Order Code IB10116
CRS Issue Brief for Congress
Received through the CRS Web
Energy Policy: The Continuing Debate
Updated June 6, 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 were high during the
ing. This legislation will be debated as an
winter of 2002-2003, owing to anticipation of
amendment to S. 14.
the war with Iraq and problems since resolved
in Venezuela, a major oil supplier to the
On April 11, 2003, the House passed its
United States. Republicans and Democrats
energy bill, H.R. 6 (247-175). The bill in-
alike indicated that a renewal of debate on
cludes several provisions that were part of
several energy issues was likely.
comprehensive, but not enacted, energy legis-
lation (H.R. 4) debated during the 107th Con-
On April 30, 2003, the Senate Committee
gress. These provisions touch upon energy
on Energy and Natural Resources completed
efficiency and conservation, clean coal tech-
comprehensive energy legislation (S. 14) that
nology, and reauthorization of the Price-An-
the Senate began debating the week of May 5,
derson Act nuclear liability system. The bill
2003. Previously, on April 11, 2003, Chair-
passed by the House would also provide
man Domenici pulled a controversial section
roughly $18 billion in energy tax incentives.
on climate change from the bill and indicated
it would be addressed later. The Senate bill
H.R. 6 also addresses controversial issues
also does not include language to allow drill-
left unresolved by the 107th Congress. The
ing in the Arctic National Wildlife Refuge
new bill includes an electricity title that
(ANWR). At present, there are no expressed
would, in part, repeal the Public Utility Hold-
plans to introduce an ANWR amendment on
ing Company Act, would prospectively repeal
the Senate floor during the debate. During the
the mandatory purchase requirement under the
week of June 2, 2003, the Senate debated
Public Utility Regulatory Policies Act, and
ethanol provisions. On June 5, 2003, the
would create an electric reliability organiza-
Senate agreed (67-29) to an amendment to
tion.
establish a renewable fuels standard that
would require refiners to blend at least 5
The House bill would authorize construc-
billion gallons annually of ethanol by 2012, a
tion of a natural gas pipeline from the Alaskan
doubling of current U.S. ethanol production.
North Slope to the lower 48 states, but would
A number of second degree amendments were
allow the Federal Energy Regulatory Commis-
defeated by significant margins. The House
sion (FERC) — which must issue a certificate
energy bill, H.R. 6, would establish a renew-
of convenience and necessity for construction
able fuels standard of 2.7 billion gallons by
of the pipeline — to do so only for a southern
2005 and 5 billion gallons by 2015.
route through Alaska, a route to which confer-
ees on H.R. 4 had informally agreed. The bill
On April 2, 2003, the Senate Committee
would also authorize $1.5 billion for expan-
on Finance reported S. 597, later superseded
sion of the Strategic Petroleum Reserve (SPR)
by S. 1149. The bill includes roughly $18
to 1 billion barrels and require a study of
billion in incentives over a 10-year period, of
passenger car fuel economy.
which $5 billion is targeted to the oil and gas
industry, $2.6 billion to producers of renew-
H.R. 6 would also authorize exploration,
able energy sources, $2.4 billion for alterna-
development, and production of oil in the
tive fuels and fuel cell vehicles, and $4 billion
ANWR, limiting the surface area of “produc-
for utilities to implement electricity restructur-
tion and support facilities” to 2,000 acres.
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
On April 30, 2003, the Senate Committee on Energy and Natural Resources completed
markup of and ordered reported comprehensive energy legislation (S. 14).1 On April 11,
2003, Chairman Domenici pulled a controversial section on climate change from the bill and
indicated it would be addressed later. The Senate bill also does not include language to allow
drilling in the Arctic National Wildlife Refuge (ANWR). Legislation reported from the
Senate Committee on Finance (S. 1149) on April 2, 2003 — which would provide more than
$18 billion in tax incentives — will be debated as an amendment to S. 14.
General debate began on the Senate floor during the week of May 5, 2003; however, the
debate was intermittent and no votes were taken prior to the Memorial Day recess. Debate
resumed on June 2, 2003, with attention first to ethanol provisions of the legislation. On
June 5, 2003, the Senate agreed (67-29) to an amendment to establish a renewable fuels
standard that would require refiners to blend at least 5 billion gallons annually of ethanol by
2012, a doubling of current U.S. ethanol production. A number of second degree
amendments were defeated by significant margins. The House energy bill, H.R. 6, would
establish a renewable fuels standard of 2.7 billion gallons by 2005 and 5 billion gallons by
2015. The Senate will next turn to an amendment to drop the provision that would authorize
federal loan assistance for nuclear power plant construction.
