Energy & Transportation Update

National Conference of State Legislatures

ENERGY & ELECTRIC UTILITIES COMMITTEE & THE TRANSPORTATION COMMITTEE UPDATE

April 15, 2003

Transportation Reauthorization Debate Nears

The administration and key members of the House and Senate transportation committees plan to soon unveil comprehensive transportation funding legislation that would reauthorize the Transportation Equity Act for the Twenty-first Century (TEA-21). Federal policy makers will tackle revenue aligned budget authority (RABA)--the trust fund estimate mechanism that has allowed for dramatic upward and downward swings and complicated establishment of annual state obligation ceilings. Legislative proposals will also address budgetary firewalls and Highway Trust Fund (HTF) revenues. On April 4, 2003, NCSL sent a letter to the House and Senate transportation committees restating NCSL's priorities for TEA-21 reauthorization. The letter signed by California Senator Betty Karnette, NCSL Transportation Committee chair, urges "retention of budgetary firewalls", retention or reduction of state matching rates for federal highway funds and greater program flexibility. The letter can be accessed on the NCSL web site at: www.ncsl.org/standcomm/sctran/transltr040703.htm

Administration's TEA-21 Proposal

On March 25, 2003, the U.S. Department of Transportation (DOT) released the "Safe and Flexible Transportation Efficiency Act of 2003" (SAFETEA) - its reauthorization funding proposal for highway and transit programs. The reauthorization draft would authorize $247 billion for FY2004 - FY2009. The administration's proposal does not include plans to increase the gas tax as a way of increasing the HTF revenue but does keep budgetary firewalls which ties the HTF revenues to transportation projects. SAFETEA introduces changes in the transit program which alters the way transit money is distributed to consolidate a number of programs which would allow states and localities flexibility to meet the needs of their areas. Many members of Congress argue that the administration's proposal falls short of the funding necessary to meet the nation's transportation infrastructure needs. See table B for funding levels.

House Committee Leaders Release Funding Proposal

On March 6, 2003, Committee Chairman Don Young (R- Alaska), James Oberstar (D-Minn.), James Petri (R-Wis.) and William Lipinski (D-Ill.) released a funding proposal for the reauthorization of the Transportation Equity Act of the Twenty-first Century (TEA-21). The proposal requests $50 billion in FY2004 and $375 billion over the six-year period of FY2004 through FY2009. Representatives Young and Oberstar argue that the current highway funding level of $36.5 billion for FY2004 is too low. According to a report issued in 2002, the Department of Transportation estimated that an investment of $91 billion was needed to maintain the condition of the nation's highway and transit systems. The proposal includes several ways to increase the HTF revenue. The committee supports the following measures to increase HTF revenues:

Draw down the existing balance in the HTF.

(By the end of FY2003 the estimated balance in the HTF is projected to be $18 billion.)

Restore interest to the HTF.

(An estimated $12 to 14 billion from FY2004 - FY2009.)

Direct all tax revenues from gasohol to the Highway Trust Fund.

Currently, 2.5 cents per gallon in gasohol user fees is diverted to the General Fund.

(An estimated $3-4 billion from FY2004-FY2009.)

Reimburse the Highway Trust Fund for lost revenues from the 5.2-cent per gallon gasohol user fee subsidy or eliminate the subsidy.

(An estimated $7-8 billion from FY2004-FY2009.)

Restore and preserve the purchasing power of the motor fuel user fee by indexing the user fee to the Consumer Price Index beginning in 1993. (An estimated $70-75 billion from FY2004-FY2009.)

This recommendation results in a 23.75-cents per gallon gasoline user fee in FY2004, a 5.45-cents per gallon increase in the gasoline user fee from 1993. In subsequent years, these user fees continue to be indexed for inflation. See table A for funding levels.

