Order Code IB10116
CRS Issue Brief for Congress
Received through the CRS Web
Energy Policy: The Continuing Debate
Updated August 8, 2003
Robert L. Bamberger
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

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
An Overview of the Senate Debate on S. 14
LEGISLATION


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Energy Policy: The Continuing Debate
SUMMARY
On July 31, 2003, the Senate, facing
Holding Company Act, would prospectively
obstacles to passage of its comprehensive
repeal the mandatory purchase requirement
energy bill (S. 14), substituted the energy
under the Public Utility Regulatory Policies
legislation the Senate had passed and sent to
Act, and would create an electric reliability
conference in the 107th Congress. Principals
organization. Both the House and Senate bills
are sorting out the implications of this unan-
would authorize construction of a natural gas
ticipated development; there are identical or
pipeline from the Alaskan North Slope to the
similar provisions in both S. 14 and the substi-
lower 48 states, but would allow the Federal
tute measure that the Senate passed as H.R. 6,
Energy Regulatory Commission (FERC),
but there are also significant differences.
which must issue a certificate of convenience
and necessity for construction of the pipeline,
Amendments passed on the floor to S. 14
to do so only for a southern route through
do not figure into the legislation passed by the
Alaska, a route to which conferees on H.R. 4
Senate, including the electricity amendment
had informally agreed. The Senate version of
— crafted over a number of months — which
H.R. 6 would also authorize up to $10 billion
was on the floor when the Senate made its
in loan guarantees for construction of the
startling decision. However, the Republican
pipelines. The House bill would also authorize
managers of the energy legislation noted that
exploration, development, and production of
the bill will be rewritten in conference.
oil in the Arctic National Wildlife Refuge
Among the issues waiting to be addressed in
(ANWR). The Senate version of H.R. 6 does
the Senate at the time of passage of H.R. 6
not include language to allow drilling in
were climate change, clean air, Indian energy
ANWR.
development, and hydroelectric relicensing,
among other issues. There are climate change
Both the House and Senate versions of
provisions in the version of H.R. 6 adopted by
H.R. 6 include provisions for the National
the Senate.
Highway Traffic Safety Administration
(NHTSA) to initiate a rulemaking on corpo-
On April 11, 2003, the House passed its
rate average fuel economy (CAFE). The
version of H.R. 6 (247-175). The bill includes
Senate bill would require electric utilities to
several provisions that were part of compre-
provide a minimum percentage of power from
hensive, but not enacted, energy legislation
renewable sources; the House bill has no such
(H.R. 4) debated during the 107th Congress.
provision. The House bill has no climate
These provisions touch upon energy efficiency
change provisions. Both bills would require
and conservation, clean coal technology, and
greater use of ethanol in motor vehicle fuel.
reauthorization of the Price-Anderson Act
nuclear liability system. The bill passed by
(For a summary of the House bill, see
the House would also provide roughly $18
CRS Report RL32009, Omnibus Energy
billion in energy tax incentives.
Legislation: Summary of H.R. 6 Non-tax
Provisions
.)
Unlike H.R. 4 in the 107th Congress, the
House version of H.R. 6 includes an electricity
title that would partly repeal the Public Utility
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
On July 31, 2003, the Senate, facing obstacles to passage of its comprehensive energy
bill (S. 14), substituted the energy legislation the Senate had passed and sent to conference
in the 107th Congress. Principals are sorting out the implications of this unanticipated
development; there are identical or similar provisions in both S. 14 and the substitute
measure that the Senate passed as H.R. 6, but there are also significant differences. Both the
House and Senate energy bills would provide for an extension of the Price-Anderson nuclear
liability program, and the bills either encourage or require the National Highway Traffic
Safety Administration (NHTSA) to initiate a rulemaking to establish new corporate average
fuel economy (CAFE) standards. Both versions of H.R. 6 would authorize construction of
an Alaskan natural gas pipeline. However, the Senate bill would require electric utilities to
provide a minimum percentage of power from renewable sources; the House bill has no such
provision. The Senate bill authorizes R&D on global climate change; the House bill has no
climate change provisions.

