nelson (D-FL) introduced S. 2239, the Permanent Protection for Florida Act of 2006, which would prohibit oil drilling off the Florida coast. This week the Senate Energy committee voted to approve S. 2253, a bill to begin the sale of oil and gas leases for 2.9 million acres off of Florida. Committee Chairman Domenici endorsed the bill, stating "There is enough gas in this part of Lease Sale 181 to heat nearly 6 million homes for 15 years. Passing this bill is the one thing we can do swiftly that will have a profound effect on gas supply and price." Sen. Salazar (D-CO) introduced an amendment to S. 2253 that would transfer at least $450 million in revenue from the lease sales to the Land, Water, and Conservation Fund, beginning in FY 2008, but later withdrew it. The floor battle over this bill is expected to be contentious; Sen. Nelson has already threatened to filibuster. While Sen. Martinez has not expressly said he will support a filibuster, he remains committed to the goals espoused in S. 2239 and has said he will do "all that I can" to prevent drilling off his state's coastline.

In other news this week, yesterday, Sen. Baucus (D-MT), the Ranking Member on the Senate Finance Committee, introduced legislation that will create an Advanced Research Projects Agency for Energy (ARPA-E), as well as provide tax incentives for people who use and produce alternative sources of fuel (such as owners of hybrid cars). This legislation, known as the Energy Competitiveness Act of 2006, expands on the tax provisions included in the Energy Policy Act of 2005, and will also ensure that the ARPA-E will function outside the Department of Energy's jurisdiction. ""The Manhattan Project was not folded into the Treasury Department," Baucus said, testifying to the necessity of an independent agency. In addition, the director of the ARPA-E will be appointed by and report directly to the President, and the agency staff will top out at 250, in order to increase the agency's credibility and effectiveness. A Finance Committee press release and a Minority Staff ARPA-E summary explain the legislation in further detail.

The battle over ANWR looks like it will be re-ignited this year; yesterday, the Senate Budget Committee marked up SGW 214, the FY 2007 budget blueprint, and passed it out of committee on a party-line vote. Chairman Gregg's (R-NH) mark included language that would allow another attempt at oil drilling in the Arctic National Wildlife Refuge (ANWR) to be included in this year's budget reconciliation legislation (a recent CRS report outlines the proposition in greater detail). Sen. Feingold (D-WI) offered an amendment yesterday that would strike the ANWR language from the mark, which was defeated along party lines. Last year, Republican leaders in the House rejected the ANWR provision included in the budget reconciliation bill, forcing Sen. Stevens (R-AK) to include it in the Defense spending bill. After contentious debate, a Senate cloture vote forced Stevens to remove the provision but vow that he would try again next time. The imminent ANWR fight already appears like it will match the ferocity of the 2005 debate. According to a recent press release, Sen. Lieberman (D-CT) declared "Should this language move forward to the floor of the Senate, we can assure you that every effort will be made to strike this reconciliation instruction." Republican leaders, with their eye on the 2006 midterm elections, seem determined to succeed on ANWR this time around, for fear that they may not get another chance in the next Congress.

This morning the Senate Committee on Energy and Natural Resources heard testimony from Department of Energy Secretary Samuel Bodman regarding the DoE appropriations that were unveiled in President Bush's FY2007 budget on Monday. In his opening statement, committee Ranking Member Bingaman (D-NM) stated: "On year ago, Congress responded to [the Administration's budget request] by appropriating slightly more for the Department than the president requested -- a total of $23.6 billion. This new [FY2007] budget is essentially flat with current spending levels. I think that this flat overall budget for the Department is bad news and hard to justify." Bodman responded that the Administration "had to make some very tough choices and decisions," and reiterated that point throughout his testimony. Senators' questions revolved mainly around the energy proposals in Bush's State of the Union speech last week and the possibilities for their implementation; the following are summaries of the main issues discussed at the hearing.

-- the U.S.'s reliance on oil, imported and domestically produced. During his State of the Union speech, President Bush vowed to reduce Middle Eastern oil imports by 75% by the year 2025; the next day, Bodman called the president's words "an example." However, when asked if the president was "wrong" by Sen. Cantwell (D-WA), Bodman unequivocally reaffirmed Bush's commitment to the State of the Union goal. "We will have a dramatic increase in the replacement of foreign oil," he stated. "That's the goal, [and the president] supports that goal." Cantwell retorted "We would like to see that goal in legislation." She stated her intent to push for such legislation implementing Bush's proposal, although Bodman refused to commit the Administration to supporting the hypothetical bill.

Bodman also specifically discussed the president's Advanced Energy Initiative, unveiled during his State of the Union speech, which proposed a 22% increase in DoE research into increasing the U.S.'s supply of natural gases and thus reducing the nation's dependence on oil; the budget commits $2.1 billion to furthering this goal. Sen. Menendez (D-NJ), the newest addition to the committee, called the 22% increase insufficient, and stated "The [president's] requests don't match the rhetoric." Committee Chairman Domenici (R-NM), on the other hand, praised the president's proposal and stated: "The president recognizes that research and innovation are America's best answer to the voracious global appetite for carbon fuels. Our economy in the coming years will reap the harvest President Bush is sowing today with this push to develop more energy from nuclear power, wind, the sun, and our own field crops."

