White House and Senate work on very different energy bills

The Republican-led White House passed a massive energy bill that would allow oil companies to drill in the Arctic National Wildlife Refuge. Responding to President Bush's call for an overhaul of the nation's energy policy, the House voted 240-189 to endorse a package designed to boost domestic energy supplies, encourage conservation and reduce the nation's dependence on foreign oil.
"We find ourselves facing energy challenges that we simply cannot ignore any longer," said House Majority Whip Tom DeLay, R-Sugar Land. Known as the Securing America's Future Energy Act, the measure would require automakers to improve the gas mileage of their trucks and sport utility vehicles, provide tax breaks for domestic oil and gas producers and encourage construction of new pipelines and electric transmission systems.

The Senate, however, is working on a very different energy bill that would place greater emphasis on conservation and renewable energy sources. And in that chamber, there is little support forexploration in the Arctic Wildlife Refuge. Despite the uncertain future of that controversial measure, the House narrowly agreed to allow oil and gas producers to explore in a portion of the South Carolina-size refuge in northeast Alaska.
For more than two decades, the oil industry has been eyeing a 1.5 mm-acre section of the refuge set aside for possible oil development. Government geologists estimate this area, together with state and tribal lands where exploration is already permitted, could yield as many as 16 bn barrels of recoverable crude.
"This oil we must have for this nation... so that Saddam Hussein cannot control the market," Rep. Don Young, R-Alaska, argued. But environmentalists object to the notion of drilling in an area they call "America's Serengeti" and a "cathedral of nature," a region where the huge Porcupine Caribou Herd comes to calve.
Rep. Nancy Johnson, R-Connecticut, disputed the argument the industry could drill in the refuge without causing tremendous damage to the ecosystem there. "The scars are permanent," she said. Proposals to drill in the wildlife refuge have never been popular. But during the presidential campaign, then-candidate Bush made drilling in the refuge a key element of his energy strategy, and the White House has lobbied aggressively on the issue.

The House bill, White House spokesman Ari Fleischer said, "can pave the way to making America more energy independent." To bolster support for granting oil companies access to the refuge, lawmakers agreed to limit the area that could be disturbed by drilling to 2,000 acres. The Houston-area delegation's vote on the energy bill was mixed.
Republicans DeLay, Kevin Brady of The Woodlands and John Culberson of Houston and Democrats Sheila Jackson Lee of Houston and Nick Lampson of Beaumont all voted for the bill, while Republican Ron Paul of Surfside and Democrat Ken Bentsen of Houston voted against the measure. The House bill also would require that pickups, vans and SUVs get better gas mileage.
Green and Rep. Joe Barton, R-Ennis, teamed up with lawmakers from the Corn Belt to beat back an amendment supported by the entire 52-member California delegation to change the requirements for gasoline sold in California. California has plans to ban the use of methyl tertiary butyl ether or MTBE, a popular gasoline component largely produced in Houston, because of problems with water contamination.

Because of provisions in the Clean Air Act, California would have to continue using MTBE or use a corn-based alternative ethanol as a substitute. But because of production and transportation problems, requiring the use of ethanol could drive up gasoline prices in California substantially.
California, which has the strictest environmental laws in the nation, was hoping to obtain a waiver on that Clean Air provision. But Texas and Midwest lawmakers argued that granting California an exclusive exemption would be unfair. The House also turned down a proposal sponsored by Rep. Henry Waxman, D-California, to impose price caps on wholesale electricity sales into California.
Numerous California lawmakers have been calling for price caps since electricity rates skyrocketed in the state last year and the lack of generating capacity prompted rolling blackouts. Waxman pointed to continued high prices being charged by Houston-based Reliant Energy to justify his price cap proposal.

The House also rejected an amendment sponsored by Green that would have wrested control of California's intrastate natural gas pipeline system out of the state's hands and turned over to the jurisdiction of the Federal Energy Regulatory Commission. Green and his allies argued that California's insistence on using a smaller pipeline than the interstate network had helped drive up natural gas prices in the state, exacerbating its power crisis.
Waxman blamed the state's natural gas woes on Houston-based El Paso, which he accused of manipulating capacity on a major interstate gas line running from Texas into Southern California in an effort todrive up prices. The Federal Energy Regulatory Commission is currently investigating those allegations.
Democrats' efforts to derail the bill were hampered by a split among their traditional allies, environmental groups and labour. Environmentalists vehemently oppose drilling in the wildlife refuge and support stricter gas mileage requirements.
The Teamsters union, however, supported the effort to tap the oil reserves in the refuge, hoping the expected oil flows would help bring down fuel prices. And the United Auto Workers union lobbied against raising the fuel economy standards, fearing such a move would cost jobs.

The House bill also would provide $ 33.5 bn worth of tax incentives to promote domestic production, encourage conservation and improve the reliability of supplies. To encourage continued exploration in the deep waters of the Gulf of Mexico, the bill reinstates a royalty tax break for companies operating in water depths greater than 660 feet.
The bill also includes tax breaks for production from low-yielding marginal wells, gives producers greater flexibility to deduct expenses and provides incentives for exploration beneath difficult-to-interpret salt formations.