Order Code IB10116
Issue Brief for Congress
Received through the CRS Web
Energy Policy:
The Continuing Debate
Updated April 23, 2003
Robert L. Bamberger
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
The Arctic National Wildlife Refuge (ANWR)
Other Non-Tax Energy Production Initiatives
Energy Tax Policy
Electricity Restructuring
Nuclear Energy
Fuel Economy
The President’s Hydrogen Fuel Initiative
Renewable Energy and Fuels
Energy Efficiency and Conservation
LEGISLATION

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Energy Policy: The Continuing Debate
SUMMARY
Energy prices during the winter of 2002-
of the pipeline – to do so only for a southern
2003 were elevated owing to anticipation of
route through Alaska, a route to which confer-
the war with Iraq and problems since resolved
ees on H.R. 4 had informally agreed. The bill
in Venezuela, a major oil supplier to the
would also authorize $1.5 billion for expan-
United States. Republicans and Democrats
sion of the Strategic Petroleum Reserve (SPR)
alike indicated that a renewal of debate on
to 1 billion barrels and require a study of
several energy issues was likely.
passenger car fuel economy by the National
Academy of Sciences (NAS).
On April 11, 2003, the House passed
comprehensive energy legislation, H.R. 6
H.R. 6 would provide $30 billion for
(247-175). The bill was a composite of sepa-
DOE research and development (R&D) pro-
rate measures approved by four committees
grams during fiscal years 2004-2007. It also
the previous week. H.R. 6 includes several
includes language to authorize exploration,
provisions that were part of comprehensive,
development, and production of oil in the
but not enacted, energy legislation (H.R. 4)
Arctic National Wildlife Refuge (ANWR).
debated during the 107th Congress. These
The House adopted language on the floor to
provisions touch upon energy efficiency and
limit the surface of “production and support
conservation, clean coal technology, and
facilities” to 2,000 acres. Some predict that
reauthorization of the Price-Anderson Act
ANWR will face a more contentious climate
nuclear liability system. The bill passed by
in the Senate.
the House would also provide roughly $18
billion in energy tax incentives.
Action on comprehensive energy legisla-
tion is in progress in the Senate. On April 2,
H.R. 6 also addresses a number of con-
2003, the Senate Committee on Finance re-
troversial issues left unresolved by the 107th
ported S. 597. As reported, the bill includes
Congress. The new bill includes an electricity
roughly $18 billion in incentives over a 10-
title that would, in part, repeal the Public
year period, of which $5 billion is targeted to
Utility Holding Company Act, would prospec-
the oil and gas industry, $2.6 billion to pro-
tively repeal the mandatory purchase require-
ducers of renewable energy sources, $2.4
ment under the Public Utility Regulatory
billion for alternative fuels and fuel cell vehi-
Policies Act, and would create an electric
cles, and $4 billion for utilities to implement
reliability organization. H.R. 6 would also
electricity restructuring.
establish a renewable fuels standard of 2.7

billion gallons by 2005 and 5 billion gallons
The Senate Energy and Natural
by 2015.
Resources Committee began markup of a
comprehensive energy bill on April 7, 2003,
The House bill would authorize construc-
agreeing by week’s end to provisions regard-
tion of a natural gas pipeline from the Alaskan
ing hydrogen, hydroelectric relicensing, nu-
North Slope to the lower 48 states, but would
clear and renewable energy. On April 11,
allow the Federal Energy Regulatory Commis-
2003, Chairman Domenici pulled a controver-
sion (FERC) – which must issue a certificate
sial section on climate change from the bill
of convenience and necessity for construction
and indicated it would be addressed later.
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
On April 11, 2003, the House passed comprehensive energy legislation, H.R. 6 (247-
175). The bill was a composite of four measures – H.R. 39, reported from the House
Committee on Resources, H.R. 238, marked up by the House Science Committee, H.R. 1531,
reported from Ways and Means, and H.R. 1644, reported out of the Energy and Commerce
Committee. Unlike comprehensive energy legislation (H.R. 4) debated in the 107th Congress,
H.R. 6 includes a section on electricity which has stirred some controversy. H.R. 6 would
provide authorization for exploration and development of the Arctic National Wildlife
Refuge (ANWR). The Senate did not include ANWR language in its version of H.R. 4, and
there is considerable speculation about whether it will be included in any omnibus energy bill
that the Senate might pass in the 108th Congress.
