The Senate last week approved, by a vote of 88-11, comprehensive energy policy legislation that focuses primarily on conservation measures. The bill (formerly S. 517 and renumbered as H.R. 4) now goes to a House-Senate conference committee, which is expected to be contentious and which may have difficulty in crafting a compromise measure to send to the President's desk.
The Senate legislation is of interest to ILMA members, in part, because it emphasizes tax incentives for renewable and non-conventional fuels rather than fossil fuel production. The bill provides roughly $15 billion in tax credits over ten years, including for the production of biodiesel made from vegetable oils and animal fats and for increased funding for fuel cell technology.
The bill, as passed by the Senate, does not include a provision to allow oil drilling in the Arctic National Wildlife Refuge (ANWR), a key component of President Bush’s energy policy. However, some of the Bush administration's energy goals could be incorporated in a final conference committee bill, because the House-passed measure (H.R. 4) more closely reflects the President's agenda, such as allowing for oil exploration in Alaska and including more funding for production-related energy tax incentives. The President held out hope after the Senate vote that elements from both bills, which "reflect" his Administration’s priorities, will be in the version of the legislation that reaches his desk.
Despite the wide margin of the final vote on passage, the Senate Democratic leadership was frustrated with failed legislative attempts by eight of its own members to alter language in the bill that creates a federal mandate to purchase ethanol and with separate efforts to defeat Republican amendments intended to limit increases in fuel economy standards.
Senate Majority Leader Thomas Daschle (D-SD) faced the most dissent from East and West Coast Democratic Senators over a provision in the bill that mandates an increase in ethanol use in gasoline by five billion gallons by 2012, and bans methyl tertiary butyl ether (MTBE), a gasoline oxygenate. Currently, about 1.7 billion gallons of ethanol is used annually in the Clean Air Act’s reformulated gasoline program, which requires gasoline used in areas that do not meet air quality standards for ozone to contain two percent oxygen. Refiners typically have met these requirements by adding MTBE, however, concerns about the additive leaking into groundwater has generated widespread state opposition to its use.
The Republicans in the Senate claimed victory in the passage of the Senate bill, especially when they were able to limit any increase in fuel economy standards. The bill would allow the National Highway Transportation Safety Administration to make a recommendation for increased corporate average fuel economy (CAFE) standards. The increase could be as little as one mile per gallon. ILMA members are concerned with any changes to the CAFE standards, as they affect the automakers and the fuel-efficiency requirements they seek from engine oils.
There is much work to be done on a final bill in conference, including electricity measures and the question of drilling for oil in ANWR. Environmental groups and some Democrats said they are concerned that the bill will only be weakened in conference. Some persons who have closely followed the House and Senate energy debates have expressed doubts the conference will be able to produce a compromise bill because of the drastic differences between the two bills.
One of the biggest differences between the House and Senate measures is the cost of the tax incentives, with the cost of the House tax package roughly double the size of the Senate bill at $33 billion over ten years. Sen. Charles Grassley (R-IA), ranking member of the Senate Finance Committee and a Senate conferee, said he expects a compromise around $20 billion.
The House Republican leadership has expressed a desire to televise the energy legislation conference, which several Senate Democrats said would be a bad decision. The House leadership has the authority to make the determination on whether to permit television cameras.