On April 11, 2003, the House passed comprehensive energy legislation, H.R. 6 (247-
175). 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
Senate version of the bill, H.R. 6 would provide authorization for exploration and
development of the Arctic National Wildlife Refuge (ANWR). (For a summary of the House
bill, see CRS Report RL32009, Omnibus Energy Legislation: Summary of H.R. 6 Non-tax
Provisions
.)
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 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.
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For the week ended June 6, 2003, gasoline and distillate inventories grew, but a decline in
crude imports and crude stocks pushed oil price futures over $32/bbl. Crude contract prices
were ranging between $26/bbl and $27/bbl as of early August.
Refiners will need to further replenish crude and product inventories while satisfying
current demand, and it is not clear how long this may require. As of the beginning of August,
crude oil stocks are 27% below year-ago levels. Depending upon gasoline demand during
the last weeks of the summer (traditionally a time of strong demand for gasoline) and
temperatures during the winter of 2003-2004, it could take several more months for crude
supply, crude and product inventories, and demand to be restored to some balance. Build of
distillate stocks has been above average, but stocks overall remain low — 16% lower than
a year ago, as of early August.
Gasoline and diesel prices ranged roughly 14 cents higher than year-earlier levels as of
the beginning of August. However, after the end of the winter heating season, calls from
constituents for short-term relief diminished. The sorts of policies being debated in the 108th
Congress 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.
H.R. 6 would also establish a renewable fuels standard of 2.7 billion gallons by 2005 and 5
billion gallons by 2015.
The House version of H.R. 6 will go to conference with the Senate version, passed on
July 31 (84-14). The Senate debate had begun in May, and the Senate was working to pass
a bill prior to the August recess. However, when the debate on S. 14 became mired and
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passage appeared unlikely, Senate Minority Leader Daschle suggested that the body pass the
comprehensive energy legislation that the Senate had sent to conference in the 107th
Congress. After several hours of discussion off the floor, both parties agreed to this
proposal, and the text of the Senate version of last year’s H.R. 4 was inserted into H.R. 6.
(A summary of the debate on the unpassed S. 14 appears at the end of this issue brief.)
The implications of this unanticipated development are being sorted out. There are
identical or similar provisions in both S. 14 and the substitute measure that the Senate passed
as H.R. 6, but there are also significant differences. Both the House and Senate energy bills
would provide for an extension of the Price-Anderson nuclear liability program, and the bills
either encourage or require the National Highway Traffic Safety Administration (NHTSA)
to initiate a rulemaking to establish new corporate average fuel economy (CAFE) standards.
Both versions of H.R. 6 would authorize construction of an Alaskan natural gas pipeline.
However, the Senate bill would require electric utilities to provide a minimum percentage
of power from renewable sources; the House bill has no such provision. The Senate bill
authorizes R&D on global climate change; the House bill has no climate change provisions.
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.
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
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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).

The FY2003 omnibus appropriations bill, P.L. 108-7, did not include any language on
ANWR, nor did S. 14, or last year’s H.R. 4, passed once again by the Senate. There were
no plans to introduce an ANWR amendment on the Senate floor during the debate.
However, given that the House bill does include provisions for ANWR, it is likely that this
issue will arise in the conference. (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. H.R. 6, as passed by the House, 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, but only if
DOI has already approved the tribe’s regulations governing such energy agreements. The
provision also absolves the United States from any liabilities for tribal losses stemming from
such an agreement. The Senate has similar language, as did S. 14.
Critics of the proposal argued that this could enable tribes to initiate projects without
going through the environmental review required by the National Environmental Policy Act
(NEPA). The Senate defeated an amendment to strengthen an environmental review process
for development of energy projects on Indian lands (52-47). The Senate version of H.R. 6
would establish a broader program than the House version, including the establishment of
an Office of Indian Energy Policy and Programs. Among other provisions, the Senate bill
would require the Secretary of Energy to report on “barriers to the development of renewable
energy” resources on tribal lands.
