Energy & Transportation Newsletter

Energy & Electric Utilities Committee
Transportation Committee

Energy & Transportation Update

A Service of the Energy and Electric Utilities Committee
and Transportation Committee
May 23, 2003

Volume IV, Number 3

Energy Bill Clears Committee; Floor Action Stalled Until After Recess

On April 30, 2003, the Senate Energy and Natural Resources Committee passed S. 14, The Energy Policy Act of 2003 (sponsored by Energy Committee Chairman Pete Domenici, R-N.M.), omnibus energy legislation that includes gas, oil, coal, electricity, renewable energy and nuclear power provisions by a vote of 13-10. S. 14 was joined with S. 597 (sponsored by Finance Committee Chairman Charles Grassley, R-Iowa) legislation extending, modifying and creating various energy tax credits totaling $15.7 billion in federal revenue losses. S. 14 puts a two-year freeze (through July 1, 2005) on the Federal Energy Regulatory Commission's (FERC) proposed rules for a Strategic Market Design (SMD). SMD would place power grids under a national regulatory umbrella, denying states their traditional authority over retail electricity transactions, including interstate power transmission. Chairman Domenici's legislation also maintains voluntary utility participation in regional transmission organizations (RTOs). These electricity-related provisions address NCSL's stated concerns on state authority and RTO participation. House-passed energy legislation, H.R. 4, sides with FERC's preemptive proposal. The bill may be sent to the Senate floor after the Memorial Day recess where prolonged debate is expected and could last into July.

The renewable fuels standard will start off the energy bill debate. The Environment and Public Works Committee approved Reliable Fuels Act (S. 791) which would require refineries to produce a certain per-year gallon amount of renewable fuel such as ethanol and biodiesel beginning in 2005, phase out MTBE and eliminate the Clean Air Act RFG oxygenate requirement. Many members are expected to offer amendments to the provision including Senator Diane Feinstein's amendment that would allow governors to decide whether or not their state would have to meet S. 791's ethanol mandate. The debate will get fiercer when the Senate debates issues too contentious for the Senate Energy Committee to address in mark-up. The administration is urging the Senate to adopt a provision, like the provision included in the House bill, to open a small portion of the Arctic National Wildlife Refuge (ANWR) to environmentally responsible oil and gas exploration, but Chairman Domenici is not encouraging Republicans to offer an amendment since Republicans lack the votes to pass the measure. Expect Senate Democrats to offer several amendments related to ethanol, renewable portfolio standard, fuel efficiency standards, climate change, nuclear energy and hydroelectric relicensing - any one of which could stall the legislation. Overall, there is a growing concern about the viability of an energy bill. Originally, the legislation expected to be voted on in the Senate in early May, but now has been postponed until June. Attached is a chart comparing the House and Senate energy bills.

Administration Unveils Transportation Proposal - Criticized as Inadequate by Congress

On May 14, 2003, Transportation Secretary Norman Mineta unveiled the administration's six-year $247 billion surface transportation reauthorization legislative proposal, Safe, Accountable, Flexible and Efficient Transportation Equity Act of 2003 (SAFETEA), to Congress. As the title attest, the SAFETEA proposal increases states safety programs and increases flexibility for how the states use safety program funds. SAFETEA would smooth out the swings in funding caused by Revenue Aligned Budget Authority (RABA) by modifying the RABA calculation so that funding adjustments are less dependent on future anticipated receipts and more dependent on the levels of actual receipts. The proposal would also redirect the 2.5 cents of gasohol tax currently deposited in the General Fund to the Highway Trust Fund. More details of the administration's proposal are available at www.fhwa.dot.gov/reauthorization/safetea.htm. The press release is available at www.dot.gov/affairs/dot04003.htm. See also Energy & Transportation Update Volume 4, Number 2.

