A Good Bill, or a Tax-Dollar-Stuffed Turkey?

At 1,200 pages, the draft Energy Bill defies characterization. Some call it a winner, some vow to stop it.

Article: On November 15, Congressional Republicans unveiled their HR 6 Conference Report on the Energy Policy Act of 2003--a 1200-page Energy Bill draft loaded with some $23 plus billion in tax breaks they said would create U.S. jobs while boosting oil, natural gas, coal, and nuclear production.

The Conference Report contains hundreds of measures addressing U.S. oil, natural gas, coal, and nuclear and renewable energy. Its provisions were published on the internet websites of the Senate Energy and Natural Resources Committee and of the House Energy and Commerce Committee.

Rather than being a resolution of differing House and Senate bills, as the usual conference report is, it was a total rewrite of those bills produced by a Republicans-only conference committee chaired by Senator Pete Domenici (D-NM) and Representative Billy Tauzin (R-LA).

It was packed with incentives ranging from cutting hundreds of millions of dollars in royalty payments for production on federal leases to billions in loan guarantees to build a natural gas pipeline from Alaska to the Midwest.

Its estimated cost, which had begun 73 days before at $15 billion, ballooned to $23.5 billion in a late-week analysis by the Congressional Budget Office.

Democrats complained the bill was bloated with giveaways for the oil industry. It lacked enough support for wind and solar energy sources and gasoline conservation, they said.

With so many provisions, it's not possible to characterize the bill. A few of its major functions can be listed:

  • Requires nationwide electric reliability standards to prevent a repeat of the August blackout.
  • Introduces a Renewable Fuels Standard and doubles ethanol production for gasoline blending to 5 billion gallons (19 billion liters) by 2012.
  • Grants hundreds of millions of dollars in tax breaks for new nuclear power plants.
  • Offers $18 billion in loan guarantees to build a natural gas pipeline from Alaska to the Midwest.
  • Bars the Federal Energy Regulatory Commission from issuing nationwide rules for electricity markets until 2007.
  • Funds a $1 billion nuclear power reactor that will use advanced technology.
  • Shields petrochemical makers of the fuel additive MTBE from product liability lawsuits.
  • Offers $1 billion to help MTBE makers convert to other lines of business before the chemical is banned in 2015.

  • Absent from the bill is a White House proposal to drill for oil in the Arctic National Wildlife Refuge.

    Republicans also dropped a provision from the legislation that would have required the government to inventory the oil and gas reserves in offshore waters where drilling is banned. Environmentalists feared the survey would eventually open the protected areas to oil companies.

    The SUV Loophole
    In a bizarre pair of twists, Senate negotiators voted at the Monday session to close a loophole allowing small-business owners to deduct up to $100,000 from their taxes for buying a luxury sport utility vehicle. Language eliminating the SUV loophole was inserted into the Senate's version of the bill. Republican Sen. Don Nickles of Oklahoma offered the proposal to drop the tax break for doctors, lawyers, real estate agents, and other business owners who buy expensive SUVs. "There is enormous abuse of this provision. People are driving SUVs through this loophole," Nickles said. The tax deduction of up to $100,000 dramatically cut the price of a Hummer H2, Land Rover, and other expensive, gas-guzzling SUVs for small business owners in the highest tax bracket. Later on Monday, however, the provision was dropped after House negotiators rejected the Senate's change.

    The non-partisan Congressional Budget Office said the Energy Bill's total cost might top $135 billion over the next decade.

    Republicans said it was a small price to pay for a start at gaining energy independence and a package that would create nearly 1 million American jobs.

    Senator Domenici said the Congressional Budget Office estimates the bill will cost $26 billion over 10 years in approved programs. The $2.6 billion per year that represents only a tiny fraction of the $440 billion Americans spend annually for electricity. "In exchange for that investment of about one-half of one percent we will diversify our resources of electricity, build new clean coal-burning power plants, [and] solar facilities, reticence our hydro power, build new geothermal plants, and, yes, perhaps build some nuclear power plants. For the same one-half of one percent we will impose mandatory reliability standards on our transmission systems to insure that blackouts like the one we had in August will not occur again. This legislation will also streamline the permitting process for oil and gas production on Federal lands."

    Reactions came fast and from both sides:

    The National Corn Growers Association (NCGA) applauded the Renewable Fuels Standard (RFS) and accelerated production schedule expected to yield 5 billion gallons of corn-based ethanol demand per year.

    "This monumental legislation is good for all corn growers by advancing American agriculture," said NCGA President Dee Vaughan. "NCGA strongly supports the bill's creation of a nationwide RFS that increases the use of ethanol, derived from corn, to the U.S. fuel supply. The RFS will increase American energy independence, protect air and water quality, reduce greenhouse gas emissions, displace foreign oil, and stimulate rural economies."

