The recently passed Federal Policy Act is a give away to industries that do not need subsidies. It will not reduce our dependence on foreign oil. It does put ratepayers at extreme risk by having repealed the country’s foremost consumer protection law with respect to utility companies, the Public Utility Holding Company Act.
The following was written by National Environmental Trust. For more information about federal energy policy and NET go to www.net.org.
President Signs Energy Bill
On August 8th, President Bush signed his energy bill, a piece of legislation that will do nothing to reduce our dependence on foreign oil or help consumers at the pump. Worse, it's loaded with tax breaks and subsidies to the energy industry — companies like ExxonMobil, which made a handsome profit of $7.84 billion this quarter alone.
Overall, the bill contains more than $85 billion in tax breaks and spending. Some of the highlights are:
(For more, see this report www.taxpayer.net by Taxpayers for Common Sense.)
The bill also contains several provisions to significantly weaken existing environmental laws. These rollbacks would have a negative effect on everything from the Outer Continental Shelf Moratorium to the Clean Water Act. Listed below are five of the worst of those provisions with a short description and the title number for each.
Worst Anti-Environmental Provisions in the Energy Bill
The following was written by Public Citizen. For more information about energy policy and Public Citizen go to www.citizen.org.
On August 8, 2005, President Bush signed into the law the (BILL0705) energy bill; on July 28,the U.S. House of Representatives (clerk.house.gov) voted 275 to 156 to approve the energy bill; and on July 29, the U.S. Senate (www.senate.gov) voted 74 to 26 to approve the energy bill.
Since 2001, energy corporations have showered federal politicians with $115 million in campaign contributions—with three-quarters of that amount going to Republicans. This cash helped secure energy companies and their lobbyists exclusive, private access to lawmakers, starting with Vice-President Dick Cheney’s Energy Task Force, whose report provided the foundation of the energy bill passed by Congress and signed by President Bush on August 8.
This energy bill will do nothing to address America’s energy problems; rather, it will make matters worse. The United States is one of the largest producers of energy—for example, we are the third-largest producer of crude oil in the world—so our problem is not that we don’t produce enough energy, but that our rates of consumption are among the highest of all countries. Our economic competitors in Europe and Asia typically use half the energy per person than we do, which helps explain why the United States alone uses 25% of the world’s energy every day. Reflecting the fact that energy companies helped write the legislation, the energy bill lavishes these lucrative corporations with billions of dollars of taxpayer subsidies, while doing little to curb energy demand.
In addition to providing billions of dollars to already wealthy oil, nuclear and coal companies, the energy bill abandons consumers by repealing the Public Utility Holding Company Act (PUHCA), one of the most effective consumer and protection laws governing the power sector. With this law now gone, investment banks, hedge funds, insurance companies and oil companies will now be allowed to own utilities, giving these new corporate owners license to raid the utilities’ guaranteed revenue streams for use in leveraging non-utility acquisitions, opening the door to price-gouging of ratepayers. Below is a summary of the major components of the energy legislation:
OIL & GAS SUBSIDIES: $6 BILLION
Allows oil companies drilling in federal land off the coast of a particular state to pay the state 44 cents of every dollar it would have paid to the federal government for the privilege of drilling on federal land.
The royalty-in-kind provisions in this section allow corporations drilling for oil on public land to forgo paying cash royalties to taxpayers. Instead, companies provide an amount of the oil as an in-kind contribution to the federal government. Since federal land supplies one-third of the oil and gas produced in the United States, expansion of this program could have a significant impact on the federal treasury.
This proposal has its origins in Bush’s (www.whitehouse.gov) National Energy Policy, which requested that the Secretary of the Interior “explore opportunities for royalty reductions.”
A recent Government Accountability Office (GAO) report (www.gao.gov) , however, criticizes the current royalty-in-kind program, concluding that the government is unable to determine whether taxpayers receive a fair shake from the program. For example, the GAO notes that the pilot program currently “relies upon royalty payors to self-report the amount of oil and gas they produce, the value of this oil and gas, and the cost of transportation and processing that they deduct from royalty payments” (emphasis added). The reporting system caused the GAO to express concern about “the accuracy and reliability of these data.”
