On The Hill Blog

On The Hill

Kevin Bliss — Fri, 31 Jul 2009 21:18:22 GMT

July 2009

As I write this column, Congress is a day away from the planned start of the August recess. Both the House and the Senate won’t meet again until after Labor Day. While initial plans called for both the House and the Senate to have passed climate change and healthcare legislation by the start of the recess, this task proved to be too difficult. As Compact Comments goes to “print," it appears that the only one of these bills that will have been passed by recess will be the Waxman-Markey climate change bill (HR 2454) in the House. That bill, otherwise known as the “American Clean Energy and Security Act of 2009," was passed by the House on June 26. Since then, healthcare legislation has moved onto the front burners with the President and House and Senate leadership only this week conceding that the healthcare deadline would also not be met. Notwithstanding this, Congressman Waxman plans to have the House Energy and Commerce Committee work into the wee hours Friday (July 31) if necessary to report a healthcare bill out of his committee before recess. That feat, and it will be a feat if liberals and Blue Dogs finally come to agreement on a bill, will only set up a process whereby the Energy and Commerce Committee healthcare bill will be merged with healthcare bills already reported out of the House Ways and Means and the House Education Committees. It will be a busy autumn.

As this is an energy-focused column, we’ve probably said all we need to healthcare. Concerning energy, as noted above, the House did pass a climate change bill. The vote was 219-212, and, as the vote total would suggest, it was not “bipartisan”. It took a lot of work for the Democratic majority to keep their members in line to secure a victory. Come fall, the action will move to the Senate. There, Senator Reid has apparently set a Sept. 18 deadline for the six Senate committees with jurisdiction over the bill to complete their work. The ultimate goal of the President and House and Senate leadership is apparently to have a final climate change bill signed into law by December when United Nations climate change talks commence in Denmark.

The Senate Committee with perhaps the biggest role to play in crafting the Senate climate change bill will be the Environment and Public Works Committee under Senator Boxer. She has indicated that the bill likely to be reported out of her committee will look a lot like the House-passed bill. Another Senate Committee with a major role to play in the climate change bill will be the Senate Energy and Natural Resources Committee. Indeed, they have already reported a bill out of the committee, S. 1462, that is likely to be the energy component of the Senate climate bill. The bipartisan bill, otherwise known as the “American Clean Energy Leadership Act of 2009," was reported out of the committee on July 16. More information on the bill can be found at the Senate Energy and Natural Resources Committee website. Of note is that the bill contains provisions that would open new areas of the Eastern Gulf of Mexico to oil and natural gas production as well as facilitate the expansion of natural gas pipelines. It also extends the life of the pilot offices for permit processing for oil and gas development that had been set up in the Energy Policy Act of 2005 (EPACT ’05). There are two very good summaries of the bill available on the site linked above, one two pages and the other ten for those interested in additional detail.

Finally, no summary of energy events on Capitol Hill would be complete these days without mention of hydraulic fracturing. Unfortunately, the news isn’t particularly positive with the introduction in both the House and the Senate of bills to repeal the exemption for hydraulic fracturing that the IOGCC worked so hard to get included in EPACT ’05. The House Bill is HR 2766 and the Senate Bill is S. 1215. They are both called the “Fracturing Responsibility and Awareness of Chemicals (FRAC) Act”. Sponsored by Representative DeGette from Colorado in the House and Senator Casey of Pennsylvania in the Senate, the bills in addition to repealing Section 322 of EPACT ’05, would also require discloser of “the chemical constituents (but not the proprietary chemical formulas) used in the fracturing process.” These bills were introduced within days of a hearing held on June 4, 2009, by the Subcommittee on Energy and Mineral Resources of the House Committee on Natural Resources. The subject of the hearing was “Unconventional Fuels, Part I: Shale Gas Potential” at which our own Lynn Helms of North Dakota testified. An audio recording of the hearing as well as a copy of all of the testimony presented, including Lynn Helms’ can be found at the Subcommittee website.

On The Hill

Kevin Bliss — Tue, 28 Apr 2009 14:10:12 GMT

On the Hill for May 2009

(Washington, April 28, 2009) Congress was back in session last week after the Easter recess for a busy 5 weeks before its Memorial Day recess. On the energy front a lot is happening in Washington. For one thing, energy was on President Obama’s agenda almost every day last week as he took part in numerous Earth Day events. One of the things President Obama talked about was the economic danger to the U.S. of dependence upon overseas oil. Obama’s solution, however, is not expanded domestic oil and natural gas production as much as it is a huge new federal government effort to develop and deploy renewable sources of energy.