Work on omnibus energy legislation is underway in the Senate, which is currently
projected to reach the Senate floor by the end of April. The Senate Committee on Finance
reported S. 597, which would provide more than $18 billion in tax incentives. The Senate
Energy and Natural Resources Committee began markup of a comprehensive energy bill on
April 7, 2003, agreeing by week’s end to provisions regarding hydrogen, hydroelectric
relicensing, renewable energy, and nuclear energy.
BACKGROUND AND ANALYSIS
Since the Arab oil embargo in 1973-74, policymakers periodically have focused on
energy policy. Most of the periods when energy policy has been the object of major
legislative initiatives have been when uncertainty about the security of future energy supply
has triggered a sharp increase in the price of energy. The current focus on energy policy was
triggered by a rise in oil prices that began in the late spring of 1999. Rising prices during the
winter of 2002-2003 had many underlying causes, including anticipation of the war with Iraq,
and a general strike in Venezuela that began in late 2002 and curtailed as much as 1.5-1.6
million barrels per day of crude and product imports to the United States. Crude oil
inventory in the United States fell sharply to make up for the shortfall from Venezuela.
Refined product inventories also fell as a consequence of cold winter weather that has placed
particular pressure on heating oil inventories.
Prices softened to roughly $28 barrel (bbl) amid optimism about the course of the war
with Iraq, the resumption of some production from Venezuela in February 2003, and a boost
in oil production by Saudi Arabia to make up for tight supply in world markets. With the
winding down of battle in Iraq, prices remain in the $28 range. By early April, U.S. crude
and product stocks were beginning to improve. Refiners have begun to shift over to the
production of gasoline in anticipation of summer demand. (There is a similar shift in late
summer to higher production of middle distillates, such as home heating oil and diesel fuel.)
However, refiners will need to further replenish crude and product inventories while
satisfying current demand, and it is not clear how long this may require. Depending upon
summer demand in 2003 and temperatures during the winter of 2003-2004, it could take
months for crude supply, crude and product inventories, and demand to be restored to some
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balance. However, in the face of damage to only a few Iraqi oil wells and reports that the
Northern oil fields could be producing 900,000 barrels per day (b/d) in a matter of weeks,
Organization of Petroleum Exporting Countries (OPEC) producers are beginning to
anticipate a possible surplus in oil supply later this year and some OPEC ministers have
called for a meeting on April 24, 2003, to consider whether current production quotas should
be lowered in an effort to keep oil price supported.
Prices have begun to soften at the pump, and with monthly heating costs abating as well,
there may be less constituent demand for short-term relief. The sorts of policies considered
in omnibus energy legislation by the 107th Congress – and likely to be debated again in the
108th – will be long-term in nature. (For an expanded background discussion about energy
policy, see CRS Report RL31720, Energy Policy: Historical Overview, Conceptual
Framework, and Continuing Issues. For a review of short-term energy policy options to
address a supply disruption and high energy prices, see CRS Report RL31676, Middle East
Oil Disruption: Potential Severity and Policy Options.)
Several energy bills were reported from committee on April 2, 2003. The House Energy
and Commerce Committee reported energy legislation (H.R. 1644) by a vote of 36-17. The
House Science Committee marked up legislation (H.R. 238) that would provide $30 billion
for DOE research and development (R&D) programs during fiscal years 2004-2007. The
House Committee on Resources reported a bill, H.R. 39 (32-14), that would authorize
exploration, development and production of oil in ANWR. On April 3, 2003, the House
Ways and Means Committee passed (24-12) H.R. 1531, the Energy Policy Tax Act of 2003.
The House bills were merged into H.R. 6, introduced on April 7, 2003, and the House passed
H.R. 6, as amended, on April 11, 2003.
