Energy & Electric Utilities Committee

SENATE APPROPRIATORS MOVE SWIFTLY TO CLEAR ENERGY FUNDS BILL CLEARS.  The Senate Appropriations Committee prepared for the July 4^th holiday recess by completing action on four appropriation bill on June 29^th just two days after these bills were reported by their respective subcommittees.  Included in this action was the FY 2007 Energy and Water Development Appropriations Act (H.R. 5427).  This legislation includes $205 million for weatherization programs, a substantial increase over FY 2006, and nearly $50 million for state energy programs. But the big news reported by the committee was a legislative rider tendered by New Mexico Senator Pete Domenici, Chairman of the Energy and Water Subcommittee, involving nuclear waste storage. Senator Domenici’s language would authorize the U.S. Department of Energy to take title to nuclear waste currently stored at commercial reactors and temporarily store it at consolidated federal sites in that state or region.  The proposal would require DOE to consult with Governors in states where nuclear reactors are located to identify sites where the waste can be consolidated and stored for up to 25 years.  The proposal would not allow for license extensions or relicensing of any of these sites.  While some proponents view this as a needed middle step until activity is completed on Yucca Mountain repository others, including subcommittee ranking member Sen. Harry Reid (Nevada), view the proposal as “Yucca-neutral”.  H.R. 5427 set first year appropriation’s for the consolidation and preparation (CAP) program at $10 million to be funded by the utility rate-payer fed Nuclear Waste Trust Fund.  One of the remaining hurdles for the proposal is the possibility that a point of order against legislating on an appropriations bill may be raised against the CAP program during floor consideration that would require 60 votes for approval.  The remaining legislative calendar for the Senate is limited.  However, we may see floor consideration of this and other appropriations as early as the week of July 17.

MORE ENERGY, NOT MUCH MORE TIME – By July 14, the Senate Commerce, Energy, Environment, and Finance Committees have all been ordered by Senate Majority Leader Bill Frist to come up with new energy initiatives in an attempt to assure the American public that Congress wants to lower energy prices .  With such little time left on the congressional calendar, many on and off the Hill believe that Congress simply does not have the ability to introduce, debate, negotiate, and vote on any new bills, and that introducing new bills at this time will suspend other bills currently in process.  Bills that could be pushed to the backburner include:

• A bipartisan bill in the Senate Finance Committee providing tax breaks to alternative fuel users.
• A bill that opens part of the eastern Gulf of Mexico to drilling in the Senate Energy and Resources Committee.
• A House-passed bill on streamlining of oil refinery permitting processes in the Senate Energy and Resources Committee, which has scheduled a hearing on July 13.

Both House-based bills are considered highly unlikely to pass the Senate.

OFFSHORE DRILLING GETS A NOD FROM THE HOUSE… – In a move that has already garnered a threat of filibuster in the Senate from Florida Senator Bill Nelson, the House passed HR 4761, the Deep Ocean Energy Resources Act of 2006 by a vote of 232 to 187.  The bill replaces 25 years of coastal leasing bans with tiered bans of which states have the right to opt-in or –out, as outlined below:

• Up to 50 miles from shore – Remains under moratorium, however states may choose to open such waters;
• 50-100 miles from shore – Open to drilling, however states may choose to ban such action;
• 100 miles from shore – Open to drilling.

The bill also increases revenue sharing between the federal government and states where coastal drilling occurs.  As passed, states will receive 64% of leases less than 12 miles from the shore.  Revenue from current leases will be phased in over 10 years, while revenue from new leases will begin at 64%.  Leases further from shore will be split 50%.  Since this particular bill has already drawn ire from certain members of the Senate, passage in the Senate is uncertain and unlikely.  However, some in the Senate hope that this bill will encourage passage of Senate Energy and Resources Committee Chairman Pete Domenici and Ranking Member Jeff Bingaman’s bill, S 2253, that would allow drilling in a portion of the Gulf of Mexico’s Lease Sale 181 area. 

. . . AND REVENUE SHARING DOES NOT FROM THE WHITE HOUSE – Although the White House supports the opening of the outer continental shelf to oil and gas drilling, it does not share that support for the revenue sharing provisions of the bill passed by the House.  The White House has

asserted that the revenue-sharing provision will cost hundreds of billions of dollars over 60 years.  More specifically, the White House opposes the sharing of leases currently in production while agreeing to revenue-sharing for new leases in newly opened areas, although not at the 64% level for leases up to 12 miles from shore.  Also opposed was the provision of lease negotiation for leases from 1998 and 1999 that allowed for royalty waivers no matter the energy prices.  In addition, the White House criticized the provision in the bill that would allow for natural gas drilling only.  The White House has indicated that further discussions on revenue-sharing with Congress are essential.

AND IN THE SENATE – Louisiana Senator Mary Landrieu, one of the Senators responsible for hindering consideration of S 2253, has developed a revenue-sharing plan of her own.  The Landrieu version divides revenue as follows:

• 37.5% of federal revenue in Lease 181 area would be shared between Alabama, Louisiana, Mississippi, and Texas;
• Starting in 2017, these four states would share 37.5% of any gas and oil lease in the Gulf of Mexico after this legislation has been enacted;
• 50% of the new revenues would go to the federal government; and
• states’ Land and Water Conservation funds would receive up to $450 million per year of the remaining 12.5%.

Senator Domenici stated that he has agreed to Landrieu’s revenue-sharing plan, however there is no deal yet secured on the underlying legislation.  Florida’s senators do not support the bill, and Domenici’s cosponsor, Senator Bingaman, does not support the notion of revenue-sharing. 

SENATE APPROPRIATORS WANT A SAY IN ALL THIS AS WELL – The Senate Appropriations Committee passed two amendments to the fiscal 2007 Interior and Environment Appropriations bill regarding the off-shore drilling leases from 1998 and 1999 on June 29; both amendments having to do with the renegotiating of those leases that allowed for royalty waivers without concern to energy prices.  One amendment, introduced by California Senator Dianne Feinstein and New Hampshire Senator Judd Gregg and passed by a vote of 15-13, would require any company that currently holds a lease from the 1998-1999 period to renegotiate if it desires to enter into agreement with the Department of Interior on any new outer continental shelf leases.   Also, royalty incentives would end once energy prices reach certain limits.  The second amendment, introduced by New Mexico Senator Pete Domenici and passed by voice vote, would encourage companies to renegotiate their 1998-1999 leases with the Department of the Interior.  According to the Government Accountability Office, leases without price thresholds could cost up to $10 billion for the government.

The Senate Appropriators also dealt with energy inland, approving an amendment by subcommittee Chairman and Montana Senator Conrad Burns preventing new oil and gas drilling or hard rock mining leases along the Rocky Mountain Front.  Current leaseholders will not be affected, but the Forest Service and Bureau of Land Management will be prohibited from selling leases in that area.

VIEW ON CAPE UP TO THE COAST GUARD – The House unanimously joined the Senate and approved the fiscal year 2006 Coast Guard Reauthorization conference report on June 27, with a vote of 413-0.   The bill authorizes the US Coast Guard’s commandant to specify terms and conditions on the Cape Wind project off of the coast of Massachusetts to ensure safety.  The bill had been held up by an amendment added to the conference report by Alaskan Senator Ted Stevens and supported by Massachusetts Senator Ted Kennedy giving veto power over the Cape Wind project to the governor of Massachusetts.  The exclusion of the veto power and Coast Guard’s role in the bill is a compromise between the Stevens/Kennedy camp and the Senate Energy Committee camp of New Mexican Senators Pete Domenici and Jeff Bingaman.