Also on the energy front, efforts are ramping up both on Capitol Hill and in the Obama Administration to limit the release of greenhouse gases into the atmosphere. On Capital Hill, both the House and Senate are working on draft climate change bills. On the House side, Congressmen Waxman and Markey unveiled the Democrats’ bill on March 31 in the form of a discussion draft. Last week they began holding a series of hearings on the bill. The hearings began with industry leaders testifying. According to Congress Daily, Markey and Waxman were careful to draft their bill so as to secure the support of an industry coalition (auto, oil, electricity, chemical and others) known as the U.S. Climate Action Partnership. It appears that industry support at the hearing was not as enthusiastic as expected because the current draft bill lacks critical details that are important to industry. Reportedly the debate is over whether the bill should start with free allowances for businesses and only eventually require a complete auction for credits or whether all credits should be auctioned from the outset as the Administration has proposed. This makes a huge difference to industry. By and large Republicans are not supporting the Waxman-Markey approach. With industry support, however, Democrats apparently believe that Republican opposition can be neutralized.

On the Senate side, climate change legislation appears to be on a slower track. It will also likely be much harder in the Senate to get a climate change bill passed than on the House side. For instance, earlier last week Senator McCain, while saying that he had long supported a “cap and trade” climate change bill, blasted the Administration approach that requires all credits be auctioned from the outset. Speaking at a national energy symposium, Senator McCain called the Administration cap and trade proposal “an irresponsible, ill-conceived, and distorted version of a cap and trade system that the President’s budget relies upon to raise nearly 650 billion dollars of revenues from a climate credits auction. The President’s proposal of auctioning one hundred percent of the carbon credits in bad economic policy that would cost businesses billions of dollars and allow for little to no transition into a low carbon system.” Bear in mind that this is a criticism from a Republican supporter of cap and trade. Not all Republicans share this view and would much prefer to see, if anything at all, institution of a carbon tax. The argument is that a carbon tax would require a much smaller government bureaucracy to administer and would be far more transparent.

While at the start of this new session of Congress there was considerable opinion that climate change legislation would be unlikely this year, that view has shifted with the strong support of the Administration for early action on a climate change bill. Congressional Democrats have thus stepped up their efforts. As noted above, however, the challenge lies in the Senate. It may yet prove difficult to secure a 60 vote filibuster-proof majority there to pass such a bill. This brings up another issue--the Budget Resolution.

Prior to leaving on their Easter recess both the House and Senate passed Budget Resolutions, both without a single Republican vote. The House and Senate will soon enter into negotiations to reconcile the two differing resolutions. One option for House and Senate leaders is to include Reconciliation in final resolution for both health care and energy that would allow passage in the Senate with a simple majority vote, 51 Senators and not 60. It is of consequence in that inclusion of Reconciliation would make passage of a climate change bill far easier and would mean that any bill that does pass would likely be stronger as there would be no need to water it down to secure Republican or moderate Democrat support. Expect a bitter partisan fight on this, although there have been some reports that agreement has been reached not to apply Reconciliation to climate change. Stay tuned.

Efforts to limit the emission of greenhouse gases into the atmosphere haven’t been limited to Capitol Hill. Two weeks ago the Obama Administration, through the U.S. Environmental Protection Agency (EPA) under the Clean Air Act, announced a finding that emissions of carbon dioxide (CO₂) and five other gases (methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride) endanger public health and welfare. This means that the Administration has effectively announced its intention to limit the release of these gases into the atmosphere. Of course, if Congress acts and the President signs legislation into law, it will take make unnecessary the EPA move. In the meantime, it makes clear that change is coming one way or the other and that the quantity of greenhouses gases that are released into the atmosphere will eventually be capped in the U.S.. One reason for taking the EPA action was to increase the pressure on Congress to act, sooner rather than later. This is because the regime implemented by EPA under the Clean Air Act is likely to be far more rigorous and less flexible than would the regime prescribed under legislation. Of course, this all means that CO₂ has now in essence been declared a pollutant. For more information on this see the Wall Street Journal article entitled How Carbon Dioxide Became a ‘Pollutant’.

