Friday, June 22, 2007

Senate Passes Energy Bill But End Product is Far From Comprehensive

Energy bill passes Senate with renewable fuels standard and fuel economy provisions but lacks important tax provisions and a renewable energy standard.

In what can at best be considered a partial victory for clean energy advocates and the Democratic leadership, the Senate passed a stripped down energy package last Thursday night. Shortly before midnight, the Senate voted 62-32 to end debate on the bill, HR 6, and then quickly passed the bill with a 65-27 vote.

While a compromise was reached that preserved a 35 miles per gallon (mpg) by 2020 increase in fuel economy standards, the first major increase in fuel economy standards in two decades, the final energy bill was far from the 'comprehensive' energy package Senate leaders had originally promised.

The bill ultimately excluded an important tax package that would have shifted $32 billion in tax incentives from the oil and gas industry to support alternative and renewable energy and energy efficiency. It also left out a renewable energy standard requiring electric utilities to obtain at least 15% of their electricity from renewable energy sources (see previous post).

In a parliamentary maneuver to block more controversial proposals, Senate Republicans required cloture votes on nearly every amendment offered to the energy package as well as on the final vote to approve the bill itself, meaning that any amendment needed 60 votes to pass (enough to block a threatened filibuster).

Thus, while both the tax package and the renewable energy standard had support from a majority of senators, both provisions were left out of the final bill.

“Republicans continue to pander to the big oil and energy companies,” Senate Majority Leader Harry Reid (D-NV) complained after conceding defeat on those issues. “Republicans repeatedly demonstrate that they do not care about the priorities of the American people, throwing up roadblocks at every turn instead of working with us...”

The tax provision (Amendment 1704) fell just three votes shy of the 60 needed to reach cloture (it failed 57-36).

An amendment offered by Senator Jeff Bingaman (D-NM) that would have created a nationwide renewable energy standard for electric utilities never received an up or down vote, although all indications are that it was also just a few votes shy of 60 and was supported by a majority of senators.

Bingaman had circulated a compromise energy standard proposal (pdf) on Wednesday seeking to shore up support for the standard, but Republicans blocked this compromise as well. The revised energy standard amendment would have moved the 15% renewable energy target back two years to 2022 and would have given individual states the option of allowing their utilities to meet up to 4% of the standard with energy efficiency investments rather than renewable energy generation (making it a 4% energy efficiency and 11% renewable energy standard by 2022).

Debate over the national renewable energy standard will now shift to the House where debate on a 20% by 2020 standard is expected. A resurrected Senate proposal could also be attached to future energy legislation later this session and both Senator Bingaman and Senator Reid have pledged to continue pushing for a national renewable energy standard this session.

Despite these disappointments environmentalists [and anyone concerned about climate change!] scored a victory by keeping support for coal-to-liquids (CTL) synthetic fuel production out of the final energy bill. Two competing CTL amendments failed on Tuesday (see previous post), and the final bill moved without any tax incentives or fuel standards for CTL fuel.

Environmentalists and several progressive grassroots groups have been pushing hard to keep CTL out of the bill (see previous post), arguing that CTL fuels will exacerbate global warming pollution and involves expanded strip mining and mountain top removal, environmentally destructive practices used to mine coal.

First Fuel Economy Standard Improvement in Decades; Closes "SUV Loophole"

The most notable provision in the final energy bill is a first major revision to corporate average fuel economy (CAFE) requiring automakers to increase the average fuel economy of their vehicles to 35 mpg by 2020.

The new standards would for the first time establish a single fleet-wide fuel economy standard applicable to both cars and light trucks and SUVs, closing the so-called 'SUV loophole' that sets separate, lower standards for SUVs and light trucks.

Cars are currently required to average 27.5 mpg and SUVs and light trucks - which now account for roughly half of all new vehicle sales - are required to average only 22.2 mpg. Fleet-wide average fuel economy requirements are therefore roughly 25 mpg. The new standards would require an overall fleet-wide average - including both cars and light trucks - of 35 mpg by 2020, an increase of roughly 10 mpg in 10 years.

The minimum fuel efficiency requirement would vary for different classes of vehicles based on vehicle weight and size, but all vehicle classes would be required to increase their fuel economy by 10 mpg over today's levels by 2020 and manufacturers would be required to meet an overall fleet-wide average of 35 mpg.