In the Senate, the Committee on Finance reported S. 597 which would provide more
than $18 billion in tax incentives. The Senate Energy and Natural Resources Committee
began markup of its own comprehensive energy bill on April 7, 2003, agreeing by week’s
end to provisions regarding hydrogen, hydroelectric relicensing, renewable energy, and
nuclear energy.
Some of the major energy issues receiving attention during the 108th Congress are
discussed briefly below.

The Arctic National Wildlife Refuge (ANWR). Domestic oil production continues
to fall. Some argue that the nation should be seizing the opportunity to develop the oil and
natural gas resources that remain untapped. The potential Alaskan resources are high on this
list, and the debate over whether or not to open ANWR for leasing continues after more than
a decade.
On April 2, 2003, the House Committee on Resources reported H.R. 39 (32-14), which
would authorize exploration, development and production of oil in ANWR. This language
was included in the omnibus energy bill, H.R. 6, passed by the House on April 11, 2003. An
amendment was agreed to (226-202) on the floor of the House to limit the surface acreage
covered by production and support facilities to 2,000 acres. Opponents of development in
ANWR expressed concern that the 2,000 acres would not be contiguous, and would disturb
several locals within the Refuge and not just a solitary area.
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Language was initially included in both the House and Senate budget resolutions that
would promote leasing in ANWR. The Senate budget resolution instructed the Senate
Energy and Natural Resources Committee to report legislation that would raise $2.1 billion
in leasing from ANWR, but this language was subsequently dropped. The House budget
resolution does not name ANWR, but instructed the House Resources Committee to raise
more than $1.1 billion in revenues during the period 2004-2013.
Proponents of exploring ANWR point to advances in exploration and drilling
technology and methods that have significantly reduced the extent of surface disturbance.
While opponents concede this may be so, they argue that these advances are limited to
exploration and extraction, and that considerable risk to the environment remains during the
production and transportation phases. Opponents also suggest that the risks are not worth
bearing, especially if the resources in ANWR turn out to be at the lower range of estimates,
providing only an additional 300,000 barrels per day (b/d) of supply. Some respond to this
argument by noting that the nation has experienced periods of tight supply when even an
additional few hundred thousand barrels of crude oil per day would have made for
significantly lower prices at the pump, and for home heating oil. It should be noted that there
are some environmentalists for whom any weighing of risks and benefits are pointless
because, citing the area’s pristine character, they argue that its ecology and habitat should not
be disturbed under any circumstances.
H.R. 6 was also amended on the floor to include language providing that revenues from
bonus bids for leases in ANWR would be available to the Low Income Home Energy
Assistance Program (LIHEAP). An amendment to strike the language authorizing leasing
and exploration of ANWR was defeated (197-228).
As an historical note, omnibus energy legislation passed by the House during the 107th
Congress (H.R. 4) would have opened ANWR to oil and gas leasing. However, in the Senate,
opponents of opening ANWR filibustered an amendment to include leasing in the Senate
version of the bill. On April 18, 2002, the Senate defeated (54-46) a procedural motion to
invoke cloture on the debate. The FY2003 omnibus appropriations bill, P.L. 108-7, did not
include any language on ANWR. (For additional information, see CRS Issue Brief IB10111,
The Arctic National Wildlife Refuge: Controversies for the 108th Congress.)
Other Non-Tax Energy Production Initiatives. The Department of the Interior
has estimated that roughly a quarter of oil resources, and less than one-fifth of gas resources,
have been developed on Indian lands. Senator Bingaman has introduced legislation (S. 424)
that includes provisions agreed to last year that would facilitate energy production on Indian
lands by making it easier for tribes to lease land and rights-of-way for energy production and
transmission.