Of note, one component of the Waxman-Markey climate change discussion draft is a provision requiring the Secretary of Energy in coordination with the Federal Energy Regulatory Administration and EPA to conduct a study to assess the need for and barriers to the construction and operation of pipelines to be used for the transportation of carbon dioxide for the purposes of sequestration and enhanced hydrocarbon recovery. Along these same lines, the IOGCC has recently formed a Pipeline Transportation Task Force to undertake a scoping on behalf of states of the issue of CO₂ pipeline transportation. Funded by the U.S. Department of Energy and the National Energy Technology Laboratory through the Southern States Energy Board, the task force will hold its first meeting in Anchorage, Alaska on May 13 and 14, 2009. The task force will be chaired by former IOGCC Vice Chairman Robert Harms of North Dakota and will produce a report in 14 months that should help states begin to understand the issues that will need to be addressed in licensing and regulating new CO₂ pipelines. While not directly connected with the ongoing IOGCC Carbon Capture and Geologic Storage (CCGS) Task Force, the Chairman of the CCGS Task Force, Lawrence Bengal of Arkansas, will serve on the new Task Force as a liaison between the two task forces.

On The Hill

Kevin Bliss — Mon, 06 Oct 2008 21:24:22 GMT

To say it’s been a busy month of September in Washington, DC is a bit of an understatement. Congress returned from its August recess early in the month and hit the ground running. Energy, as expected, was a leading topic of debate and deliberation. It was ultimately pushed aside by the U.S. financial crisis and by a decline in the price of oil, but one can be sure that energy will once again be front and center in the New Year.

As I write this, Congress is close to adjourning, almost a week later than planned. Both House and Senate had hoped to have concluded legislative business by Friday, Sept. 26, but that didn’t happen. Among other things, the financial crisis intervened.

Before I address the financial crisis and the rescue package, which curiously now has an energy component, let’s review what’s happened on the hill on the energy front.

Offshore Development. As reported in an “On the Hill” email update in mid-September, the U.S. House of Representatives at long last took up debate mid-month on opening U.S. offshore oil and natural gas resources to development. Both Democrats and Republicans introduced bills, the Republican bill being the Peterson-Abercrombie bi-partisan bill (HR 6709) mentioned in the email. It lost, however, to the Democrat bill because Democrats have the most votes these days. The bill that passed (HR 6899) would allow offshore development from 50-100 miles offshore subject to the approval of the state to which the offshore acreage corresponds. From 100 miles outward there would be no restrictions on development, except in Florida where restrictions passed previously would remain in effect. The bill that passed would allow no oil and natural gas development from the coastline through 50 miles offshore (effectively extending the moratoria in this zone). The Democratic bill also did not include revenue sharing for the coastal states impacted and imposed $17 billion in taxes on domestic oil and natural gas producers, including, apparently, small domestic onshore producers.

The bill that passed the House, however, will not become law, at least not before the election because the Senate opted not to tackle the offshore issue before the election recess. The Senate leadership concluded that there were going to be substantial differences between the House and Senate bills and that it was too close to the elections to be able to come to agreement. The Senate bill that was gaining traction was one being championed by the so-called “Gang of 20” co-lead by Senators Conrad (ND) and Chambliss (GA). So unless there’s a “lame duck” session after the election, there is not likely to be any offshore bill until the new Congress in January and under a new president. It is, however, looking likely that at least the Senate will convene for a few days the week of Nov. 17, so anything is possible. The terms of the House adjournment has apparently left open the possibility of such a session in the House in November as well.

Continuing Resolution. Since Congress didn’t complete the appropriations process this year it was necessary that a Continuing Resolution (CR) be passed by both Houses and signed by the President by Sept. 30, to keep government running past that date. The $600 billion plus CR (HR 2638) that passed and was signed by the President on the 30th will run through March 6, 2009. For most departments and agencies, including the U.S. Department of Energy, funding until then will be at last year’s levels. By March 6 congress will have to pass an omnibus budget covering the remainder of the fiscal year, about the same time they’ll be beginning work on the FY 10 appropriations bills. The biggest energy consequence of the CR was that it did not include, as it has for many years now, the moratoria on offshore drilling. It’s assumed that the House and Senate leadership realized that there was no harm in letting the moratoria expire. Besides giving them the ability to claim before the election that they had responded to the public’s demand that the offshore be opened to development, they undoubtedly realized that legislation clarifying what can and can’t be drilled would be passed long before the Minerals Management Service completed their Five-Year Plan, a necessary precursor to any new development.

