By DAVID WHITNEY
July 27, 2005
For California, the compromise bill clears the way for the waters off the coast to be mapped for their oil and gas potential. The state also could see its authority over the location of liquefied natural gas plants weakened and, for the first time in six decades, electric utilities could be sold to corporations with no experience in the business or connection to regional markets.
But in a last-minute compromise, negotiators rejected a House-passed provision that would have immunized producers of the controversial gasoline additive MTBE from liability when the product leaks from underground storage tanks and pollutes drinking water.
Rep. Joe Barton, the chairman of the House Energy and Commerce Committee who led the negotiations, immediately went to work Tuesday trying to sell the measure that had been four years in the making and labeled a top priority of President Bush.
"This balanced bill will lower energy prices for consumers, spur our economy, create hundreds of thousands of jobs and take unprecedented steps to promote greater energy conservation and efficiency," said Barton, R-Texas.
Committee Democrats, however, condemned the legislation and said they would vote against it, virtually assuring that Congress will approve it with deep partisan divisions.
"For those Republicans who want to borrow money to give to their friends in the energy business, they've won the day," said Rep. Henry Waxman, D-Los Angeles, emphasizing the bill's $11 billion in subsidies and incentives to boost energy production.
Waxman complained that an additional $500 million was added into the bill at the last minute "for the oil companies to develop oil resources" - something they already are pocketing record profits for doing, he said.
Even Republicans involved in the negotiations conceded that nothing in the measure would immediately bring down the high prices of gasoline and natural gas. Opening the Arctic National Wildlife Refuge in Alaska, the most promising prospect in the United States for a major oil discovery, is not included in the bill and will be taken up later as part of a budget package.
The energy bill proposes through a series of incentives and subsidies, however, to foster development of other oil and gas reserves in the United States. It also seeks to expand oil refining in the country and to tighten down on states and regions that, through their own regulations on gasoline, force oil companies to sell fuels tailored for specific environmental conditions.
The bill also accomplishes a long-sought goal of the electric power industry of repealing the Public Utility Holding Company Act, which for more than 60 years has banned companies not in the electricity business from owning power companies.
Michele Boyd of the watchdog group Public Citizen said the law's repeal is certain to touch off consolidations within the electric utility business and open their sale to oil companies and perhaps even foreign countries.
But the bill also gives the Federal Energy Regulatory Commission that oversees electricity and natural gas broader authority to punish companies like Enron that manipulate markets to boost profits - something the commission has been seeking since the California electricity crisis of 2000-2001.
The bill also sets new efficiency standards for appliances and extends Daylight Savings Time by a month to save energy. But the measure does nothing to increase gas mileage of cars and trucks.
The most tangible provision affecting gasoline is a new requirement increasing the use of ethanol, distilled from agricultural products such as corn. The bill calls for at least 7.5 billion gallons a year of ethanol to be mixed with gasoline by 2012.
California had sought an exemption from that requirement because of concerns that ethanol can increase air pollution.
Other provisions affecting California include the requirement for a national inventory of offshore oil and gas reserves, which most of the state's congressional delegation and Gov. Arnold Schwarzenegger opposed.
Drilling in federal waters off the state has been banned until 2012, and there's been no new development in state waters since a 1969 oil spill in Santa Barbara.
While the national inventory would not include drilling, it's likely to involve seismic testing in which explosives are detonated on the ocean floor so that sensors can map the vibrations and pinpoint geologic structures that could be favorable to oil and gas deposits.
The House consistently has opposed the inventory idea but it's been favored in the Senate, where advocates said that it is only prudent for the country to know what natural resources it has. But many see the inventory as the first step to ending drilling bans. And rather than benign scientific studies, many think the noise from seismic testing will be damaging to sea life.
On another California issue, the legislation resolves in the federal government's favor any question about whether the state has the authority to stop the site selection of liquefied natural gas plants under the Natural Gas Act. Under the bill, that role is given exclusively to the Federal Energy Regulatory Commission.
The California Public Utility District is challenging FERC's authority now before the 9th U.S. Circuit Court of Appeals in San Francisco, and it was not clear Tuesday what impact the energy bill would have on that case.
The lawsuit involves the state's say in whether a consortium can build a new liquefied natural gas plant in Long Beach, Calif. But regardless of the provision's impact on the appeals court case, both the developer and the FERC say California's voice will be heard.
Bryan Lee, spokesman for the commission, said California has considerable authority to block a plant seeking permits under such laws as the Clean Air Act and the Clean Water Act.
"This does not take away authority from the states," Lee said.
Tom Giles, president and CEO of Sound Energy Solutions, which is seeking to build the plant, said local authorities will have final say simply because the Port of Long Beach owns the property.
"The FERC can approve the site but it can't lease the land," Giles said.
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