Alaska currently holds 30 trillion cubic feet of undeveloped proven natural gas reserves,
about 18% of total U.S. reserves. Because these reserves are located on Alaska’s North
Slope, they have not been developed due to the very high cost of building and operating the
transportation infrastructure to reach distant markets. There also was debate during the 107th
Congress over whether construction of a natural gas pipeline to carry gas to the lower 48
states would require loan guarantees and other incentives and over the most desirable route
for the pipeline. The energy legislation, H.R. 6, passed by the House on April 11, 2003,
would authorize construction of a natural gas pipeline from the Alaskan North Slope to the
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lower 48 states, but would allow the Federal Energy Regulatory Commission (FERC) –
which must issue a certificate of convenience and necessity for construction of the pipeline
– to consider only the southern route through Alaska to which conferees on omnibus energy
legislation had agreed in the last Congress (H.R. 4). The same language is included in H.R.
6.
Energy Tax Policy. Policymakers often explore whether the tax system can be used
to help boost declining domestic production of oil and gas, and promote alternatives to
traditional fuels. Omnibus energy legislation (H.R. 6) passed in the House on April 11, 2003,
would provide about $18 billion in energy tax incentives. The legislation includes less than
$100 million in general tax increases so that the net energy tax cut is about $3 billion greater
than S. 597, the Energy Tax Incentives Act of 2003 (H.R. 1531), reported from the Senate
Finance Committee (SFC) on April 2, 2003 by a vote of 18-2.
The provisions passed by the House in H.R. 6 are substantially scaled down from the
House energy tax provisions in H.R. 4, which included about $33 billion in energy tax cuts
over 10 years. The relative weights among the three categories – fossil fuel production,
energy efficiency, and alternative/renewable fuels are the same as last year’s bills, but the
absolute amounts of the cuts are much smaller. The House bill does not include clean coal
tax cuts, while the SFC bill retains the clean coal tax provisions that were in S. 1979 (107th
Congress). The Senate bill would provide a ten year tax cut of just over $18.0 billion for
energy conservation, and for production of oil, gas, and coal. With the exception of two
deleted provisions, both relatively minor, and about $3 billion in corporate revenue increases,
S. 597 is similar to the energy tax incentives legislation (S. 1979) that was brought to the
Senate floor in April 2002 and incorporated into the Senate’s version of H.R. 4. (For more
information see CRS Report RL31828, The Energy Tax Incentives Act of 2003 (S. 597):
Summary of Provisions.)
The size of the tax cuts in S. 597, however, is somewhat larger than in S. 1979 (107th
Cong.), with the additional tax cuts allocated to oil and gas production and refining. The
revenue losses in S. 597 would be partially offset through additional curbs on corporate tax
shelters, limits on corporate and individual expatriates, and an extension of Internal Revenue
Service user fees, which would raise about $3.2 billion over 10 years, so that the net energy
tax cut is about $15.5 billion.
Overall, while both the current Senate and House bills increase the fraction of tax cuts
for oil and gas production that would have been provided by previous legislation, H.R. 6
reduces the absolute dollar tax cuts for oil and gas (because the total cuts in H.R. 1531 were
much smaller than last year’s bill, H.R. 2511), while the SFC bill increases the dollar
amounts for oil and gas production (because it is somewhat larger than last year’s bill, S.
1979). (For a broader listing of energy tax-related bills, see CRS Issue Brief IB10054, Energy
Tax Policy.)
Electricity Restructuring. Historically, electric utilities have been regarded as
natural monopolies requiring regulation at the state and federal levels. The Energy Policy Act
of 1992 (EPACT, P.L. 102-486) removed a number of regulatory barriers to electricity
generation in an effort to increase supply and introduce competition, but further legislation
has been introduced and debated to resolve remaining issues affecting transmission,
reliability, and other restructuring concerns.
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There were no electricity provisions in the version of omnibus energy legislation (H.R.
4) passed by the House in the 107th Congress, and the conferees on H.R. 4 were unable to
resolve differences between proposals on electric utility restructuring submitted by staff to
the conference committee. On March 13, 2003, Representative Tauzin, chairman of the
House Energy and Commerce Committee, insisted to Republican colleagues that they
support inclusion of an electricity section in any comprehensive legislation the committee
reported. Tauzin expressed his opinion that the absence of a House position on electricity
in the House version of H.R. 4 in the previous Congress had hobbled the work of the
conferees and contributed to their inability to finish a bill before the 107th Congress
adjourned.