Tax Extenders Bill. For some months now there has been an effort to pass what has come to be called the “tax-extenders” bill. It is a bill to extend certain expiring tax credits, mostly for renewable energy and energy efficiency. The bill also includes a lot of other things, including a patch for the alternative minimum tax, disaster aid, new taxes on the oil industry, as well as tax breaks for refineries using oil from unconventional sources. According to the Washington Post, it has come up 10 times on the Senate floor since June 2007. The problem has been that the Senate and House haven’t been able to agree as to the terms of a bill. The primary difference is that the House legislation would fully offset all of the business tax breaks contained in the bill whereas the Senate legislation would only partially offset those revenue losses. Furthermore, many of those offsets are tax increases aimed at the oil and natural gas production industry. It is one reason that House Republicans have supported the Senate extenders bill rather than the House extenders bill. This brings us to the next and last topic.

Financial Rescue Legislation. I mentioned at the beginning that the financial crisis and passage of a rescue bill has assumed center stage in Washington but now curiously also contains an energy component. That component is none other than the Senate Tax Extenders Bill, inserted by the U.S. Senate as a part of their proposed financial rescue package. That package passed the Senate on Oct. 1, by a vote of 74-25. The Senate vote followed by 3 days the House vote which rejected the administration and congressionally negotiated rescue package by a margin of 228-205. For many of us who’ve lived in Washington a while, the Monday House vote was one of the most shocking and surprising votes we’d witnessed and its impact on the stock market, as we all by now know, was immediate.

As readers will no doubt be aware by now, the House upon reconsideration of the rescue bill on Friday, Oct. 3, 2008, passed it by a vote of 263-171. What the House passed was exactly the same bill (HR 1424) as cleared the Senate on Oct. 1. The bill was modified noticeably, however, from the bill initially rejected by the House. The “sweeteners,” in addition to the tax extenders provisions, also included an increase in the amount of FDIC insurance on individual depositors from $100,000 to $250,000, as well a provision allowing the Securities and Exchange Commission to suspend “mark to market” accounting rules that required companies to mark down assets to estimated market value. In the interim House members had also been lobbied intensively by a coalition of groups from business to labor that advocated passage of the bill.

It’s also been announced that the House will hold its opening session of the 111th Congress on Jan. 6, 2009, with the counting of the electoral votes for president occurring on Jan. 8.

On The Hill

Kevin Bliss — Mon, 06 Oct 2008 16:14:37 GMT

When Congress reconvenes from its August recess in early September, energy promises to be on the top of the agenda in both the House and Senate. That’s a pretty easy prognostication given that energy’s been a top item on the agenda for a while now. Indeed it is one of the hottest political issues this year, with gasoline and other energy prices apparently having changed public opinion and driving politicians to appear responsive.

Of interest, since adjournment for the recess, House Republicans have continued to speak daily on the House floor demanding that Speaker Pelosi bring the House back into session for a vote on “American energy”. That isn’t going to happen of course, but Speaker Pelosi has apparently indicated that she will allow the House to vote on offshore drilling after Congress reconvenes in September – something she and congressional leadership have heretofore been unwilling to do. This is an apparent accommodation with Senator Obama’s announcement that he could support limited offshore drilling as part of a compromise package to advance a broad range of energy initiatives. It is less clear what Majority Leader Reid will be willing to do in the Senate.

The compromise package to which Senator Obama referred was apparently the proposal put together by the bipartisan “Gang of 10”. The proposal includes offshore drilling as well as renewable energy tax incentives and promotion of nuclear energy. Similar compromises are being crafted in the House by a number of groups including one led by Congressmen Peterson and Abercrombie. Of additional note, apparently Senate Majority Leader Reid and Minority Leader McConnell have agreed to hold a one-day energy summit shortly after the Senate reconvenes in September.

One thing to note about any of the compromise packages is that they will themselves be controversial. Criticism of the “Gang of 10” proposal in the Senate, for instance, includes that it only offers up limited offshore production (opening additional areas in the Gulf of Mexico only and allowing only the states of Virginia, North Carolina and Georgia to “opt in”) and that it pays for new energy incentives by increasing the taxation of (or withdrawing deductions currently allowed) oil and natural gas companies. Opening the Arctic National Wildlife Refuge to development is also unlikely to be included in any of the compromise packages that have a chance of passage.