Indeed, the industry’s cheerleading for the royalty in-kind program stems from recent court decisions that found U.S. oil companies, equipped with an “honor system” self-reporting system, routinely underreported the volume of oil and natural gas removed from taxpayer land, therefore allowing the companies to cheat the public. By seeking to end cash payments for the privilege of drilling on public land altogether, it appears as though the oil companies are attempting to hedge their losses from the embarrassing court decisions.
In 1998, the Mineral Management Service (www.mrm.mmsgov) estimated that similar provisions would cost taxpayers between $140 million and $367 million every year.
There was a vote on April 21 in the House to strike the section providing a suspension of royalty payments for offshore oil and gas production in the Outer Continental Shelf (OCS) in the Gulf of Mexico, but it failed, 227 to 203 (clerk.house.gov).
Title IX, Subtitle J
This section would provide $1.5 billion in direct payments to oil and natural gas corporations to drill in deepwater wells. This section is a pet project of Texas Republican and House Majority Leader Tom DeLay. It would designate a private entity, Sugar Land-based Texas Energy Center, as the “program consortium” to dole out taxpayer money to corporations. The Texas Energy Center has strong ties to Tom DeLay, with six different executives (Herbert W. Appel, Jr., Robert C. Brown, III, Philip E. Lewis, Thomas Moccia, Ronald E. Oligney, and Barry Ashlin Williamson) giving a total of $8,000 to DeLay’s campaign since March 2004. In addition, three of the Center’s executives have given a total of $4,500 to President Bush’s 2004 re-election effort.
The Center’s lobbyist is Barry Ashlin Williamson. In 1988, Williamson went to work for the Reagan administration and became principal advisor to the U.S. Secretary of Energy in the creation and formulation of a national energy policy. President George H.W. Bush later chose him to be the U.S. Department Interior’s Director of the Minerals Management Service, which managed oil and gas exploration and production on the nation’s 1.4 billion-acre continent shelf. Williamson then served as Chairman of the Texas Railroad Commission from January 1993 to November 1995.
The Texas Energy Center will play host to The Research Partnership to Secure Energy for America, whose members include Halliburton and Marathon Oil.
OIL & GAS REGULATORY ROLLBACKS
The section severely limits the ability of local communities and states to have adequate say over the siting of controversial Liquified Natural Gas (LNG) facilities. The section states that the Federal Energy Regulatory Commission (FERC) “shall have the exclusive authority to approve or deny an application for the siting, construction, expansion, or operation of an LNG terminal” under the Natural Gas Act (emphasis added).
The language is clearly aimed at a July 2004 lawsuit filed by the State of California claiming that FERC illegally ruled in March 2004 that states have limited jurisdiction over the permitting and siting of LNG facilities inside their borders. The lawsuit is being closely watched by other states, where officials have expressed alarm about the inability of state and local governments to have adequate input into these projects. LNG projects are particularly controversial because liquefied natural gas is extremely volatile and dangerous. Even if one supports increasing the number of LNG terminals in North America, there is absolutely no justification for limiting the ability of states and local communities to have control over the permitting and siting of these facilities. (See our Liquid Natural Gas section www.citizen.org.)
LNG proponents claim that states still can veto LNG projects, as they retain jurisdiction over the facilities under the Coastal Zone Management Act, the Clean Air Act and the Federal Water Pollution Control Act. But these three acts have very limited jurisdiction (for example, LNG facilities don’t really pollute the water or air, so states have no real ability to raise objections under these laws). The broadest possible law is the Natural Gas Act, so it is no surprise that natural gas companies and their allies in Congress pushed to give FERC “exclusive authority” under the one law (Natural Gas Act) with the most sweeping power.