H.R. 6, the omnibus energy legislation passed by the House on April 11, 2003, does
include a section on electricity. Title VI of H.R. 6 would, in part, provide for incentive-based
transmission rates, allow transmission owners in certain instances to exercise the right of
eminent domain to site new transmission lines, allow transmission owners that do not belong
to a regional transmission organization to preferentially serve native load customers, create
an electric reliability organization, and give new, but limited authority to the Federal Energy
Regulatory Commission (FERC) over municipal and cooperative transmission systems. In
addition, H.R. 6 would repeal Public Utility Holding Company Act (PUHCA) and give
FERC and state public utility commissions access to books and records, prospectively repeal
the mandatory purchase requirement of the Public Utility Regulatory Policies Act of 1978
(PURPA), and require utilities to provide real-time rates and time-of-use metering. H.R. 6
would establish market transparency rules, explicitly prohibit round-trip trading, and
significantly increase criminal penalties under the Federal Power Act.
On February 27, 2003, Senator Craig introduced electricity legislation similar to the
Senate-passed provisions in H.R. 4 during the 107th Congress, which had provided for repeal
of PUHCA and PURPA reform. (For additional information, see CRS Issue Brief IB10006,
Electricity: The Road to Restructuring, or see the CRS Electronic Briefing Book: Electric
Utility Restructuring [http://www.congress.gov/brbk/html/ebele1.shtml].)
Nuclear Energy. Reauthorization of the Price-Anderson Act nuclear liability system
is one of the top nuclear items on the energy agenda. Omnibus energy legislation (H.R. 6)
passed by the House on April 11, 2003, would reauthorize the Price-Anderson Act through
August 1, 2017. Legislation being marked up in the Senate Committee on Energy and
Natural Resources would extend the Act indefinitely. Under Price-Anderson, commercial
reactor accident damages are paid through a combination of private-sector insurance and a
nuclear industry self-insurance system. Liability is capped at the maximum coverage
available under the system, currently about $9.6 billion. Price-Anderson also authorizes the
Department of Energy (DOE) to indemnify its nuclear contractors. The nuclear industry
contends that the system has worked well and should be continued, but opponents charge that
Price-Anderson's liability limits provide an unwarranted subsidy to nuclear power. H.R. 6
would also require the Nuclear Regulatory Commission (NRC) to issue new regulations on
nuclear power plant security and to conduct force-on-force security exercises. The proposed
nuclear liability and security provisions are nearly identical to a Price-Anderson extension
bill passed by the House in the 107th Congress (H.R. 2983).
H.R. 6 would authorize appropriations for DOE research on nuclear technology,
including advanced reactors, spent fuel treatment and reprocessing, improved operation of
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existing reactors, and university nuclear science and engineering. DOE's spent fuel treatment
and reprocessing research is particularly controversial. Supporters contend that reprocessing
could provide additional energy and reduce nuclear waste hazards, but opponents counter
that plutonium extracted from spent fuel during reprocessing could be used for weapons.
(For details, see CRS Issue Brief IB88090, Nuclear Energy Policy.)
On April 11, 2003, the Senate Energy and Natural Resources Committee also agreed
to language to provide $30 billion in loan guarantees for the construction of 6 reactors that
would add 8,400 megawatts to the current nuclear capacity generation of 98,000 megawatts.
Some argue that loan guarantees will be insufficient to spur construction of nuclear energy
plants. However, opponents of nuclear energy oppose the loan guarantees just in case they
do prove sufficient. The Senate bill would also authorize $1.3 billion for the construction
of a nuclear-hydrogen cogeneration project at the Idaho National Engineering and
Environmental Laboratory. The purpose would be to explore production of hydrogen fuel
from nuclear energy. Currently, natural gas is the main source for hydrogen fuel.