Sen. Domenici and Sen. Murkowski (R-AK) also reiterated their intention to seek to include a provision to allow drilling in the Arctic National Wildlife Refuge (ANWR) in the 2007 Budget Resolution. Murkowski pointed to the failed attempt to include the ANWR provision in last year's Defense Appropriations bill as a missed opportunity to increase production of and reliance on domestically produced oil.

-- the development and increased access to cleaner and more energy-efficient vehicles. The FY2007 budget appropriates $289.5 million in funding for the president's Hydrogen Fuel Initiative, including a 27% increase in funding for advanced battery technology research that will increase the efficiency of hybrid cars. Sen. Wyden (D-OR) complained that "there is no there there" in the budget, and claimed that the Administration has provided simply for research down the line rather than for attempts to implement a more immediate solution. Sen. Martinez pushed for the modification of automobiles to increase gas mileage, and Bodman stressed that the Administration, as well as automobile companies Ford and General Motors, shared that goal.

-- the Global Nuclear Energy Partnership (GNEP). Domenici called the creation of GNEP a sign that the U.S. is "getting back in the game" regarding leadership in production of nuclear energy. Bodman declined to give an exact figure as to the total life-cycle cost of GNEP, but ball-parked the cost at "$20 to $40 billion." The main point of contention surrounding the GNEP initiative was the provision that established a permanent depository for high-level nuclear waste at Nevada's Yucca Mountain. The president's budget includes $544.5 million for this purpose. Bodman testified that "permanent geological disposal at Yucca Mountain offers the safest, most environmentally sound solution." Domenici pledged his support for legislation that the DoE plans to push for to ensure the establishment of the depository.

-- the DoE's Power Marketing Administrations (PMAs). Electricity sold by the PMAs (including Southeastern, Southwestern, Western Area and Bonneville Power Administrations) makes up 4% of the nation's electricity supply, and the budget includes $229 million in appropriations to the PMAs (excepting the Bonneville PA, which receives no Congressional funding and is financed instead by ratepayers in the Pacific Northwest). Said Bodman: "The budget provides that the BPA will use any secondary net revenues it earns above $500 million annually to make early payments on its federal bond debt to the U.S. Treasury. Due to high energy prices, these net secondary revenues could be significantly higher than historical levels." Bodman went on to warn the committee that a failure to approve the president's budget request could result in the elimination of the BPA's borrowing authority from the U.S. Treasury and thus to a limitation on its ability to invest in energy infrastructure.

GalleryWatch Note In his State of the Union address on Tuesday night, President Bush announced his goal for America to "move beyond a petroleum-based economy," specifically by reducing our dependency on oil imported from the Middle East. The President vowed to replace 75% of Mideast oil with ethanol by 2025, and to make non-corn-based ethanol available in large and "practical" quantities within the next six years. He also unveiled the Advanced Energy Initiative, which called for a 22% increase in Department of Energy research in order to aid future investment in nuclear energy, solar and wind technologies, and coal-based power. Stressing that "America is addicted to oil," the President made it clear that development of cleaner and more efficient energy sources would be one of his Administration's top priorities in the coming year.

Conspicuously absent from President Bush's speech was a mention of another push for oil drilling in the Arctic National Wildlife Refuge, which both Sen. Ted Stevens (R-AK) and Sen. Pete Domenici (R-NM), the Chairman of the Senate Energy and Natural Resources Committee, have endorsed. Attempts by both Senators to include an ANWR provision in the Defense appropriations and the Budget Reconciliation bills, respectively, were defeated last year, and on Feb. 1, Sen. Mel Martinez (R-FL) and Sen. Bill Nelson (D-FL) introduced S. 2239, the Permanent Protection for Florida Act of 2006, to prohibit drilling for oil off the Florida coast. The bill would provide permanent no-drilling zones as well as remove existing drilling leases by granting royalty forgiveness. Rep. Jim Davis (D-FL) plans to introduce an accompanying bill in the House.

In his keynote speech at the National Journal's Policy Council panel discussion last week, Sen. Domenici said "We will take another shot at ANWR [this year]." He emphasized that the Energy Policy Act, signed into law last year by President Bush, did not and will not reduce the U.S.'s dependency on foreign oil. Despite Domenici's stated desire to open Alaska and Florida to exploration, he shares President Bush's determination to increase the supply of renewable energy. Wind power, the Senator claimed, would offset 7 billion pounds of carbon dioxide, and coal-power plants would similarly aid in the removal of carbon.

Sen. Domenici credited the Energy Policy Act with inciting foreign awareness of and excitement over nuclear power, and stressed the importance of the bill's "incentives package" for any technological breakthroughs that increase energy efficiency or deter global warming. Climate change is on Congress's agenda, Domenici stated, but the "acrimony, anger and angst" over the issue will most likely impede any real progress, at least in the coming year. "We've reached the point where we ought to do something about it," the Senator said, but noted that actual policy implementation would naturally raise lots of questions that are unlikely to be settled anytime soon. However, committee hearings in the next few months are expected to explore the possibilities.