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 Senate bill authorizes the same
pipeline, but also includes loan guarantees of up to $10 billion for construction.
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General concern that natural gas supply will remain tight, and that prices will remain
high, spurred the Senate to adopt an amendment in S. 14 that would require the Secretary of
Energy to conduct a study on natural gas supply and demand.
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 and was 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.
However, the version of H.R. 6 passed by the Senate on July 31, 2003, includes the tax
provisions enacted in the Senate’s comprehensive bill, H.R. 4, passed in 2002. The
committee version of S. 1149 was similar to the energy tax incentives included in the
Senate’s version of H.R. 4.
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 Senate legislation does. As the Senate never addressed energy tax issues
during the debate on S. 14, it is one of the issues that will be taken up in conference. (For
more information see CRS Report RL31828, The Energy Tax Incentives Act of 2003 (S.
597): Summary of Provisions
.)
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
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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.
Electricity is among the issues that Senate committee staff addressed during the July 4
recess and thereafter. On July 23, 2003, Senator Domenici announced that “bipartisan”
agreement had been reached on a comprehensive electricity amendment that he would offer
as an amendment to S. 14. This amendment was on the Senate floor when agreement was
reached to send last year’s energy bill to conference with H.R. 6. Its electricity section would
give FERC additional review authority over certain electric utility mergers; require FERC
to apply cost-of-service rates when market-based rates are unjust, unreasonable, unduly
discriminatory or preferential; require an electric reliability organization to develop and
enforce mandatory reliability standards; provide access to the transmission system for certain
intermittent generators; and give states the authority to prescribe and enforce laws regarding
the application of the Consumer Protection Subtitle. (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.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 $10.9 billion. Price-Anderson also authorizes the
Department of Energy (DOE) to indemnify its nuclear contractors. The House version of
H.R. 6 would reauthorize the Price-Anderson Act through August 1, 2017. The Senate
version of H.R. 6 would extend it until 2012 for new reactors and indefinitely for DOE
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. The House version of 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).
The House version of 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.)
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The energy bill first debated by the Senate, S. 14, would have authorized 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. On June 10, 2003, an amendment to strike the federal nuclear assistance from
the bill narrowly failed (48-50). The version of H.R. 6 ultimately passed by the Senate
makes no provision for construction of nuclear power plants. (For more details, see CRS
Report RS21536, Potential Cost of Nuclear Power Plant Construction Assistance in S. 14.)
Another provision that was included in S. 14, but is not part of the Senate-passed
version of H. 6, is an authorization of $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. There is no provision for this in the House
version of H.R. 6.
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. 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).
CAFE amendments were among the first order of business as the Senate resumed debate
on July 24, 2003. The Senate’s decision to approve the previous year’s energy bill partly
reinforces what happened during debate on S. 14. An amendment to S. 14 proposed by
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Senator Durbin that would have raised CAFE to 40 mpg by 2014 for passenger vehicles and
redefined sport utility vehicles to remove them from the light-truck category was defeated.
An amendment introduced by Senators Durbin and Levin, identical to one passed by the
Senate (62-38) last year in H.R. 4, essentially authorizing NHTSA to determine by rule
appropriate standards, as provided in current law, was approved.
However, the Senate version of H.R. 6 retains an amendment that was approved on the
Senate floor in 2002. The Senate language — originally passed before the latest NHTSA
rulemaking — would require NHTSA to issue new CAFE standards, except for “pickup
trucks.” This provision would roll back the standard for pickup trucks to 20.7 miles per
gallon, the level in effect when the Senate first approved this language in 2002. The CAFE
freeze on pickup trucks, which are undefined, could shift at least some of the burden for
achieving fuel savings to the passenger automobile portion of the fleet.