Fuel Economy. Energy problems can be addressed on both the supply and demand
side; at issue since the Arab oil embargo in the mid-1970s is what balance should be struck
between policies affecting supply and demand. One of the first initiatives designed to have
a significant effect on supply was passage of corporate average fuel economy standards
(CAFE) in the Energy Policy and Conservation Act of 1975 (EPCA, P.L. 94-163). In the
years since, there have been periodic calls for stiffening or broadening the CAFE standards
– especially as consumer demand has turned more to light-duty trucks and sport utility
vehicles (SUVs).
The 107th Congress lifted a prohibition on expenditure of appropriated funds by the
National Highway Traffic Safety Administration (NHTSA) to undertake CAFE rulemakings.
Subsequently, on April 1, 2003, NHTSA issued a final rule to boost the CAFE of light-duty
trucks by 1.5 mpg by 2007. The rule sets the interim standards at 21.0 mpg for model year
(MY)2005, 21.6 mpg for MY2006, and 22.2 for MY2007, and is the first increase in CAFE
since MY1996.
This rulemaking has not quelled interest in CAFE. H.R. 6, the omnibus energy bill
passed in the House on April 11, 2003, would authorize appropriations to NHTSA to conduct
rulemakings, and would require a study on the feasibility and effects of reducing fuel use by
automobiles. During markup in the House Committee on Energy and Commerce, an
amendment by Representative Markey to require reductions of 5% in automotive fuel usage
by 2010 and an additional 5% by 2015 was defeated (14-38). An amendment offered on the
floor of the House to include only the 5% savings by 2010 was defeated (162-268) as well.
Currently, light truck fuel economy standards do not apply to vehicles above 8,500
pounds gross vehicle weight (GVW). Senator Feinstein has introduced legislation (S. 225)
that, among other provisions, would expand the applicability of fuel economy standards to
vehicles up to 10,000 pounds GVW. (For additional information, see CRS Issue Brief
IB90122, Automobile and Light Truck Fuel Economy: The Cafe Standards.)
The President’s Hydrogen Fuel Initiative. In his State of the Union Address on
January 28, 2003, President Bush announced a new $720 million research and development
(R&D) initiative for hydrogen as a transportation fuel. This program, the Hydrogen Fuel
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Initiative, is intended to complement the FreedomCAR initiative, which focuses on
cooperative vehicle research between the federal government, universities, and private
industry. While these two partnerships have different goals, they do share in common the
goal of producing by 2010 hydrogen-fueled engine systems that achieve double to triple the
efficiency of today’s conventional engines at a cost competitive with conventional engines.
The Administration’s FY2004 budget request would increase overall funding for research
into hydrogen fuel, fuel cells, and vehicle technologies by about 30%. Some of this increase
would be offset by funding reductions in other programs, but the majority will be new
funding. H.R. 6 includes language that would authorize the President’s requested level of
funding for the program in FY2004; the President’s request was for an additional $720
million over a period of five years from levels authorized for FY2003. An amendment in the
House Science Committee to boost the funding level even more was defeated.
Critics of the Administration suggest that the hydrogen program is intended to forestall
any attempts to significantly raise vehicle CAFE standards, and that it relieves the
automotive industry of assuming more initiative in pursuing technological innovations. On
the other hand, some will argue that it is appropriate for government to become involved in
the development of technologies that are too costly to draw private sector investment. At
issue for these policymakers will be whether or not the federal initiative and level of funding
is aggressive enough. (For additional information, see CRS Report RS21442, Hydrogen and
Fuel Cell R&D: FreedomCAR and the President’s Hydrogen Fuel Initiative.)
Renewable Energy and Fuels. One of the most controversial provisions of the
energy legislation debated during the 107th Congress was the establishment of a renewable
fuel standard (RFS) intended to increase the use of ethanol. Toward that end, the legislation
also proposed the elimination of methyl tertiary butyl ether (MTBE). The provision was
supported by the oil industry, ethanol producers, and environmental groups. However, critics
argued that it would boost prices to consumers and create shortages.