House Passes Energy Bill, Senate Continues Debate

On April 11, 2003, the House passed the Energy Act of 2003 (H.R. 6) by a vote of 247-175. The House energy bill, a package comprised of four pieces of legislation approved by the Energy and Commerce, Ways and Means, Resources and Science Committees, would authorize $18.7 billion in energy tax incentives, $31.7 billion in energy research and development programs, $6.5 billion in energy conservation programs and $5.6 billion in energy efficiency. The House defeated an attempt to strike the provision that would allow drilling in the Arctic National Wildlife Refuge (ANWR) but approved another compromise amendment that would restrict the surface area developed in ANWR to 2000 acres. The House defeated an amendment that would have raised Corporate Average Fuel Economy (CAFE) standards but passed a provision which mandates a renewable fuel standard, requires increased production of ethanol and repeals the reformulated gasoline (RFG) oxygenate requirement. The House approved an amendment that would increase the Low-Income Home Energy Assistance Program (LIHEAP) $2.1 billion over five years (currently set at $2 billion annually) using oil and gas production revenues from ANWR. The Congressional Budget Office estimates enactment of the bill will cost $19.7 billion over 10 years.

Oversight of regional transmission grids divided House energy committee members. H.R. 6, sponsored by Representative Joe Barton (R-Texas), supports a proposed rule implementing national unification through a controversial Federal Energy Regulatory Commission's (FERC) program known as Standard Market Design (SMD). It would preempt state control of electricity markets. An amendment offered by Representative John Dingell (D-Mich.) that would have removed the electricity title was defeated (193-237). A group of Republicans threatened to oppose the electricity title because of the SMD provision, but backed down when compromise language was added that would protect customers who are assured fixed electricity prices under state law from federal regulation, but the compromise provision does not allow states to opt out of the SMD. On March 31, 2003, NCSL and other state organizations emphasized that "states should retain authority to site electric facilities." The letter went on to urge congressional support for "states' authority to negotiate and enter into cooperative agreements or compacts with federal agencies and other states to facilitate the siting and construction of electric transmission facilities."

On April 8 - 9, 2003, the Senate Energy and Natural Resources (ENR) Committee completed two of six mark-up sessions on the Senate comprehensive energy draft proposal, approving hydrogen, renewable energy, energy efficiency, state energy programs, oil and gas and coal titles. The approved energy titles would authorize:

$18 billion in loan guarantees for the Alaska Natural Gas Pipeline;
$200 million annually through 2011 for the administration's Clean Coal Power Initiative;
$3 billion for research and development of hydrogen infrastructure, fuel and fuel cells; and
$3.4 billion annually for FYs2004-2006 for LIHEAP.

The package includes the major themes in last year's Senate-passed comprehensive energy package but omits language on CAFE standards and drilling in ANWR because of a failed attempt to include ANWR drilling language in the FY2004 budget resolution (on a vote 48-52). The original Senate draft of the electricity title would have allowed states to opt out of SMD and form a Regional Energy Services Commission (RESC) with other states and take control of regional transmission regulation rather than being subject to federal authority. However, due to complaints from both sides of the aisle, Senator Pete Domenici (R-N.M.), chairman of the ENR Committee, announced he would try to find a consensus and redraft the controversial electricity restructuring proposal. The Committee plans to mark-up the redrafted electricity title on April 30, 2003. On April 9, 2003, the Senate Environment and Public Works Committee, which has partial jurisdiction over some energy issues that will be added to the comprehensive energy package after approval by the ENR Committee, approved the Reliable Fuels Act (S. 791). It would require refineries to produce a certain per-year gallon amount of renewable fuel such as ethanol and biodiesel beginning in 2005 - the House bill also mandates a renewable fuel standard. The energy package is expected to be voted out of committee on May 1, 2003 and reach the Senate floor later this spring.

Both Chambers Pass Budget Resolution

On April 11, 2003, Congress approved the FY2004 budget resolution conference report.

The FY2004 budget resolution includes $1.3 trillion in federal tax cuts, $784.5 billion in discretionary spending and limits each chamber to a tax cut reconciliation of $550 billion. The House-approved package provided for $726 billion in reconciled tax cuts while the Senate resolution provided for $350 billion. Conferees ultimately approved a tax cut package of $550 billion (House) and $350 billion (Senate).

Conferees adopted the Senate's state highway funding obligation road map for the next five years that allows highway, mass transit and highway safety programs to grow-if funds can be found. The conference report includes $35.5 billion for FY2004 highway budget authority and $5.8 billion in mass transit. On March 11, 2003, NCSL and other state and local organizations sent a letter to House and Senate Budget Committee members urging them to include a substantially increased transportation budget level to meet growing urgent needs of our nation's transportation network. The letter can be accessed on the NCSL web site at: www.ncsl.org/standcomm/sctran/FY04Budgresoltr.htm.