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Senate Overwhelmingly Passes Energy Bill

By Justin Blum
Washington Post Staff Writer
Wednesday, June 29, 2005

The Senate yesterday overwhelmingly approved a broad-based energy bill that would provide tax breaks and incentives to encourage domestic oil and natural gas production but billions more to boost renewable energy sources, nuclear power and conservation.

After years of partisan bickering over energy policy, the Senate struck a bipartisan deal that would benefit the booming oil industry but that also begins to address the concerns of Democrats and environmentalists that more needs to be done to conserve energy and develop cleaner energy alternatives. For the first time, the Senate has gone on record calling for mandatory limits on emissions of carbon dioxide and other greenhouse gases linked to global warming, although the resolution is not binding on the Bush administration, which opposes mandatory controls.

The final vote was 85 to 12, with 49 Republicans, 35 Democrats and one independent voting in support of the measure. Maryland and Virginia senators voted for it.

By contrast, the version of the energy bill that the House approved in April is heavily tilted toward providing incentives for traditional energy production. The House bill also includes protection from defective-product lawsuits for manufacturers of the gasoline additive methyl tertiary-butyl ether, or MTBE, which has contaminated drinking water in hundreds of communities. In 2003, the Senate blocked final passage of energy legislation after the House insisted on inclusion of a similar MTBE provision.

President Bush has called on Congress to send him a final bill by August, but the two chambers are far apart on MTBE and several other issues that will complicate negotiations. Bush has sought enactment of comprehensive energy legislation since shortly after taking office in 2001, but twice previously, lawmakers failed to reach agreement.

Another key difference is the size and beneficiaries of tax breaks. The Senate agreed to provide about $18 billion in tax breaks over 10 years, which is offset by about $4 billion in revenue-generating measures, according to the Joint Committee on Taxation. The House tax breaks total $8 billion over 10 years. The Bush administration sought $6.7 billion in new tax breaks.

Bush said in a statement that the Senate-passed legislation "will help our economic growth by addressing the root causes of high energy prices and reducing our dependence on foreign sources of energy."

But energy analysts and environmentalists said the bill would provide only modest relief for consumers and do little to reduce oil imports, at a time when oil prices hover around $60 a barrel and gasoline is selling for more than $2 a gallon.

"I don't think consumers benefit from corporate welfare, and that's all that these proposals add up to," said Jerry Taylor, director of natural resource studies at the Cato Institute in Washington, which promotes free-market policies. "With energy prices as high as they are, we don't need to provide any incentives."

The United States imports about 58 percent of all the oil it consumes. According to federal projections, that figure will rise steadily in the coming years as domestic production continues to decline -- a result of natural depletion of oil fields. Oil prices have been driven up over the past year as economies in China and elsewhere have boomed and supplies have tightened.

Backers of the Senate bill said they hope it will spur increased domestic production of oil and natural gas and provide incentives for new technologies and energy sources that eventually could displace oil.

"It should produce new sources of clean energy," said Sen. Pete V. Domenici (R-N.M.), who as chairman of the Energy and Natural Resources Committee guided the bill through the Senate with the panel's ranking Democrat, Jeff Bingaman (N.M.).

But Bingaman cautioned that "this bill does not bring down the price of gasoline at the pump in the near term."

"In the long term," he added, "it puts in place good policies that will move us in directions that will be very beneficial to American consumers, American industry and the American economy."

Energy interests have been lobbying heavily, and many found something to like in the legislation.

Environmentalists said that the Senate version is better than the House bill but that both measures fall far short of meeting the country's needs. Neither the House nor Senate legislation takes a step that environmentalists said would make the biggest impact in reducing oil imports and lowering gasoline prices: increasing minimum mileage standards for vehicles. Senators rejected an amendment to do so, saying it would hurt U.S. automobile manufacturers, cost jobs and create unsafe cars.

The Senate legislation does not call for opening the Arctic National Wildlife Refuge in Alaska to oil drilling, as the House version does. Both chambers have approved budget resolutions that call for opening the refuge, which is a top priority of the Bush administration. Final votes must be taken.

Both versions of the legislation mandate the use of more ethanol and other agriculture-derived fuels by 2012, though the Senate version requires more than the House bill.

The Senate bill also includes government-backed loans for new power plants that create electricity from cleaner-burning coal and facilities that would convert coal into gas. Taxpayer advocates worried that companies could default, leaving the government to pay the bill.

To address rising natural gas prices, the legislation gives authority to federal regulators to approve terminals to receive imports of liquefied natural gas. Supporters said that would clear the way for more terminals to be constructed by limiting state challenges. Opponents said the measure would allow federal officials to force terminals on communities that do not want them.

The legislation seeks to encourage the construction of nuclear power plants using a combination of incentives.

In an effort to improve the reliability of the electrical grid, the Senate bill calls for mandatory and enforceable rules for utilities. Currently, those regulations are voluntary. The bill also gives the federal government new authority in approving the location of electrical transmission lines.

The Senate legislation goes much further than the House measure in encouraging energy efficiency. It provides tax breaks for energy efficient commercial buildings, homes and appliances.

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