Energy Bill Seen as a Gusher of Industry Breaks

With the battle to allow oil drilling in an Alaska wilderness refuge effectively over, Congress is moving to pass a thick bill filled with lower-profile measures eagerly sought by the energy industry.

A 772-page bill, expected to be approved by the House today, would offer tax breaks and royalty relief to oil and gas companies for drilling in the Gulf of Mexico, extend a cap on the nuclear industry’s liability in case of an accident, and promote the building of a $20-billion pipeline to bring natural gas from Alaska to the lower 48 states.

The bill also would enlarge the nation’s emergency stockpile of oil and, in a boon to Midwest farmers, double the amount of corn-based ethanol that would have to be added to the country’s gasoline supply. It also would authorize $1.8 billion to promote President Bush’s initiative to speed development of hydrogen-powered fuel-cell vehicles.

Addressing problems spotlighted by California’s electricity crisis in 2000-01, the measure would prohibit trading practices used by energy companies to drive up the price of power and boost to $1 million the fine for violating federal laws governing power markets.

Many of the same provisions are included in a bill expected to reach the Senate floor next month.

Although energy legislation has been one of Bush’s domestic priorities and gained momentum after rolling blackouts hit California in 2000, a bill died in Congress last year amid partisan and regional spats over an array of issues.

But now, Congress is likely to deliver the first overhaul of energy policy in more than a decade -- albeit without the most contentious measures: opening Alaska’s Arctic National Wildlife Refuge to drilling and imposing tough fuel-economy standards on sport-utility vehicles.

The Senate last month rejected Bush’s bid to open the refuge to energy exploration. And efforts to pass stricter miles-per-gallon rules face stiff opposition from a coalition of Democrats from car-making states and Republicans wary of regulation.

“I think we can get it done,” Rep. W.J. “Billy” Tauzin (R-La.), chairman of the House Energy and Commerce Committee, said Wednesday, noting that the war in Iraq has renewed attention on U.S. dependence on foreign oil. “This legislation is absolutely critical in securing our national security.”

The major change from last year, added Sen. Pete V. Domenici (R-N.M.), chairman of the Senate Energy and Natural Resources Committee, was the Republican takeover of the Senate, putting the job of rewriting energy policy in the hands of two GOP lawmakers -- himself and Tauzin. “We want to deal,” Domenici said.

Battles, nonetheless, remain on a number of issues. Critics of the bill contend that it is tilted too heavily toward production over conservation.

“It’s a special-interest energy bill that will give billions of dollars to the oil, gas, coal and nuclear industries and will do almost nothing to get us off our dependence on imported oil,” said Rep. Henry A. Waxman (D-Los Angeles).

Tauzin disputed that, contending that the bill’s $18.7 billion in tax incentives seek to promote conservation and use alternative energy sources, such as wind power, as well as production of traditional fuels.

Referring to the tax incentives to encourage deep drilling in the Gulf of Mexico, Tauzin said, “We could double production in that region without having to drill off California,” where new offshore drilling is banned.

California officials remain unhappy with a provision of the bill that would double the amount of ethanol -- 5 billion gallons by 2015 -- that would have to be added to the nation’s gasoline supply.

Ethanol advocates, including politically influential Corn Belt lawmakers, say that the additive is a cleaner-burning, home-grown alternative to foreign oil, and that its use can help the economy by reducing the need for farm subsidies.

But California officials have expressed concern that the provision would lead to a second energy crisis because of logistic hurdles in bringing hundreds of millions of gallons of ethanol from the Midwest to the West Coast.

Tauzin said the provision would not harm California, adding that the bill would allow the Department of Energy to adjust the ethanol requirement if supply shortages or price spikes arise.

California officials also are worried about a provision of the bill they say would limit their ability to sue producers of MTBE, or methyl tertiary butyl ether, a fuel additive blamed for contaminating groundwater throughout California.

“It gravely concerns us that there would be no recourse for water agencies and their customers should MTBE ... contaminate drinking water supplies,” said Jennifer Perskike, a spokeswoman for the Assn. of California Water Agencies.

But the bill’s supporters contend it would not prevent lawsuits on groundwater contamination.

The House bill includes a provision to permit Arctic drilling -- for symbolic reasons, most supporters say. An industry lobbyist said, “The major oil companies are not pushing to open [the refuge],” conceding the issue is a lost cause for the time being.

The industry is strongly backing a tax break in the bill that seeks to encourage continued production of low-producing oil and gas wells when energy prices drop. Industry officials say the provision could prevent the loss of 140,000 barrels of oil a day.

Last year, producers abandoned and plugged 12,000 wells because they weren’t profitable, said Jeff Eshelman, a spokesman for the Independent Petroleum Assn. of America.

The House bill also seeks to expedite permits for construction of a pipeline that supporters say would deliver 4 billion cubic feet of natural gas a day from Alaska to the lower states -- or about 6% of the nation’s daily need.

ConocoPhillips, one of the oil companies that has been pushing the pipeline, says the government needs to provide “risk insurance” and other incentives to make the project economically feasible if natural gas prices fall. The House bill does not provide such a provision; the Senate bill does.

The House bill includes some measures designed to promote conservation. These include providing a $2,000 tax credit to those who purchase an energy-efficient new home, and requiring regulators to set energy-efficiency standards for such things as exit signs in buildings, traffic lights and vending machines.

Critics say the conservation measures are inadequate.

“Rather than maximizing the efficient use of energy ... this imbalanced bill gives a gentle nod to efficiency but makes a deep bow to energy production,” said David Nemtzow, president of the Alliance to Save Energy, a bipartisan coalition of business, consumer and environmental leaders.