Energy Bill Passes Senate With Bipartisan Support

The Senate overwhelmingly approved a new national energy policy Tuesday that would provide more than $18 billion in tax breaks to spur more efficient use of resources, greater development of nuclear energy and increased reliance on renewable fuels such as ethanol.

The Senate measure, adopted by a bipartisan 85-12 vote, would offer no immediate reduction in gasoline prices at the pump. But some of its tax breaks are aimed at increasing domestic oil production.

Senate supporters cautioned that tough negotiations lay ahead with the House, which passed its version of an energy bill in April. The Senate measure places more emphasis on encouraging the development of alternative and renewable sources of energy than the House measure does.

For instance, the Senate bill would require that renewable energy sources -- such as wind and solar -- generate 10% of the electricity that utilities produce by 2010. Such sources now supply about 2% of the nation’s electricity.

The bill also would require U.S. gasoline refiners to double the amount of the corn-based ethanol additive used in fuel, to 8 billion gallons by 2012. California would be exempted from that standard during the summer, because of concerns that it would boost the state’s air pollution levels.

Focusing on more traditional energy sources, the bill would provide incentives to encourage the construction of nuclear power plants.

The bill would provide tax credits to encourage investment in so-called clean coal facilities that turn coal into gas to produce electricity more cleanly.

It also would encourage conservation by extending and increasing an existing tax break for the purchase of hybrid cars. It would give tax deductions for energy-efficient buildings and the manufacture of energy-efficient appliances.

Other provisions would increase natural gas imports.

The measure also would direct the president to find ways to reduce the country’s projected demand for oil by 1 million barrels a day by 2015 -- a requirement opposed by the White House.

California Sens. Barbara Boxer and Dianne Feinstein, both Democrats, were among those supporting the bill.

With gas prices remaining near an all-time high and the summer vacation travel season underway, President Bush welcomed the Senate’s action and called on Congress to get an energy bill to him to sign before the August recess.

“I applaud the Senate for working in a bipartisan way to pass comprehensive energy legislation consistent with what I proposed in 2001,” Bush said in a statement. “This bill will help our economic growth by addressing the root causes of high energy prices and reducing our dependence on foreign sources of energy.”

The House has passed an energy bill three times since 2001, and the Senate had twice passed energy legislation before Tuesday’s vote. Each time, the chambers have failed to produce a final bill.

One key sticking point this year is expected to be a House provision that would partially shield producers of methyl tertiary-butyl ether, or MTBE, from lawsuits arising from the gasoline additive, which has been found to contaminate groundwater. The Senate bill contains no such provision.

A dispute over the MTBE liability provision between the two chambers helped kill the 2003 energy bill.

Lawmakers have been trying to negotiate a compromise on the MTBE issue, and say they are close to agreement. Rep. Charles F. Bass (R-N.H.) said the talks were focused on creating a company-financed fund to compensate communities whose groundwater had been polluted by MTBE.

The Senate bill also includes no provisions to sell leases in a small area of the Arctic National Wildlife Refuge that would allow oil and gas drilling there, as the House bill does. The Senate has given preliminary approval to a separate measure that would authorize the drilling.

The author of the Senate bill expressed confidence that House and Senate negotiators could settle all these differences and send a measure to Bush.

“Our pledge in going to the House is: This time we’re going to get an energy policy that both houses will agree upon and take it to the president of the United States. That’s urgent,” said Sen. Pete V. Domenici (R-N.M.), chairman of the Senate Energy and Natural Resources Committee.

The White House has expressed concerns about some of the spending proposals in the House and Senate versions. Both bills, for instance, include a provision that would authorize $1.25 million for an Idaho nuclear reactor that would produce hydrogen. The White House says it opposes that initiative.

Energy Secretary Samuel Bodman, who appeared with Domenici and other senators after Tuesday’s vote, said Bush had instructed him to help House and Senate negotiators reach agreement -- and to ensure that the costs of the bill stay close to the nearly $7 billion the president supports.

“We will be working very hard ... to see what can be done about reducing the cost of it,” Bodman said.

That may be hard to do.

Both bills are laced with lawmakers’ pet programs. The House bill authorizes $8 million to study producing fuel from sugar cane. The Senate added to its measure $1 billion in aid, mostly for energy-producing Gulf Coast states, even after the White House objected because it would worsen the federal budget deficit, projected to be $365 billion this year.

Sen. Judd Gregg (R-N.H.), chairman of the Senate Budget Committee and one of five Republicans to vote against the bill, has complained that the money for the Gulf Coast states could be spent for “any purpose whatsoever, including ... building casinos, boardwalks.”

Still, the price tag could climb. Neither bill includes government-backed “risk insurance” that the administration favors to revive the nuclear power industry. The insurance is intended to help pay the additional costs faced by investors because of project delays beyond their control, such as lawsuits.

An effort is expected to be made to add the provision during House-Senate negotiations.

According to the Congressional Budget Office, programs authorized in the Senate bill would cost $39 billion over the next five years.

The bill’s $18.7 billion in tax breaks over 10 years would be partially offset by imposing $4.7 billion in new taxes, including the reimposition of a tax on oil companies to clean up oil spills.

Speaker of the House J. Dennis Hastert (R-Ill.) congratulated the Senate, but offered a partisan jab. “House Republicans have passed this legislation three times, only to see it blocked by Senate Democrats,” he said in a statement. “The obstruction of the energy bill needs to end.”

Thirty-six Democrats joined 49 Republicans in voting for the Senate measure. Along with the five Republicans opposing it were seven Democrats.

In a statement, Feinstein said she voted for the measure despite serious reservations. She praised the bill for promoting energy efficiency and development of new energy technologies, and for strengthening consumer protections to prevent energy market manipulation that she said contributed to the 2001 California energy crisis.

But Feinstein expressed disappointment that the bill doubled the ethanol mandate, saying the cost of transporting the additive could cause gasoline prices to rise in California.

She also objected that the bill would give exclusive authority to the Federal Energy Regulatory Commission for choosing the sites of liquefied natural gas terminals. Opponents of that provision argued that states should have more say in the process.

Boxer said that although the measure was “more balanced and more protective of consumers” than energy bills she voted against in 2002 and 2003, it contained many provisions that she opposed, including the incentives to promote nuclear energy.

If the bill “returns to us from conference more like the House bill, I will have to vote against it,” she said.

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Different plans

Here are some of the differences in the Senate and House energy bills that will require negotiation this summer:

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Offshore drilling

Senate: Requires inventory of oil and natural gas in federal offshore areas, including those where new leasing is forbidden

House: No provision

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Cleaner fuels

Senate: Requires gas refiners to use 8 billion gallons of ethanol in fuel by 2012

House: Mandates 5 billion gallons by 2012

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Tax incentives

Senate: $14 billion; expands credits for alternative and renewable energy sources such as wind and solar

House: $8 billion; focuses mostly on fossil fuels and nuclear energy

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Daylight saving time

Senate: No provision

House: Extends it by two months

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Arctic refuge

Senate: No provision

House: Approves drilling in Alaska’s Arctic National Wildlife Refuge

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Energy efficiency

Senate: Grants tax breaks for energy-efficient appliances and homes, hybrid cars

House: Breaks for homeowners making energy improvements

Sources: Congressional Quarterly, Associated Press