Energy bill faces tough hurdles as prices fall during election year

By Jonathan H Harsch

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, Jan. 12, 2016 -- The Senate GOP leadership calls the energy bill that the Energy Committee passed with a bipartisan 18-4 vote last July “a leading contender” for floor debate early this year. Energy Committee Chair Lisa Murkowski, R-Alaska, is eager to lead that debate, hoping for Senate passage by March.

If the Senate passes the Murkowski/Cantwell Energy Policy Modernization Act, S. 2012, the next step will be a House/Senate conference to merge that bill with the North American Energy Security and Infrastructure Act, H.R. 8, which the House passed Dec. 3 in a 249-174 vote.

But prospects for finalizing an energy bill this year face four major hurdles:

  • Passing any legislation in a presidential election year is tough because there's only a narrow window before partisan campaign craziness takes over.
  • Since the election year limits opportunities for legislation, senators will try to use any energy bill as a vehicle for their own favored amendments. Any partisan amendments would slow the process and undermine support for the bill.
  • The bipartisan Senate bill includes important provisions to support renewable energy such as $2.5 billion to support grid modernization and grid-scale energy storage whereas the House bill lost some support from Democrats after some renewable provisions weren't included in the bill.
  • U.S. and world oil prices have plunged, leading some members of Congress to call for more support for fossil fuels and less for renewable energy.
Low oil prices are likely to exert increasing pressure on Congress because stressed U.S. producers were counting on a rebound in prices rather than a further drop. Instead, this week U.S. and world oil prices fell below $31 a barrel, one-third their June 2014 peak and the lowest since 2004. In response, some House and Senate members are considering oil industry bailout measures that could include using sanctions designed to pressure Saudi Arabia to limit its production.

The price plunge is driven by a perfect storm of factors: stubbornly high U.S. and OPEC production despite the low prices, rapidly growing world stockpiles, fears that China's slowing economy will continue to limit world oil demand, Iran's promised surge in oil exports once U.S. sanctions are lifted, and a strengthening U.S. dollar. U.S. oil and natural gas companies have maintained production at unexpectedly high levels - levels that make no sense when much of the new U.S. production from hydraulic fracking has break-even costs of $50 to $100 a barrel.

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Continuing high U.S. production comes despite warnings from Goldman Sachs, Morgan Stanley and others that oil could sink as low as $20, with no significant recovery likely until 2017. Even at today's sub-$31 level, analysts warn of a flood of oil-sector bankruptcies.

Given the grim oil price outlook, Rep. Kevin Cramer, R-N.D., says using sanctions to try to limit Saudi production is a potential option.

Attorney Joseph Stanko, a partner who heads the federal government relations team at Hunton & Williams, tells Agri-Pulse that “should it appear that the Saudis or other parties are dumping oil on the world market intending long-term harm to U.S. domestic oil production, that could very well be the subject of oversight or legislative activity.”

Cramer says that along with addressing major obstacles to U.S. energy production including EPA's Clean Power Plan to limit coal power plant emissions, “we have to get at some of the other regulatory issues” affecting the energy industry. He calls for legislation “to halt or at least rein in” problem regulations and “to stop or at least to slow down the war on coal.”

Cramer recognizes that any bills to block “regulatory overreach” will likely be vetoed. But he insists it's worth passing such bills to show “what a Republican president, supporting a Republican Congress, would look like.”

Despite the challenges, House Energy and Commerce Committee Chair Fred Upton, R-Mich., says he's “hopeful the Senate will take up and pass their energy bill so we can work through our differences in a conference committee to enact meaningful policy reforms.” He adds that along with the need to pass major energy legislation, his committee will continue to pursue “further DOE oversight, examination of EPA's burdensome regulations, pipeline safety reauthorization, and an effort to modernize our electric grid.”

Upton is optimistic about 2016, noting the “wins” Congress posted last year in terms of energy policy.

“We lifted the 40-year-old ban on crude oil exports, enacted several grid security provisions into law via the highway bill, and modernized the Strategic Petroleum Reserve in the budget bill.” This year, he says, “we look to build on that momentum.”

One obstacle to the momentum could be efforts to repeal or at least reduce the volume requirements for EPA's Renewable Fuel Standard (RFS) designed to increase the use of biofuels.

Last week American Petroleum Institute President and CEO Jack Gerard dismissed the RFS as “a relic of our nation's era of energy dependency that poses a direct threat to our nation's economy, risks reversal of important environmental improvements, and could raise energy costs for American consumers.”

In response, Renewable Fuels Association President and CEO Bob Dinneen insists that as the nation endures another costly oil industry boom-and-bust cycle, “The fact is our nation needs domestically-produced clean burning renewable fuels now more than ever. Ethanol plants strengthen communities, they do not abandon them.” He explained that unlike oil industry jobs, “Ethanol jobs are as stable and renewable as the fuel itself.”

Growth Energy co-chair Tom Buis responded to RFS critics by asserting that “The RFS is the most successful energy policy this nation has enacted in the last 40 years. Not only is it creating jobs, it is revitalizing rural economies, reducing harmful emissions, improving our environment and reducing our dangerous dependence on foreign oil and fossil fuel. Additionally, it is providing consumers with a choice at the pump.”

The sharp divide over the RFS, along with other contentious issues such as the Clean Power Plan and the Endangered Species Act, threatens prospects for passing energy legislation this year. Any attempt to add anti-RFS or anti-Clean Power Plan amendments on the Senate floor at the very least would undermine support among Democrats.

National Corn Growers Association Director of Public Policy Beth Elliott says she hopes the Senate energy bill “survives the amendment process.” To make that happen, she says NCGA's grassroots supporters will be on alert to rally opposition to any anti-RFS amendments.

Jill Gerber, press secretary for Sen. Chuck Grassley, says the Iowa Republican expects to be busy “defending renewable fuels against attacks and pressing the administration to live up to its statutory obligations” for greater biofuels use. She says there's a long list of “energy items requiring action.” While some may be addressed in the Senate energy bill if it's not derailed by partisan amendments, she says Grassley's energy priorities include biodiesel and other tax breaks expiring this year but that “it seems unlikely that any movement would happen on tax extenders until after the election, during the lame duck session.”

On the contentious issue of the Clean Power Plan, one industry lobbyist tells Agri-Pulse that Congress hasn't focused on the issue yet because Republicans are hopeful the courts will issue a stay order this month. If that doesn't happen, he says, he expects Congress to find “the most effective legislative vehicle” - perhaps the Senate energy bill - to freeze the Clean Power Plan and protect states from being forced to make financial commitments before there is a final court decision.

National Rural Electric Cooperative Association (NRECA) Legislative Affairs VP Brian Cavey is hopeful the Senate will pass its energy bill. But he warns that "there are relatively few legislative days this year, and the closer we get to the election, the harder it is to move any large legislation.”

Cavey says the challenge is to make sure the amendments process results in a bill that helps “our electric co-op members provide safe, affordable, reliable electricity” and avoids imposing any additional costs on NRECA's consumer members. He expects lots of amendments because there's “pent-up appetite for policy changes” and “Being an election year might increase the appetite.”

Cavey concludes that “our hope is that Chairman Murkowski's wish to move the bill sooner rather than later is heard by the Senate and by the majority leader and that they are able to get action on that in the near future.”

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