The vehicle classes will be established by the Department of Transportation’s National Highway and Transportation Safety Administration (NHTSA).

Creating several new attribute-based vehicle classes should also help end the 'buy a hybrid, save a hummer' syndrome (see previous post). Currently, with only two vehicle classes - one for cars and one for light trucks - purchasing efficient vehicles on the leading edge of a vehicle class - a hybrid Toyota Prius or Ford Escape for example - essentially amounts to a 'free pass' for auto manufacturers to crank out more gas guzzling SUVs and luxury sedans at the trailing edge of a vehicle class. Creating several separate vehicle classes will help end this counterproductive scenario.

The new fuel economy standards apply to all light duty vehicles up to 10,000 pounds in weight and applies to model years 2011 and beyond.

The original fuel standard proposal had called for a 4% annual increase in fuel economy standards for each year after 2020. This requirement was dropped in a bi-partisan compromise aimed at shoring up support for the 35 mpg standard in the face of a much weaker automaker-backed proposal offered by Michigan Senators Levin and Stabenow. Car manufacturers had lobbied ferociously to fight the 35 mpg standard and backed the weaker Levin-Stabenow proposal which would have created a 30 mpg by 2022 standard and kept the separate standards for cars and light trucks.

The bill now says that from 2021 to 2030, NHTSA must set fuel economy standards that are "the maximum feasible" and ratchet these standards up at a reasonable rate, without specifying a specific rate.

Finally, while not specifying a particular efficiency standard, the energy bill directs NHTSA to develop and require improvements in the fuel economy of medium and heavy duty vehicles over a 20 year period as well.

Environmental groups and Democratic Senators, though disappointed by the setbacks on renewable energy, nevertheless hailed the vote on higher mileage requirements as a long-sought victory that could eventually reduce American gasoline consumption by more than 1 million gallons of gasoline a day and cut greenhouse gas emissions from the transportation sector.

“We are thrilled,” said Kevin Curtis, a lobbyist for the Pew Campaign for Fuel Efficiency. “This is the first time in decades that the Senate has passed a significant increase in fuel economy standards.”

“Today, the Senate roundly rejected the automobile industry’s scare tactics,” said Michelle Robinson, director of the Union of Concerned Scientists’ clean vehicle program.

A Biofuels Bananza - Energy Bill Includes 36 Billion Gallon Renewable Fuels Standard

In addition to increasing fuel economy standards, the energy bill calls for dramatic expansion in the use of renewable fuels including ethanol and biodiesel.

The energy bill establishes a renewable fuels standard of 36 billion gallons per year by 2022. The standard includes a requirement for advanced biofuels, which does not include ethanol derived from corn starch, to meet 60% of the total renewable fuel requirement by 2022.

However, without the tax package that would have provided tax breaks and subsidies to support the development of renewable fuels infrastructure, the bill is missing the package of financial incentives intended to support this renewable fuels standard.

The final energy bill includes an amendment offered by Senator Bingaman and passed on Wednesday that contains a number of provisions to make sure biofuel production would remain environmentally sensible. These provisions call for studies on environmental impacts of biofuels and include a requirement that advanced ("next generation") biofuels have "life cycle" global warming emissions at least 50 percent less than that of conventional gasoline.

The biofuels standard received major support from lawmakers from farm states, which already benefit from government supports for corn-based ethanol and stand to gain even more by expanded support for both conventional and advanced biofuels such as cellulosic ethanol made from agricultural residues like corn stover or dedicated energy crops like switchgrass.

Farm state Senators, many of them Republicans, also lobbied hard with their colleagues to drop their opposition for the tax package which would have expanded tax incentives for biofuels as well as wind power development, much of which is centered in mid-West and Western states.

“We’re taxing the oil industry to get a renewable energy industry started,” Senator Charles E. Grassley of Iowa, the ranking Republican on the Senate Finance Committee, said on the Senator floor. “I hope you’ll understand that God only made so much fossil fuel and that there’s got to be a follow-on if we’re going to have growth in our economy.”

