Industry Flexes Muscle, Weaker Energy Bill Passes

NY Times
December 14, 2007

By JOHN M. BRODER

WASHINGTON — Pared-down energy legislation cleared the Senate on Thursday by a wide margin after the oil industry and utilities succeeded in stripping out provisions that would have cost them billions of dollars.

The legislation still contains a landmark increase in fuel-economy standards for vehicles and a huge boost for alternative fuels. But a $13 billion tax increase on oil companies and a requirement that utilities nationwide produce 15 percent of their electricity from renewable sources were left on the floor to secure Republican votes for the package.

The tax measure and the renewable electricity mandate were included in an energy bill that easily passed the House last week. But industry lobbyists focused their attention on Republican members of the Senate and on the White House, which repeatedly threatened to veto the bill if the offending sections were not removed.

Earlier in the week, Senate leaders agreed to drop the renewable electricity section. And on Thursday, after a failed effort to cut off debate on the bill, Senator Harry Reid of Nevada, the Democratic leader, said he would reluctantly remove the tax provisions as well, clearing the way for passage in the early evening.

The slimmed-down bill passed 86-8.

The Edison Electric Institute, which represents investor-owned electric utilities, led the opposition to the renewable electricity mandate. Along with its member companies in the Midwest and Southeast, the group carried out an extensive lobbying campaign warning that the bill would cause sharp increases in electric rates.

The institute was joined by the National Association of Manufacturers, the Chamber of Commerce and groups representing the paper, mining, petrochemical and refining industries.

Dan Riedinger, a spokesman for the institute, said that a federal mandate would conflict with mandates for renewable power in place in more than half the states and that this could possibly complicate efforts to pass a nationwide program to combat climate change.

“The federal government jumping in now and second-guessing the states and enacting a fuel mandate in advance of economy-wide greenhouse gas regulation just wasn’t going to make it out of Congress,” Mr. Riedinger said.

The bill now returns to the House, where Speaker Nancy Pelosi predicted that it would pass overwhelmingly early next week. A White House spokesman said President Bush was pleased that the bill was “moving in the right direction” and that he would sign it when it reached his desk.

The oil industry conducted its own campaign of opposition to the tax provisions, arguing that it would impose burdens on the industry when it needed all the resources it had to find and develop new sources of energy.

“We made sure that everybody knew our point of view — the White House, the House, the Senate,” said James Ford, director of government affairs at the American Petroleum Institute. “We told our story and told it thoroughly.”

Mr. Ford said that even with the tax provisions removed, the oil industry had concerns about meeting the bill’s requirement that 36 billion gallons of renewable fuels be blended into gasoline by 2022. He said the bill was far too specific about how much of certain kinds of fuels must be produced, whether from corn, various other plant fibers or animal fats.

“With all these boutique biofuels, we need an ability to adjust the mandate if technological advances aren’t made,” Mr. Ford said.

Environmental advocates were generally pleased with passage of the new vehicle fuel-economy standards and the biofuel provision. Dan Becker, an environmental consultant who has been working on auto efficiency issues for nearly 20 years, called passage of the bill the biggest environmental victory since enactment of the Clean Air Act of 1990.

But some environmentalists said they were unhappy that the bill would not provide large incentives for expansion of renewable energy sources like wind, solar and biothermal.

Brent Blackwelder, president of Friends of the Earth Action, accused Senate Democrats of “capitulating” to Senate Republicans and the White House.

“When the Republican leadership and the polluter lobby have blocked important legislation, Senate Democrats have been all too willing to move in their direction,” Mr. Blackwelder said in a statement. “The result is that the two most positive provisions of the energy bill — a clean energy mandate and a tax package reining in handouts for fossil fuels and promoting clean energy — are being removed, while detrimental provisions, such as a radical five-fold increase in unsustainable biofuel use, remain.”

Separately, Congress reached a tentative agreement on a major energy package that it plans to enact outside the energy bill, according to a Senate Democratic staff member. The agreement, to be included in a broad government spending bill, would authorize the Energy Department to guarantee loans for various energy projects, making financing far easier.

The agreement would guarantee loans of up to $25 billion for new nuclear plants and $2 billion for a uranium enrichment plant, something those industries had been avidly seeking. It would also provide guarantees of up to $10 billion for renewable energy projects, $10 billion for plants to turn coal into liquid vehicle fuel and $2 billion to turn coal into natural gas.