    The Teamsters Union, on the other hand, criticized the draft bill for failing to open the Arctic National Wildlife Refuge (ANWR) to drilling, which it said would have created high-paying union jobs.

    "First the Republican Congress and White House gave workers a jobless recovery, and now they want to give us a jobless energy package," said James Hoffa, the union president.

    "This committee report is a failure. It is a failure in every sense of the word," said Rep. Henry Waxman (D-CA). "We do nothing to address our dependence on oil."

    Dozens of other pro and con assessments of the Conference Report came from many quarters over the weekend. However, with so very many, it will be some time before the full effects can be gauged.

    As of yesterday (November 20) it was by no means certain that the U.S. Senate would approve the conference report, the last step before it goes to the President for signing into law. The conference report may not be amended at this stage, but only voted up or down. A vote of 60 Senators is required to approve the report.

    Ethanol and MTBE
    Of the many hundreds of provisions in the conference report, two seemed to be the most contentious: ethanol and MTBE.

    The American Farm Bureau said Tuesday the Energy Bill's boost to corn-based ethanol would create $51 billion in new farm income over the coming decade. The legislation would double U.S. consumption of ethanol to 5 billion gallons by 2012. Ethanol is used as an additive to make cleaner-burning gasoline and to stretch U.S. fuel supplies.

    "We are endeavoring to do what we can to hold up this bill," said New York Democrat Charles Schumer. Democratic presidential candidate Sen. Joseph Lieberman of Connecticut said he would back a filibuster on the MTBE issue. "I will strongly back a filibuster against the energy bill. For the sake of our environment and public health, polluters must be held accountable for the damage they caused," he said.

    The Conference Report protected petrochemical companies manufacturing MTBE from product liability lawsuits. The bill would also give the companies more than $1 billion to help them convert to other kinds of businesses.

    Tax-Dollar-Stuffed Turkey?
    Joining Schumer in condemning the Bill was Sen. John McCain (R-AZ), who waxed eloquent in the Senate Chamber:

    "I think this legislation is very timely," he said. "Because if we pass it, Thanksgiving will come early for the Washington special interests, the American public will be presented with an enormous turkey stuffed with their tax dollars. And tell your constituents to save their holiday turkey carcasses because this foresighted bill even provides subsidies for carcasses used as biomass to generate energy.

    "We can't discuss this bill without looking at the fiscal condition of the United States of America today" he continued. "According to recent reports, government spending, thanks to the Congress, grew 12 percent. We're looking at a half a trillion-dollar budget deficit next year. We've gone from a five trillion dollar surplus over the past few years to a multi-trillion dollar deficit. So what do we do? We're passing a bill that's going to increase the deficit by about $24 billion....This bill also contains the other white meat, and of course I'm referring to pork. If we pass this 1,200-page, pork-laden bill the outbreak of Washington-based trichinosis will be so severe we'll be forced to construct a field office of the Centers for Disease Control right next to the Capitol. I'm not saying this bill won't generate some energy; I'm not at all. It will certainly fuel the coffers of big oil and gas corporations. It will propel the special interests and it will boost the deficit into the stratosphere. Indeed, as I've said on several occasions the name of this Bill should be the 'Leave No Lobbyist Behind Act of 2003'.... I hardly know where to begin. I feel somewhat like a mosquito in a nudist colony: I hardly know where to begin."

    McCain went on to say the whole direction of the Energy Bill is wrong, the ethanol provision in particular. "It costs 70 percent more to produce ethanol than the energy that is in ethanol. Every time you make one gallon of ethanol there is a net energy loss." Citing a GAO report, McCain said "Ethanol tax incentives have not significantly enhanced energy security since they have reduced U.S. gasoline consumption by less than 1 percent."

    McCain also condemned the MTBE product liability waiver. "It's an outrage to see a product liability waiver for producers of MTBE retroactive to September 5, 2003, which nullifies the lawsuits against MTBE producers which were filed after September 5th in the Superior Court of California. A jury found that MTBE products were defective resulting in a settlement in which MTBE producers agreed to pay more than $50 million and to clean up contaminated water supplies. Who is going to pay now?"

    Faces Fight in Senate
    On Tuesday November 18, Republican Senator Pete Domenici, head of the Senate Committee on Energy and Natural Resources said Democrats can't block the Energy Bill. "Senate Democrats do not have enough votes to filibuster or block the bill. There are not sufficient Democrats to filibuster this bill," Domenici told reporters. "I believe the support will be so overwhelming that we will prevail in short order in the U.S. Senate."

    A general goal of finishing this bill and Medicare prescription drug legislation before the Congressional Thanksgiving break indicates that action can be expected Thursday or Friday. It appears that the bill will be voted up or Democrats will filibuster it down. At midweek, it's anybody's guess.