In the End, Energy Bill Fulfilled Most Industry Wishes

There was nothing in President Bush's energy proposals in the spring to directly assist oil and gas companies, which were enjoying record profits, yet by the time the House finished work on the president's plan this week, Big Oil was the beneficiary of $13 billion in new tax credits and spending.

In similar fashion, Bush offered only modest incentives to the coal industry -- $2 billion over 10 years for research on clean coal technology. But the bill that emerged from the House early Thursday included three times that amount -- including millions more added by Energy and Commerce Committee Chairman W.J. "Billy" Tauzin (R-La.) to establish clean coal technology "Centers of Excellence."

The GOP portrayed the energy bill as a tool for stimulating domestic energy production after years of neglect by the Clinton administration. But Democrats and other critics saw it differently. They said the measure was designed primarily to reward the oil, gas, coal and nuclear industries for their cooperation in the spring, when they helped to ease passage of the president's tax cut bill by not insisting that it include tax breaks of their own.

By winning more than $30 billion in tax incentives -- three times the president's request -- in the energy bill, industry received much of what it wanted. But its success raised questions about how lawmakers and the administration plan to pay for it in a period of declining budget surpluses, according to lawmakers who opposed the bill and budget analysts.

White House spokeswoman Claire Buchan said yesterday that, while the president did not propose any tax incentives for oil and gas production or many of the other provisions that turned up in the legislation, "we're pleased with the overall bill."

"There were some different things in the House bill as it relates to the tax incentives . . . and we're going to continue to work with the Congress as the bill moves through the Senate," Buchan said. "But it reflects the priorities the president put forward."

But Rep. Lloyd Doggett (D-Tex.), a member of the tax-writing Ways and Means Committee, complained that House GOP leaders went overboard in responding to industry's pent up demand for tax breaks. "The purpose of this bill is to reward those businesses that got behind the Bush tax package who couldn't get involved in round one," he said.

The 511-page bill that passed the House 240 to 189 early Thursday includes $33.5 billion in tax breaks over 10 years and other incentives for the power industry aimed at increasing oil and gas exploration, developing new coal-burning technologies and promoting nuclear energy. It also includes funding for conservation efforts and the development of alternative energy sources.

The bill would open up the coastal plain of the Arctic National Wildlife Refuge in Alaska to oil and gas exploration, a top priority of the Bush administration. House Republicans pushed through an amendment that would limit the area open for exploration to 2,000 acres, down from the 1.5 million acres outlined in the president's energy proposal.

But opponents of Arctic drilling said the amendment was merely an attempt to put an environmentally friendly gloss to the bill, arguing that since he released his energy plan in May the president himself has focused on plans to use no more than 2,000 acres as a staging area for probing the coastal plain.

Senior Democrats, including Sens. John F. Kerry (Mass.) and Joseph I. Lieberman (Conn.), vowed yesterday to block the drilling plan when the Senate takes up its energy bill. "I will filibuster any effort to drill in the refuge," Kerry told reporters. "It will never pass the Senate."

A Democratic analysis of the tax provisions of the energy bill concludes that only 17 percent of the total would go for strictly conservation efforts while the remainder would go to oil, gas, coal and nuclear power interests.

Administration officials have expressed some concern about the overall cost of the bill's tax provisions, estimating that they would reduce the budget surplus by at least $30 billion over the next decade.

While the bill would put the budget in technical noncompliance with rules that require tax cuts to be offset with spending cuts, Congress in recent years has routinely waived those rules.

Still, some budget experts say the bill continues a pattern this year of passing additional tax cuts with long-term implications when the near-term budget picture is looking increasingly uncertain with the slowing economy. The budget surplus this year may be as low as $160 billion, leaving little room if the administration wants to meet its pledge of not touching the surpluses generated by Social Security payroll taxes. The situation for fiscal 2002 looks even more problematic.

Some Democratic and Republican lawmakers and environmental groups monitoring the energy debate say the problem has been exacerbated by the approval of narrow special-interest provisions or provisions that were conceived as important environmental efforts but were altered at the last minute as a favor to industry.

One of the tax credits, for energy-efficient appliances, would reduce revenue by nearly $300 million and benefit essentially four companies -- Maytag, General Electric, Whirlpool and Frigidaire. The provision would pay the manufacturers $50 or $100 per clothes washer or refrigerator if they met certain production and energy-efficiency thresholds.

Douglass C. Hortsman, a Maytag lobbyist, said the provision grew out of negotiations last year between the appliance industry and environmental groups on setting higher standards for the energy efficiency of washers and refrigerators. He said it was designed to encourage the companies to develop the appliances earlier than the 2007 effective date for the new standards. "It is more expensive to produce a more energy-efficient machine," he said, but companies are so competitive that they "rarely are able to pass the costs through in price increases."

Environmental leaders thought they had an agreement with the auto industry and lawmakers over more than $2 billion in alternative motor vehicle credits to encourage long-term fuel efficiency and lower fuel consumption. But they complained yesterday that the industry extracted last-minute concessions that drastically reduced the effectiveness of the credits.

"They weakened it to the point where we can't be assured public health will be adequately protected or that large amounts of the credits won't flow to inefficient vehicles," said Kevin Mills, a lawyer with Environmental Defense.