It will be interesting to watch what develops. Part of what’s driving things besides election politics and shifting public opinion is the need for the House and Senate to pass legislation to extend tax credits to certain industries, including the renewable energy industry. The controversy lies, at least in part, with the insistence by House and Senate Democratic leadership that the extensions be wholly or at least partly offset by new revenues sources, such as the withdrawal of certain tax incentives to oil and natural gas companies. Solving this dilemma is a key aspect of the compromise proposals.

Also on the House and Senate agenda for September is consideration of a Speculation Bill to address concerns that oil market speculation has been at least partly responsible for driving up the price of energy. Efforts to come up with a bi-partisan bill failed before the recess and efforts will resume after the House and Senate reconvene. Apparently aiding this effort will be a September report due out by the Commodity Futures Trading Commission, which it is anticipated will shed some additional light on problems in need of fixing.

It promises to be an interesting autumn.

On the Hill

Kevin Bliss — Mon, 06 Oct 2008 16:13:08 GMT

The 110th Congress already is counting the days until adjournment. When one factors in the August recess and the targeted end of September adjournment, there are few working weeks left in this session. As usual, the annual appropriations bills are a top priority, but few now expect Congress to be able to pass any of the bills. This would mean that the bills would be rolled into a continuing resolution that would need to be passed before final adjournment by this Congress, even in a lame-duck session after the election.

Energy is certainly in the news in Washington, and around the country. High gasoline prices and their impact on the economy are driving a lot of charges and counter-charges on Capitol Hill as to which party has been responsible. Public opinion may at some point force reconsideration of legislation that would open up additional public lands to development, including offshore. While Republicans are in the process of developing legislation to do just that, one should view it more in the context of defining a campaign issue than as legislation anyone expects to pass in this session, although this could change.

Democrats are also introducing energy legislation to show constituents that they're taking action in light of rising energy prices. As Democrats are in control it is easier for them to move bills to the floor for a vote. One such bill dealt with leasing of federal lands onshore and offshore. The Democrats are claiming that oil and gas companies are sitting on leases which they could be producing. To address this "problem" House leadership brought a “use it or lose it” bill, HR 6251, to the floor the day before the Independence Day recess. While it failed to garner the 2/3 vote necessary under a suspension of the rules the House has scheduled another vote on a bill that includes “lose it or lose it” language, HR 6515, as Compact Comments goes to “print" (July 21). Readers may want to take a look at the legislation on the Thomas Web site and weigh in with their congressional delegation should they have opinions on the bill. On this issue, readers may also be interested in perusing Senator Domenici’s floor statement or a letter to House leadership from the president of the American Association of Petroleum Geologists.

One energy issue that seems to have been dispensed with for this session of Congress is the Warner-Lieberman climate change bill. Supporters had high hopes that legislation would be passed. And even though it would be vetoed by President Bush, the measure would give them legislation ready to be introduced, passed and signed into law early in the 111th session of Congress. As it turned out, the bill had to be pulled because opposition was stronger than expected, opposition which included some Democrats and many Republicans. The prevailing view is that major changes will now be needed before the bill is ready to be considered again.

Other legislation that failed to pass in the Senate recently was an energy package that would have revoked a number of oil company tax breaks and instituted a windfall profits tax. Had the bill passed, President Bush had threatened to veto it.

Additionally, the House failed to pass in late June, HR 6346, the Federal Price Gouging Prevention Act, which would have made it unlawful during a period proclaimed by the president to be an energy emergency to sell petroleum distillate at prices deemed excessive or as taking unfair advantage of the public. President Bush had promised to veto that legislation also.

Congress is expected to consider anti-speculation legislation any day. There are attempts being made in the House and Senate to craft a bipartisan bill.

Finally, concerning net receipts sharing, the news is not looking good for repeal. On the Hill in February discussed the unfortunate return of “net receipts sharing,” something IOGCC members thought finally had been dispensed with in 2000 after an active effort by the organization.

The House and Senate Interior Appropriations Committees included the provision in their bill last year (accepting the proposal contained in the president’s budget), resulting in a 2 percent charge to states out of their share of royalties from federal lands for Fiscal Year 2008. As part of the president’s budget again this fiscal year (FY 2009), it appears likely at this juncture that the provision will once again be contained in the House Interior Appropriations Committee bill, currently awaiting markup by the full committee. Particularly for IOGCC members who’s states have Congressmen on the House Appropriations Committee, it is suggested that an immediate call to them on this issue might be in order. Please call me (202-416-5062) for additional details.