Some had hailed as an alternative to tightening CAFE an amendment to S. 14 proposed
by Senator Landrieu that was agreed to (99-1) by the Senate on June 9. The provision would
have required the Administration to develop a plan to reduce U.S. oil consumption by 1
million barrels by 2013 from projected consumption levels. The amendment did not create
any new authorities. Rather, it would have given the Administration the latitude to use
currently existing authorities, including CAFE. Opponents of an increase in CAFE
especially embraced the amendment because it required a significant reduction in petroleum
consumption without necessarily using CAFE as one of the levers. However, with both the
House and Senate encouraging, or requiring, a rulemaking on CAFE from NHTSA, it
appears likely that CAFE will be retained in any final bill reported from conference. (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 as passed by the House 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. However, the House Appropriations Committee elected to reduce
hydrogen funding in the Energy and Water Appropriations bill (H.R. 2754) to $20 million
below the President’s request. The Senate Appropriations Committee agreed to fully fund
the President’s hydrogen request for FY2004.
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The Senate version of H.R. 6 would require the production of 100,000 hydrogen-fueled
cars by 2010 and 2.5 million vehicles by 2020 and annually thereafter. However, the Senate
version does not authorize the President’s requested funding increase for hydrogen.
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 as passed by the House 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 gallons annually by 2015.

The House version of H.R. 6 would eliminate the current 2% oxygenate mandate for
reformulated gasoline, but would not ban MTBE outright. As passed by the House, and like
the Senate-passed version, H.R. 6 includes the controversial “safe harbor” provision that
would exempt producers from liability for damages resulting from the use of renewables,
such as contamination of water supply. The House version of H.R. 6 would also extend this
protection to 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 underground storage tanks that leak.
(For additional information, please see CRS Issue Brief IB10041, Renewable Energy: Tax
Credit, Budget and Electricity Production Issues
.)
Energy Efficiency and Conservation. Both the House- and Senate-passed
versions of H.R. 6 direct DOE to issue a rule that “determines whether” an energy efficiency
standard needs to be set for “standby mode” energy use by battery chargers and external
power supplies. Further, DOE is directed to create voluntary programs to reduce standby
mode energy use. The House and Senate versions also legislate standards for illuminated
exit signs, torchieres, distribution transformers, and traffic signal modules, and direct DOE
to set standards by rulemaking for suspended ceiling fans, vending machines, commercial
refrigerators and freezers, and unit heaters. In these respects, the provisions in S. 14 as it
reached the Senate floor, and H.R. 6 as passed by the Senate, were similar. As one point of
difference, S. 14 would have also legislated a standard for medium base compact fluorescent
lamps (CFLs). This provision is not in the Senate version of H.R. 6. However, in another
point of difference, the Senate-passed version of H.R. 6 would direct DOE to “amend” the
energy efficiency standard for central air conditioners and heat pumps.
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The House and Senate versions of H.R. 6 would set goals for further energy efficiency
in federal buildings. Although the baseline years and associated coverage periods have
different dates, the provisions in the House and Senate versions of H.R. 6 are nearly
identical, setting progressive annual 2% reductions over a 10-year period that end with a 20%
reduction from baseline. Both bills would also call for DOE to review results by the end of
the 10-year period and recommend further goals for building energy savings for an additional
decade. S. 14 had closely similar provisions.
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. The House- and Senate-passed versions of H.R. 6 propose some
modest new tax incentives for energy efficiency. Most of the provisions are similar in nature,
but there are some differences in standards, percentage caps, and dollar caps. They cover
new homes, existing homes, and combined heat and power (CHP). Also, both bills have tax
incentives for alternative fuel vehicles and equipment. As one point of difference, the
House-passed version of H.R. 6 has a provision for fuel cell power plants that is not in the
Senate-passed version. As another point of difference, the Senate version of H.R. 6 would
provide a tax credit for manufacturers of certain appliances that exceed federal standards, and
would create a tax deduction for efficient commercial buildings. These two provisions do
not appear in the House-passed version. (For additional information, see CRS Issue Brief
IB10020, Budget, Oil Conservation and Electricity Conservation Issues.)