Other Energy Provisions

The energy package passed by the Senate includes the following other provisions:

  • Calls for a new a consumer labeling program that includes greenhouse gas emissions along with fuel economy ratings.
  • Calls for ensuring that 50% of vehicles sold in the US are alternative fuel vehicles by 2015, including but not limited to flex-fuel vehicles, hybrids, electric vehicles, fuel cells and others.
  • Anti-price-gouging provisions that unlawful to charge an "unconscionably excessive" price for oil products during a time of designated national emergency.
  • A controversial provision known as "NOPEC" that makes it illegal for foreign governments to engage in oil or gas price cartels - e.g. OPEC - and allows the Attorney General to bring foreign governments to court for violations. (This provision is largely symbolic but is nonetheless controversial and may invoke a veto from President Bush who warns it will harm relations with Middle Eastern states).
  • New appliance and lighting efficiency standards.
  • A requirement that the federal government purchase at least 15% of its electricity from renewable energy sources by 2020 and accelerate the use of more efficient lighting in public buildings.
  • Establishes a public program and funds other initiatives that provide training for jobs that are created through renewable energy and energy efficiency initiatives with authorized funding of $100 million per fiscal year.
  • Electric-Drive Transportation Program to promote the development of plug-in electric vehicles, deploying near-term programs to electrify the transportation sector, and including electric drive vehicles in the fleet purchasing programs.
  • Gives the U.S. Secretary of Energy authority to establish 'national interest transmission corridors' for clean energy; expands the “federal backstop” transmission siting role given to the Department of Energy and the Federal Energy Regulatory Commission in the Energy Policy Act of 2005.
  • Directs the Executive Branch to develop and publish a plan to reduce oil consumption by 2.5 million barrels per day by 2017, 7 million barrels per day by 2026 and 10 million barrels per day by 2031.
  • Green Car Congress has a full list of the literally hundred plus amendments offered to the energy package in the Senate including the results of any votes on these amendments.

    Debate Moves to House; Bush Veto Possible

    The energy package now awaits action by the House which is expected to begin debating energy legislation next week. However, after facing a storm of criticism and division within their own caucus, House Democratic leaders agreed on Monday to drop the most controversial issues from this summer's energy bill debate, including CAFE standards, support for coal-to-liquids fuel and perhaps the national renewable energy standard as well.

    In a memo circulated among Energy and Commerce Committee members on Monday, Chairman John Dingell (D-MI) wrote that several issues floated by the committee in a draft earlier this month need more consideration, according to Energy and Environment Daily (subscription required).

    "These issues are important, and we are committed to addressing them and others when we take up comprehensive climate change legislation in the fall," Dingell wrote. "This will also give us the needed time to achieve consensus on these issues if at all possible."

    Translation: Congressman Dingell has apparently decided to effectively punt until later in the year the entire fuels title, which contained an alternative fuels mandate, a low-carbon fuel standard, a boost in corporate average fuel economy (CAFE) standards and coal-to-liquids provisions.

    According to E&D Daily:
    The move comes after two weeks of closed-door negotiations among senior Democrats, some of whom vigorously objected to the proposed language. In particular, many Democrats -- among them Speaker Nancy Pelosi (D-Calif.) -- said they would not support a bill that contained language the would block California and other states from setting their own GHG emissions rules for motor vehicles.

    The controversy on this and other issues forced the committee to postpone a markup of Dingell's draft legislation, and Pelosi and Dingell had been meeting over the last few days in an effort to hash out a compromise.

    According to Dingell's memo, Pelosi has signed off on the deal and thinks the pact could pave the way for smoother passage of a summer energy package.
    It therefore looks like both the Senate and House energy bills will be missing important clean energy provisions with the House measure likely to include some provisions absent from the Senate version - most notably a package of clean energy tax incentives - and vice versa - the Senate bill includes CAFE standards and a renewable fuels standard. This will leave a lot of details up to conference committee later this year which will be tasked with syncing up the House and Senate energy packages.

    And to add further uncertainty to the mix, a presidential veto is still a real possibility, depending on what provisions are present whatever energy package finally passes Congress. President Bush has said that while he supports the biofuels standard, he is unhappy with much of the Senate proposal, particularly the CAFE standards, the anti-price gouging provisions and the "NOPEC" amendment.

    According to an Oregonian/AP article:
    The White House said the president would be urged to veto an energy bill that includes the price-gouging measures, arguing that they amount to price controls. The president also repeatedly has said he opposes Congress mandating a specific mileage number for auto fuel economy. Bush believes the Transportation Department should be given increased flexibility to set a standard.
    The future of the energy package is thus still largely uncertain. Stay tuned...

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