Language added during the conference committee (meaning it wasn’t in either the original House or Senate bills) gives the Department of Defense veto authority over LNG projects proposed near military bases, directing FERC to “enter into a memorandum of understanding with the Secretary of Defense for the purpose of ensuring that [FERC] coordinate and consult with the Secretary of Defense on the siting, construction, expansion, or operation of liquefied natural gas facilities that may affect an active military installation.” FERC is further required to “obtain the concurrence of the Secretary of Defense before authorizing the siting, construction, expansion, or operation of liquefied natural gas facilities affecting the training or activities of an active military installation”.
But a similar proposal in the Senate to provide states with these exact rights now given to the DoD was rejected by a vote (www.senate.gov) of 52 to 45 (a “yea” vote is bad, in that it was a vote to kill, or table, the amendment that would have forced FERC to get the approval of states to permit LNG facilities).
The House also rejected an amendment (www.senate.gov) that would have removed this section entirely, thereby preserving the status quo and allowing the state of California to continue its challenge in federal court (so an “aye” vote is good, as it was to remove the entire LNG section).
COAL SUBSIDIES: $9 BILLION
Senator Larry Craig, on behalf of Senator Ken Salazar, got Section 413 into the energy bill by unanimous consent on June 23. Corporate lobbyists representing Pacificorp and Xcel recommended the language to Sen. Salazar. While the intended recipient may be Pacificorp and/or Xcel (for unannounced projects), another company qualifying for the loan guarantee is the Medicine Bow Fuel & Power project in Wyoming (the section requires that the project “be located in a western State at an altitude greater than 4,000 feet”) The section explicitly states that “the demonstration project shall not be eligible for Federal loan guarantees”—making the relationship between this section and the very similar-sounding loan guarantee project outlined in Section 1703 a little unclear. Medicine Bow, Wyoming is at an altitude of over 6,500 feet. Medicine Bow is owned by DKRW, a Houston-based firm led by four former Enron executives, including Thomas White. White served as Secretary of the Army from May 2001 to March 2003. Prior to that, he served as vice chairman of one of Enron’s largest divisions, Enron Energy Services (EES).
Under White’s tenure, EES played a major role in the California energy crisis. In 1998, the year he became its vice chairman, EES was America’s 61st largest energy trader. When he left, his division was the 28th largest energy-trading firm in the country. Until March 2001, the trading operations of EES were separate from the rest of Enron’s Wholesale Energy unit—meaning White was responsible for a huge trading operation that played a significant role in California’s energy crisis.
Also, under White’s direction, EES severed at least two large retail contracts in California in January and February 2001 during the height of the energy crisis, which Enron helped create. Based on the evidence on hand, it appears that EES took the power that had been obligated to serve these retail consumers and sold it in the wholesale market where EES could fetch higher prices than it could by continuing to sell power at lower, fixed rates to retail customers. This significant wholesale trading operation, combined with White’s decision to break retail contracts in California, made (www.citizen.org) the division a major player in California’s deregulated wholesale market.
Subsection (c)(1)(B) describes a project almost exactly the same as what is described in Section 413, except that the demonstration project grant outlined in Section 413 does not allow the recipient to also receive a loan guarantee. So, the most likely recipients are the former Enron executives with DKRW or Xcel Energy.
Subsection (c)(1)(C) provides $800 million in federal loan guarantees to controversial Excelsior Energy (www.citizen.org) for a coal power-generating plant (ConocoPhillips is a partner in the project). The DOE awarded the company a $36 million in October 2004 during an event that appeared to be designed to boost the image of (www.fossil.energy.gov) President Bush in Minnesota just weeks before the election.
Subsection (c)(1)(D). There are two general possibilities for the recipient of this federal loan guarantee. One could be Lexington, Kentucky-based EnviRes to build a coal gasification facility to create fuel in East St. Louis, Illinois. The total cost of the project is $254.2 million. EnviRes is a joint venture of three companies, including Triad Research, which is controlled by Robert Addington of AEI Resources, a huge coal conglomerate.
The other possibility is Pennsylvania-based Waste Management & Processors Inc. On October 26, the Bush Administration announced a $100 million grant for a “clean coal” project in the swing state of Pennsylvania, benefiting Waste Management (www.fossil.energy.gov) , headed by John Rich. His family and company employees have contributed over $60,000 to candidates for federal office since 2001.