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. In contrast to
the legislation going to the Senate floor, H.R. 6 would provide authorization for exploration
and development of the Arctic National Wildlife Refuge (ANWR).
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.
1 For technical reasons, the Senate report is issued as accompanying S. 1005. However, the floor
debate and any other references by the Senate itself to omnibus energy legislation in the Senate will
be to S. 14.
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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 end
of military options in Iraq with minimum damage to Iraqi oil fields, prices fell back to the
mid-$20 range and OPEC – in anticipation of the resumption of oil exports from Iraq –
tightened quotas to forestall a glut in oil supply later in 2003. U.S. crude and product stocks
have stabilized, but are not significantly being rebuilt. Refiners have shifted over to the
production of gasoline to meet summer demand; however, an unexpected decline of more
than 3 million barrels in gasoline stocks for the week ended May 23, 2003, startled markets.
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 a number of
months for crude supply, crude and product inventories, and demand to be restored to some
balance.
Prices have softened at the pump from highs observed earlier in 2003, and with the
abatement of monthly heating costs as well, there has been 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 House committees 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.
The House bill includes several provisions that were part of comprehensive, but not
enacted, energy legislation (H.R. 4) debated during the 107th Congress. These provisions
touch upon energy efficiency and conservation, and clean coal technology. A separate bill
in the 107th Congress would have reauthorized the Price-Anderson Act nuclear liability
system; language to do so has been incorporated into H.R. 6. The bill passed by the House
would also provide roughly $15.5 billion in net energy tax incentives.
H.R. 6 also addresses a number of controversial issues left unresolved by the 107th
Congress. It includes an electricity title that would, in part, repeal the Public Utility Holding
Company Act, would prospectively repeal the mandatory purchase requirement under the
Public Utility Regulatory Policies Act, and would create an electric reliability organization.
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H.R. 6 would also establish a renewable fuels standard of 2.7 billion gallons by 2005 and 5
billion gallons by 2015.
On April 30, 2003, the Senate Energy and Natural Resources Committee ordered
reported its own comprehensive energy legislation (13-10) (S. 14). It includes a narrowly
approved electricity section that would, among other provisions, “remand for
reconsideration” a controversial proposal from the Federal Energy Regulatory Commission
(FERC) called standard market design (SMD), which would provide for the standardization
of access and management of electricity transmission lines. The committee rejected a
proposed amendment to require light trucks and sport utility vehicles (SUVs) to meet the
same corporate average fuel economy standards (CAFE) as passenger automobiles. The
Senate bill would also provide federal support for the construction of nuclear power plants
and provide loan guarantees for construction of an Alaskan natural gas pipeline. Unlike the
House bill, the Senate legislation does not include for a renewable fuels standard and does
not include language to open up the Arctic National Wildlife Refuge to leasing. Reported
from the Senate Committee on Finance, S. 597, later designated as S. 1149, would provide
$15.5 billion in net energy tax incentives. The Senate will debate the language of S. 1149
as an amendment to S. 14.
General debate began on the Senate floor during the week of May 5, 2003; however, the
debate was intermittent and no votes were taken prior to the Memorial Day recess. Debate
resumed on June 2, 2003. During the week of June 2, the Senate added a renewable fuels
standard to S. 14 that would require refiners to blend at least 5 billion gallons annually of
ethanol by 2012, a doubling of current U.S. ethanol production. Votes on June 3, 2003,
decisively defeated amendments that would have allowed states to opt in to any renewable
fuels program (34-62) and permitted the EPA Administrator to waive the ethanol mandate
for states that already meet Clean Air Act standards (34-61). An amendment to exempt
states on the East and West Coast and the Rocky Mountains from the ethanol mandate was
defeated (69-26) on June 5, 2003. Also defeated was an amendment to drop language
referred to as the “safe harbor provision” that extends a product liability waiver to ethanol
producers (57-38).
On June 5, 2003, the Senate also agreed by unanimous consent to an amendment to
increase the funding authorization for the Low Income Home Energy Assistance Program
(LIHEAP) to $3.4 billion annually through FY2006.
The resolution of the ethanol mandate during the week of June 2, 2003, may enhance
the likelihood that the Senate will complete an energy bill despite the limited amount of time
cleared for additional debate on S. 14. Negotiations have been ongoing to reconcile
differences on other controversial issues prior to these provisions reaching the Senate floor.
When debate resumes on June 9, the Senate will be considering an amendment to drop
language in S. 14 that would authorize federal assistance for the construction of nuclear
power plants.
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
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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.