An Overview of the Senate Debate on S. 14. On April 30, 2003, the Senate
Energy and Natural Resources Committee ordered reported its own comprehensive energy
legislation (13-10) (S. 14). It included a narrowly approved electricity section that would,
among other provisions, “remand for reconsideration” a controversial proposal from 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 CAFE
standards as passenger automobiles. The Senate bill would also have provided federal
support for the construction of nuclear power plants and provided loan guarantees for
construction of an Alaskan natural gas pipeline. Unlike the House bill, the Senate legislation
did not include a renewable fuels standard and did not include language to open up the Arctic
National Wildlife Refuge to leasing.
General debate began on the Senate floor during the week of May 5, 2003, and the bill
remained on the floor until June 12. Before debate was suspended in June, a unanimous
consent agreement was reached to limit the number of amendments. During the interim
period, negotiators tried to pare the nearly 400 proposed amendments to a manageable level.
Senate staffers suggested that roughly three-fourths of these amendments were “second tier”
and that about 70-100 amendments awaited disposition.
During the week of June 2, 2003, 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
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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.
When debate resumed on June 9, the Senate agreed to an amendment proposed by
Senator Landrieu that would require the Administration to develop a plan to reduce U.S. oil
consumption by 1 million barrels daily by 2013 from projected consumption levels. The
amendment would not have created any new authorities, but gave the Administration the
latitude to use any authorities, or combination of authorities, currently at its disposal to
achieve the reduction.
On June 10, the Senate narrowly (48-50) defeated an amendment to drop language in
S. 14 to authorize federal assistance for the construction of nuclear power plants. An
amendment by Senator Dorgan that would require the production of 100,000 hydrogen-
fueled cars by 2010 and 2.5 million vehicles by 2020 and annually thereafter was passed on
June 10 (67-32). On June 11, the Senate voted to require a report from the Secretary of
Energy on supply and demand for natural gas. A motion to table an amendment by Senator
Feinstein to institute new controls in energy trading and markets passed (55-44). An
amendment to establish an environmental review process for development of energy projects
on Indian lands was defeated (52-47).
The Senate bill would also have required an inventory and analysis of oil and natural
gas resources that may lie underneath the Outer Continental Shelf (OCS). Opponents of the
survey argue that it is a veiled attempt to begin a process of ending the moratorium on
development of the Florida and California OCS. An amendment proposed by Senator
Graham to drop the language requiring the inventory was defeated (44-54).
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.
Debate resumed on S. 14 on July 24, 2003. Amendments pertaining to corporate
average fuel economy (CAFE) were among the first order of business. The Senate agreed
to an amendment that would have required the National Highway Traffic Safety
Administration (NHTSA) to complete a CAFE rulemarking for both cars and light trucks by
2006. The next major piece of business was electricity. On July 23, 2003, Senator Domenici
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had announced that “bipartisan” agreement had been reached on a comprehensive electricity
amendment that he offered as an amendment to S. 14. Several amendments to the electricity
substitute were defeated just before the Senate debate stalled. It was at this point that Senator
Daschle proposed that the Senate go back to, and pass, the energy bill (H.R. 4) agreed to
during 2002. Both parties conferred off the floor, and during the evening of July 31, the
Senate agreed (86-14) to substitute last year’s H.R. 4 in the text of H.R. 6. The bill will go
to conference.
A bill reported from the Senate Committee on Finance, S. 597, later designated as S.
1149, would have provided $15.5 billion in net energy tax incentives. However, the version
of H.R. 6 passed by the Senate on July 31 includes the tax provisions included in H.R. 4 from
2002.
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. Senate version passed
July 31, 2003 (84-14).
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.
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S. 14 (Domenici)
A bill to enhance the energy security of the United States, and for other purposes.
Introduced April 30, 2003; Chairman’s Mark reported May 6, S.Rept. 108-43. For technical
reasons, the Senate report read to accompany S. 1005; however, the debate referred only to
S. 14. On July 31, 2003, the Senate suspended debate on S. 14, and substituted in H.R. 6 the
text of the energy bill the Senate had passed in 2002 (H.R. 4).
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.
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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