While Waste Management is the lead company on the project, they have teamed up with several other companies: (1) Shell Global Solutions U.S., as gasification technology supplier; (2) Uhde GmbH, a Dortmund, Germany-based global engineering company; (3) Sasol Synfuels International, as liquefaction technology provider; and, (4) Nexant, Inc., as owner’s engineer.
NUCLEAR POWER SUBSIDIES: $12 BILLION
ELECTRIC POWER SUBSIDIES
OTHER INDUSTRY BENEFITS IN ELECTRICITY TITLE
Title XII, Subtitle F—Repeal of PUHCA and Merger Reform
The 70-year-old consumer and investor protection statute would be completely abolished within six months, opening up ownership of approximately $1 trillion worth of electric generation, transmission and distribution assets and natural gas distribution assets to any kind of company, anywhere, for the first time since 1935. At that time, hundreds of Enron-type affiliate and other abuses took place between holding companies and their utility subsidiaries resulting in the collapse of the holding company empires, which wiped out tens of thousands of investors.
In PUHCA’s place, FERC would be given a virtually meaningless right to look at the “books and records” of conglomerates the size of GE, ExxonMobil, J.P. Morgan and Berkshire Hathaway, in the off-chance that FERC could discover whether these vast conglomerates have affiliates whose activities have in any way affected their affiliated utility’s rates. State review of such huge companies, the adequacy of which review would clearly be absurd in any case, would have even more restricted rights to look at these affiliated books and records. In addition, the bill would give certain additional merger authority to FERC over generating plants and holding companies. However, without the structural merger standards of PUHCA, which limit the size and geographic scope of utility mergers in order to protect local management and effective regulation, FERC will presumably continue to approve all the utility mergers that it reviews.
The only rates state utility commissions will have any control over at all will be distribution facility costs; the rest will be determined by FERC, which has abrogated its rate review to “the market.” However, with PUHCA repealed, interstate holding companies will also be free to buy up and consolidate distribution companies. Analysts agree that there will be “substantial consolidation” in the utility industry once PUHCA is repealed, which will effectively eliminate local control, accountability, and any adequate regulation of rates.
The repeal of PUHCA means we will have again the huge “power trusts”—only this time owning unregulated utility monopolies, thanks to FERC’s wholesale electricity deregulation, and the fact that Congress is rendering meaningless any effective state utility regulation by removing, via PUHCA repeal, all limits on the creation of gigantic, multi-state utility holding company conglomerates.
VOTES on AMENDMENTS
During debate, Congress repeatedly rejected efforts to improve the energy bill. On June 23, the Senate voted 67 to 28 (www.senate.gov) to reject an amendment to improve automobile fuel economy standards (a “yea” vote was in favor of improving fuel economy standards).
The Senate did approve a renewable energy standard (www.senate.gov) , but this measure was rejected by the House during the conference committee, so it isn’t part of the energy bill signed by President Bush.
The Senate also voted to protect the ethanol industry (www.senate.gov).
The House voted down amendments to save PUHCA (clerk.house.gov) , to block (www.clerk.house.gov) drilling in ANWR, to increase (clerk.house.gov) fuel economy standards from 25 to 33 miles a gallon by 2015, to reduce oil (clerk.house.gov) demand by one million barrels of oil per day, to remove the MTBE (clerk.house.gov) “safe harbor,” and to delete the (clerk.house.gov) Refinery Revitalization Zone provisions (ultimately dropped in conference).
Furthermore, the House failed to strengthen standards of environmental justice in law by voting (clerk.house.gov) down an amendment that sought to codify Executive Order 12898, “Federal Actions to Address Environmental Justice in Minority Populations and Low Income Populations”; provide a definition of “environmental justice”; establish offices of environmental justice in appropriate agencies; and reestablish the Interagency Federal Working Group on Environmental Justice.
The House approved amendments to expand the (clerk.house.gov) definition of renewable fuels eligible for grants, and to conduct a (clerk.house.gov) study of the negative impacts of industry consolidation on consumer prices.
These are the issues of immediate importance we are working on right now.