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. The comprehensive energy legislation going to the Senate floor does
not include language on ANWR. At present, there are no expressed plans to introduce an
ANWR amendment on the Senate floor during the debate. (For additional information, see
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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. S. 14 includes a controversial provision that would
allow Indian tribes to enter into agreements with energy developers without obtaining prior
approval from the Department of the Interior. Critics of the proposal argue that this could
enable tribes to initiate projects without going through the environmental review required by
the National Environmental Policy Act (NEPA).
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
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, reported from the Senate Finance
Committee (SFC) on April 2, 2003 by a vote of 18-2 – and later designated as S. 1149.
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. 1149 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. 1149, however, is somewhat larger than in S. 1979 (107th
Cong.), with the additional tax cuts allocated to oil and gas production and refining. The
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revenue losses in S. 1149 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.
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.
The energy bill on the Senate floor includes a narrowly approved electricity title. The
proposal would “remand for reconsideration” a controversial proposal from the Federal
Energy Regulatory Commission (FERC) called standard market design (SMD), which would
provide for the standardization of access and management of electricity transmission lines.
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The Senate bill would prohibit FERC from issuing a new proposal before July 1, 2005. It
would repeal PUHCA and express the sense of Congress that participation in regional
transmission organizations (RTOs) should be voluntary for utilities. FERC would be
granted limited authority over utilities that have been generally exempt from FERC
oversight; these include rural co-ops and municipalities. The intention is to ensure that
competing power suppliers could have access to their transmission lines at comparable rates
and service levels. A number of amendments are expected. (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. The energy bill approved by the Senate Committee on Energy and Natural
Resources, S. 14, 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
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.)
S. 14 would authorize federal loan guarantees and power purchase agreements to aid
construction of six or seven reactors that would add up to 8,400 megawatts to the current
nuclear generation capacity of 98,000 megawatts. When the Senate resumes debate on S. 14
the week of June 9, 2003, an amendment will be on the floor to strike the federal nuclear
assistance from the bill. (For more details, see CRS Report RS21536, Potential Cost of
Nuclear Power Plant Construction Assistance in S. 14.)
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
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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. In the Senate Energy and Natural Resources
Committee, an amendment to require light trucks and sport utility vehicles (SUVs) to achieve
a CAFE of 27.5 mpg by MY2011 was defeated (15-7). Though Senator Domenici is
reported to be trying to discourage the effort, Senator Feinstein has indicated that she will
propose the same amendment on the Senate floor during debate on S. 14. (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
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. As reported,
S. 14 proposes $3.0 billion for hydrogen and fuel cell research. Senator Dorgan intends to
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introduce an amendment on the Senate floor to boost hydrogen research to $6.5 billion over
10 years.
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.
As placed on the Senate calendar, S. 14 did not include an RFS. However, on June 5,
2003, the Senate agreed (67-29) to an amendment to establish a renewable fuels standard that
would require refiners to blend at least 5 billion gallons annually of ethanol by 2012, a
doubling of current U.S. ethanol production. A number of second-degree amendments were
defeated by significant margins. Votes on June 3, 2003, decisively defeated second-degree
amendments that would have allowed states to opt in to any renewable fuels program (34-62)
and permitted the EPA Administrator to waive the ethanol mandate for states that already
meet Clean Air Act standards (34-61). An amendment to exempt states on the East and West
Coast and the Rocky Mountains from the ethanol mandate was defeated (69-26) on June 5,
2003. Also defeated was an amendment to drop language referred to as the “safe harbor
provision” that extends a product liability waiver to ethanol producers (57-38). The Senate
accepted an amendment to broaden the ethanol program to include agricultural residues and
waste products as feedstocks for ethanol production.
S. 14 would also ban MTBE in 4 years. H.R. 6 would eliminate the current 2%
oxygenate mandate for reformulated gasoline, but would not ban MTBE outright. As passed,
and like S. 14, H.R. 6 includes the 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. The House version of H.R. 4 passed by the House in 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 inadequate underground storage tanks that leak.
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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. 1149, 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. 1149 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. 1149
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. 1149 propose some modest new tax incentives for
energy efficiency. Most of the provisions in the tax titles of the two bills are similar. They
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.
1149 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.)
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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. 14 (Domenici)
A bill to enhance the energy security of the United States, and for other purposes.
Introduced April 30, 2003; reported May 6, S.Rept. 108-43. For technical reasons, the Senate
report reads to accompany S. 1005; however, the debate will refer only to S. 14.
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
vehicles, and for other purposes. Introduced January 30, 2003; referred to Committee on
Commerce, Science, and Transportation.
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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. 1149 (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. Reported from the Committee on Finance April 2, 2003 (S.Rept.
108-54). When first considered by the committee, the bill was S. 597.
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