Energy Update

Energy & Electric Utilities Committee

A Federal Information Service of the NCSL Standing Committee on Energy and Electric Utilities
May 8, 2006
Volume 1, Number 1

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As gasoline prices rose to near-record levels in recent weeks, Congress and the Administration both turned much of their attention to what action the federal government could take to alleviate this problem. While legislation is currently moving piecemeal through both the House and Senate, it is possible that momentum will develop enabling the passage of a more comprehensive energy package. For specific questions on any legislative items or for more details on a group of proposals please contact Tamra Spielvogel or Amanda Naughton in the NCSL Washington, DC Office.

PRESIDENT’S ANSWER TO HIGH GASOLINE – On April 25, 2006, the President revealed his four-part plan to ease the gasoline “energy crisis” in a speech to the Renewable Fuels Association. His plan includes: an investigation into price gouging by oil companies as well as a repeal of tax breaks to those oil companies; tax credits for hybrids and clean diesel cars sold this year in addition to increasing the Corporate Average Fuel Economy (CAFE) standards (see story below); halting deliveries to the Strategic Petroleum Reserve (SRP), granting environmental waivers when fuel supplies appear to be in jeopardy, creating a Governors’ Boutique Fuel Task Force (see story below), and opening up the Arctic National Wildlife Refuge (ANWR) to drilling; and increasing the use of ethanol and biodiesel while continuing to encourage the production of new technologies, such as “plug-in” hybrids and fuel cells. As all lawmakers in the nation’s capitol scurry to quell constituents’ anger over $3 gasoline, experts question whether any action at this point in time will shave off more than a few cents per gallon.

BOUTIQUE FUELS TAKE CENTER STAGE AS EPA LAUNCHES NEW TASK FORCE – On Thursday, May 4^th, EPA Administrator Stephen L. Johnson convened the first meeting of a Governor’s Task Force to review the use of boutique fuel blends nationally. Setting an ambitious timeline of 6-8 weeks, the Administrator tasked the Governors with working jointly with EPA on options to increase the flexibility and fungibility of the national fuel supply and distribution system. EPA expects to forward a report to the President highlighting a review of the overall process, providing a summary of actions to date & a current report of the use and utility of boutique fuels, stakeholder opinion and feedback, and options for possible changes to our fuel supply system. Questions still remain concerning the ultimate membership of the Task Force, the breadth of its focus, and the stakeholders involvement in responding to the report. NCSL staff has been working with the White House and EPA to ensure the opportunity for State Legislators to provide input on these efforts.

PRESIDENT PUTS CAFE BACK ON THE RADAR SCREEN – In an April 27^th letter to Congressional leadership, Secretary of Transportation Norman Y. Mineta requested prompt action on legislation sought by the President to reform fuel economy standards for passenger fuel automobiles. Unlike recent efforts to mandate a specific increase in the corporate average fuel economy (CAFE) number for passenger cars, this legislation seeks to grant National Highway Traffic and Safety Administration -- a division of the Transportation Department -- the authority to both increase the CAFE number for passenger cars and change the overall structure of the program. Both the House and Senate plan to move legislation in the coming weeks that would increase the President’s authority to set fuel economy standards. However, it is not clear sailing as proponents of more direct Congressional mandates, including House Science Committee Chairman Sherwood Boehlert (R-N.Y.) and Rep. Ed Markey (D-Mass.), plan to take advantage of this increased focus on CAFE standards to advance their legislation which would mandate a 33 mile-per-gallon CAFE standard for all vehicles.

REFINERY LEGISLATION REVISITS THE HOUSE FLOOR – House Republican leadership brought to the House floor last week the first two pieces of legislation aimed at alleviating the price crunch felt at the gas pump nationally. H.R. 5254, the Refinery Permit Process Schedule Act, sponsored by Rep. Charles Bass (R-N.H.), takes a new approach at streamlining the permitting process for siting new or expanded oil refineries. In a new twist, this legislation would establish a federal coordinator responsible for bringing all parties, including states, to the table and establishing a mutually agreed upon timetable for consideration of permit applications. H.R. 5254 was initially brought to the House floor May 4^th on suspension, a procedure requiring a two-thirds vote for passage, along with the anti-price gouging legislation, H.R. 5253 (see story below). Proponents of the legislation failed to garner enough votes to pass it under suspension and the motion failed 237-188. However, the vote was sufficient to pass the legislation under regular orders and House Energy and Commerce Committee Chairman Joe Barton (R-Texas) promised to bring the legislation back to the floor this week through the Rules Committee.

PRICE GOUGING HAS THE HILL UP IN ARMS – President Bush is not the only one calling for investigations into the record profits of oil companies. Capitol Hill wants answers from the oil industry as to why they are raking in the cash while the American people are paying more at the pump than ever. Numerous members from both sides of the aisle have been busy sharing their official thoughts through letters with leadership and the administration, and several bills have been introduced to increase penalties for price gouging, including HR 3782, the Gasoline Price Gouging Act of 2005, and HR 5253, the Federal Energy Price Protection Act of 2006, which passed the House on May 3 with a vote of 389-34. The passed bill requires the Federal Trade Commission to define price gouging as well as investigate and punish violations. Also, committees have planned hearings covering gasoline pricing, such as the House Energy & Commerce full committee hearing scheduled for May 10 titled Gasoline: Supply, Price and Specifications, and the Senate Commerce, Science & Transportation full committee hearing scheduled for May 23 titled Gasoline Price Gouging. Some say, however, that new laws are not needed because price gouging is already handled under existing antitrust statutes and state laws.

SHORT-TERM SOLUTIONS LOSE STEAM – In addition to the anti-price gouging movement taking place on the Hill, many elected officials are considering what to do ‘in the immediate.’ Senate Majority Leader Bill Frist proposed the Gas Price Relief and Rebate Act of 2006, which among other things, would give a $100 gas tax holiday rebate check to taxpayers. Frist originally planned to pay for this rebate by altering taxing practices and eliminating LIFO, or “last-in-first-out,” which would significantly raise taxes for businesses with large inventories. The business community quickly joined together in opposition to this idea, and Frist has since abandoned eliminating LIFO. Other suggestions have included a 60-day suspension of the 18.4-cents-per-gallon gas tax, or “tax holiday,” which was introduced by Senators Robert Menendez (D – NJ) and John Thune (R – SD). This idea has also not been widely accepted. Representative Phil English (R – PA) has offered a similar bill, HR 3683, the Gas Tax Relief Act, which creates a 30-day suspension of the gas tax. Expect more legislation to be introduced throughout the month of May, as the House gets prepared for House Majority Leader John Boehner’s “Energy Week” sometime in June.