The administration's proposal was met by sharp criticism in both chambers when U.S. Department of Transportation (DOT) officials testified on behalf of SAFETEA this week. Senate Environment and Public Works Committee Chairman James Inhofe (R-Okla.) called the transportation plan "inadequate" and other members of the Senate committee said they were "very disappointed" in the administration's funding levels. The House Transportation and Infrastructure (T&I) Committee members told Secretary Mineta that they wanted to boost highway and transit funding levels above administration's levels. House T&I Chairman Don Young (R-Alaska) said while the $247 billion proposal is an increase over TEA-21 funding levels, it provides less purchasing power and falls far short of the funding that is needed. In both the House and Senate critiques, Transportation Committee members cited a report released by the DOT which stated $50 billion annually is needed in highway and transit investment to maintain the current system and $75 billion was necessary for improvement of the transportation system.

In March 2003, the House T&I Committee proposed a transportation funding proposal to the House Budget Committee that proposed $375 billion over the next six years ($62.5 billion annually) for transportation programs - compared to the administration's $247 billion ($41.16 billion annually). However, the FY2004 budget resolution conference report set FY2004 transportation funding at $41.3 billion. House Transportation Committee members propose paying for the increased investment by retroactively indexing the federal gasoline and diesel taxes. Representative William Lipinski (D-Ill.) told Secretary Mineta that although the administration does not support a gas tax increase, 21 of the 27 committee members who testified in front of the committee said they were in support of a gas tax increase. However, gas tax opponents outside the committee have begun a campaign against a gas tax increase or indexing. This week, Representative Marilyn Musgrave (R-Colo.) sent a "Dear Colleague" letter opposing a raise in the gas tax to House Speaker Dennis Hastert (R-Ill.) with signatures of more than 20 House members. Secretary Mineta and other administrators testified as proponents of SAFETEA in both chambers this week.

States Would Be Required to Pay in Rail Reauthorization Proposals

On April 25, 2003, Amtrak proposed a five-year strategic capital investment and operating plan that aims to restore its physical plant and train equipment to a state of good repair and improve the railroad's operational reliability. Amtrak proposes that Congress appropriate $8.2 billion over five years, starting at $1.8 billion in FY04 and decreasing to $1.5 billion in FY08. Amtrak proposes not to undertake new train services unless operating loss is fully covered by the state or states it serves. Beginning in FY04, Amtrak also plans to seek full state funding for any incremental operating loss associated with existing state-supported services.

The Senate and the House had hearings on the future of Amtrak April 29 and 30, 2003. At the Senate hearing, Deputy Transportation Secretary Michael Jackson said DOT would introduce a six-year reauthorization plan. Secretary Jackson said the administration's plan would rely heavily on the states to determine what rail service is needed and to contract third-party operators to run rail service. States would be asked to fund a large majority of the rail service operating costs. After the six-year plan is implemented, states would have to pay at least 50 percent of the needed capital investments for intercity rail. The "federal-state compact" will likely be a source of contention during the Amtrak reauthorization debate in Congress.

Senate and House Committees Pass Aviation Funding Bills

On May 1, 2003, the Senate Commerce, Science and Transportation Committee passed the Aviation Investment and Revitalization Vision Act (AIR-V) (S.824), which would authorize $43.5 billion for the Federal Aviation Administration (FAA) programs FY2004 through FY2006, including $10.5 billion ($3.5 billion annually) for the Airport Improvement Program (AIP). The Senate's AIR-V would extend the Essential Air Service (EAS) program through FY2007 and would authorize $125 million annually. AIR-V includes a provision that would establish an annual $500 million Aviation Security Capital Fund to pay for security capital costs at airports to prevent AIP funds being used to pay for security upgrades. The fund would be financed with aviation security fees already being collected by the Transportation Security Administration (TSA) and would be administered through the DOT grant program.

The House T&I Committee quickly followed suit by approving their version of a FAA reauthorization bill on May 21, 2003. House legislation, The Centennial of Flight Aviation Authority Act (Flight 100) (H.R. 2115), would reauthorize FAA program funding for FY2004 through FY2007, including $14.8 billion ($3.7 billion annually) for AIP. Flight 100 would limit the amount of AIP funding that could be used to modify airports in order to fit federal-mandated explosives detection systems (so a larger amount of AIP funds will be used for airport development projects) and qualifies air quality improvement projects for AIP funds. Flight 100 revises the EAS program so that small airports close to major airports would have to pay a 10 percent local share (phased in over 4 years).