H.R. 6 includes a renewable fuel standard (RFS) that would require the blending of 2.7
billion gallons of renewable fuel with gasoline in 2005. Most of this would be met with
ethanol, but other renewable fuels, including biodiesel, would qualify. The required volume
would rise to 5 billion barrels annually by 2015. In the Senate, S. 791, expected to be added
to the draft Senate omnibus energy bill, would set an RFS of 2.6 billion gallons in 2005,
rising to 5.0 billion gallons in 2012.
H.R. 6 would also eliminate the current 2% oxygenate mandate for reformulated
gasoline, but would not ban MTBE outright; S. 791 would also restrict the use of MTBE. As
passed, H.R. 6 also includes a controversial “safe harbor” provision that would exempt
producers from liability for damages resulting from the use of renewables or MTBE, such
as contamination of water supply. Comprehensive energy legislation passed by the House
during the 107th Congress had included all renewables in its waiver; the Senate version in the
107th Congress included ethanol but did not include any of the ethers such as MTBE. Those
opposed to an outright ban of MTBE argue that marketers should be allowed to choose to use
ethanol in markets that are closest to storage and blending facilities, and that the key problem
is not MTBE, but leaking underground storage tanks.
S. 385, introduced by Senator Daschle on February 13, 2003, would require the use of
5 billion gallons of renewable fuels annually by 2012; production of ethanol in 2002
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exceeded 2.1 million gallons.1 The legislation would also eliminate the use of MTBE as an
oxygenate, though 17 states have already acted to ban or limit its use.
H.R. 6 includes incentives for power generated by renewable energy sources. The
existing renewable energy production tax credit provides a 1.8 cents/kwh credit for
businesses that generate power from wind, closed-loop biomass (energy crops), and poultry
waste for sale to the grid. P.L. 107-147 extended this credit through Dec. 31, 2003. Both
H.R. 6 and S. 597, the Senate’s energy tax bill reported from the Senate Finance Committee
on April 2, 2003, would extend the credit for three years, through Dec. 31, 2006. The bills
would also expand the eligible sources to include open-loop biomass (forest, agricultural, and
construction wastes). H.R. 6 would further extend the credit to landfill gas and trash
combustion facilities. S. 597 does not include landfill gas and trash facilities, but would
expand credit eligibility to swine and bovine waste, geothermal energy, solar energy, small
irrigation power facilities, municipal biosolids, and recycled sludge. Further, S. 597 sets
conditions under which the credit could be transferable.
Parallel to the production tax credit, there is a renewable energy production “incentive”
(REPI) for state and local governments. This 1.5 cent/kwh incentive was created by Energy
Policy Act of 1992 and is funded through appropriations to the Department of Energy. H.R.
6 and the draft Senate bill have identical provisions that would extend this incentive through
2023 and add landfill gas to the list of eligible resources. (For additional information, please
see CRS Issue Brief IB10041, Renewable Energy: Tax Credit,. Budget and Electricity
Production Issues.)
Energy Efficiency and Conservation. H.R. 6 and the draft Senate bill have
identical provisions that direct DOE to set efficiency standards within three years for
“standby mode” energy use by battery chargers and external power supplies. The two bills
also have identical provisions that call for standards to be developed for suspended ceiling
fans, vending machines, unit heaters, commercial refrigerators, freezers, refrigerator-freezers,
illuminated exit signs, torchieres, distribution transformers, and traffic signal modules. The
draft Senate bill differs by including medium base compact fluorescent lamps (CFLs) and
commercial clothes washers. Many of the above items were approved by the conference
committee on H.R. 4 in the 107th Congress.
H.R. 6 and the draft Senate bill set goals for further energy efficiency in federal
buildings. The baseline years differ slightly: The House bill specifies FY2001 while the
Senate bill specifies FY2000. Otherwise the provisions are nearly identical, with both setting
progressive annual reductions that end with a 20% reduction from baseline by FY2014.
However, the Senate bill also calls for DOE to review results by the end of 2011 and
recommend further goals for building energy savings for the period 2014 through 2022.
