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Energy Reform: A Legislative Washout?

Congress is shifting U.S. energy policies toward green alternatives. Is the new direction temporary or permanent?

Fortnightly Magazine - August 2007

represent a short-term liberal resurgence—filling the vacuum left by a beleaguered Bush administration, and reacting to public anger over high oil prices and the Iraq war. Such resurgence might not translate into lasting policy changes—most notably because any major changes likely will raise energy costs and upset legislators’ most vocal and influential constituencies.

“The hard truth is costs are only going to go up,” says Bert Garvin, of counsel with Foley & Lardner in Madison, Wis., and a former commissioner on the Wisconsin Public Service Commission. “Everyone is concerned about the environment, and wants to make the world a better place. But fulfilling that objective will require the resolve to tackle these issues and make tough choices. In this country, that’s hard to do.”

Seeing Green

In mid-summer, as legislators were preparing to leave town for the July 4th holiday, energy-policy legislation was in a holding pattern.

In June the Senate passed H.R. 6, an amended version of a bill the House passed in January, which primarily advances appliance-efficiency standards and biofuel production. A few measures address utility issues—for example, encouraging smart-grid investments and interconnection standards for plug-in electric vehicles. Meanwhile, lawmakers in the House of Representatives were negotiating another energy bill. The Energy & Commerce Committee approved language supporting grid modernization and electric transportation, along with a grab bag of other initiatives (see sidebar “Summer Snapshot: Utility Related Legislation in Congress”).

These bills illustrate the policy trend emerging in Congress—namely, green-centered legislation is gaining favor at the expense of fossil-fuel-oriented policies.

Those policies, of course, are encountering their share of conflict. The most contentious debates involve money—specifically, how to pay for the green investments and priorities lawmakers are advancing. The putative answer is to make oil companies pay for it. A distinctly pro-green, anti-petroleum tax package fell just short of the 60 votes required to end debate and move forward in the Senate—probably because a few key senators weren’t present to vote on it. It enjoyed some Republican support, however—including the Finance Committee’s ranking Republican, Sen. Chuck Grassley, R-Iowa. And at press time, a similar package—albeit half as big—was awaiting action on the House floor.

Hill watchers expect some form of the House tax package will survive a floor vote. But to become law, a resulting House-Senate conference bill will need to win either Bush administration support or a veto-proof 67-vote majority in the Senate. That likely will require substantial compromise. Nevertheless, the relative success of the oil-money-for-renewables concept illustrates the dramatic difference between energy-policy legislation in 2007 versus 2005. In addition to the tax policy, the legislation is notable for the absence of any incentives for oil and gas development—or significant support for coal.

“Regardless of the tax controversy, the shape of the bill is apparent,” says Joe Colaneri, public affairs director with Foley & Lardner. “The winds have shifted toward renewable energy and conservation.”

Part of the legislative trend arises from high gasoline prices and record profits in the oil industry. “Looking at the annual reports of oil companies, it isn’t clear they need a lot of incentives to