Since the late 1970s, there have been some tax incentives to promote fuel switching and
alternative fuels as a way to conserve gasoline and reduce oil import dependence. In
contrast, tax incentives for energy efficiency and for electricity conservation have been rare,
and generally short-lived. H.R. 6 and S. 597 propose some modest new tax incentives for
energy efficiency. Most of the provisions in the tax titles of the two bills are similar. They
1 Inside Fuels and Vehicles, Vol. 2, No. 4, February 13, 2003, p. 9.
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cover fuel cell power plants, new homes, existing homes, and combined heat and power
(CHP). Also, both bills have tax incentives for alternative fuel vehicles and equipment. S.
597 also has provisions to provide a tax credit for manufacturers of certain appliances that
exceed federal standards, and would create a tax deduction for efficient commercial
buildings. (For additional information, see CRS Issue Brief IB10020, Budget, Oil
Conservation and Electricity Conservation Issues.)
LEGISLATION
H.R. 6 (Tauzin)
To enhance energy conservation and research and development, to provide for security
and diversity in the energy supply for the American people, and for other purposes.
Incorporates H.R. 39, H.R. 238, H.R. 1531, and H.R. 1644. Introduced April 7, 2003;
referred to several committees. Passed by the House, April 11, 2003.
H.R. 39 (Young)
Arctic Coastal Plain Domestic Energy Security Act of 2001. Declares that it is the
policy of the United States to permit exploration, development, production, and
transportation of oil and gas resources in a designated area of the Coastal Plain Study Area
of the Arctic National Wildlife Refuge. Introduced January 3, 2003; referred to Committee
on Resources. Reported from the Committee on Resources April 2, 2003.
H.R. 238 (Boehlert)
Energy Research, Development, Demonstration and Commercial Application Act of
2003. Authorizes programs in energy efficiency, distributed energy and electric energy
systems, renewable energy, fossil energy, and nuclear energy. Introduced January 8, 2003;
referred to Committee on Science and Committee on Resources' Subcommittee on Energy
and Mineral Resources.
H.R. 1531 (McCrery)
Energy Tax Policy Act of 2003.To amend the Internal Revenue Code of 1986 to
enhance energy conservation and to provide for reliability and diversity in the energy supply
for the American people, and for other purposes. Introduced April 1, 2003; referred to
Committee on Ways and Means. Ordered to be reported (24-12) April 3, 2003, H.Rept. 108-
67.
H.R. 1644 (Barton)
Energy Policy Act of 2003. To enhance energy conservation and research and
development, to provide for security and diversity in the energy supply for the American
people, and for other purposes. Introduced April 7, 2003. Reported from Committee,
H.Rept. 108-65.
S. 225 (Feinstein)
Amends title 49, United States Code, to require phased increases in the fuel efficiency
standards applicable to light trucks; to require fuel economy standards for automobiles up
to 10,000 pounds gross vehicle weight; to increase the fuel economy of the Federal fleet of
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vehicles, and for other purposes. Introduced January 30, 2003; referred to Committee on
Commerce, Science, and Transportation.
S. 385 (Daschle)
Amends the Clean Air Act to eliminate methyl tertiary butyl ether (MTBE) from the
United States fuel supply, to increase production and use of renewable fuel, and for other
purposes. Introduced February 13, 2003; referred to Committee on Environment and Public
Works.
S. 421 (Cantwell), H.R. 671 (Bono)
Reauthorizes and revises the Renewable Energy Production Incentive program, and for
other purposes. House bill introduced February 11, 2003; referred to Committee on Energy
and Commerce. Senate bill introduced February 14, 2003; referred to Committee on Energy
and Natural Resources.
S. 424 (Bingaman)
Tribal Energy Self-Sufficiency Act. To establish, reauthorize and improve energy
programs relating to Indian tribes. Introduced February 14, 2003; referred to Committee on
Indian Affairs.
S. 597 (Grassley)
Energy Tax Incentives Act of 2003. Provides a number of tax credits and incentives to
increase the production of oil and gas, and institute or extend tax credits to promote biomass,
biodiesel and wind energy. Introduced March 11, 2003; referred to Committee on Finance.
Reported from the Committee on Finance, April 2, 2003.
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