Power Engineering - Senate energy conference postponed until third week of October

Washington, D.C., Oct. 2, 2003 -- Senate Energy & Natural Resources Chairman Pete V. Domenici has postponed the energy conference which had been scheduled for Oct. 3. The energy conference will be rescheduled following the Senate recess the following week.

"The Senate Finance Committee notified me today that negotiations with House Ways and Means Committee on the energy tax package will not be completed by Friday," Domenici said. "This package is critical to our overall national energy policy. I am happy to give these very busy committees additional time to complete their work.

Domenici reported that the committee was very close to final deals on ethanol, electricity and the Alaska natural gas pipeline. The decision to postpone the conference was partly to accommodate the tax-writing committees. The conference will likely take place in the third week of October, Domenici said.

• Clean Coal Power Initiative - Adopted a compromise proposed during staff discussions to provide no less than 60 percent of the funding for coal gasification and clarify that the Secretary has the authority to provide up to 40 percent of funds to be used for other technologies other than gasification.

• Clean Power Projects - Responded to staff concerns that earmarked projects would draw from available funds. Proposed change requires that all projects are to be funded separately, but are still required to meet the same technical milestones specified in the Clean Coal Power Initiative.

• Payment of Advanced Royalties Under Coal Leases - Struck language allowing the Secretary to "waive, suspend or reduce advanced royalty". This section provides both the Secretary of the Interior and the lessee greater flexibility under the advanced royalty program. It would make no sense to make these significant changes if the Secretary is permitted to waive the royalty altogether.

• Amendments Relating to Financial Assurances with Respect to Bonus Bids - Responded to concerns raised during staff discussions regarding availability of surety bonds. Modifications will allow the Secretary of the Interior to waive the surety bond requirements if the lessee has a history of timely payments. In addition, changes were made to strengthen the Secretary's ability to cancel a lease if the lessee fails to make payment. If a lessee fails to make a payments within 10 days the Secretary shall cancel a lease and demand full payment of the unpaid bonus bid.

• Inventory Requirement - Per staff request language was included to clarify the inventory evaluation will cover all federal lands except National Park land.

In response to comments, the second energy efficiency discussion draft includes further strengthening and clarifying changes to a title that has already been lauded by energy efficiency advocates as a major advance for energy efficiency. These changes:

• Expanded the role for energy efficiency advocacy organizations in Federal energy use measurement and accountability measures.

• Clarified implementation mechanisms for energy savings performance contracts (ESPC) in non-building applications.

• Strengthened provision for voluntary commitments to reduce energy intensity by specifically requiring significant reductions in energy use (relative to recent years) as a condition for recognition under the program.

• Specified that the advanced building efficiency testbed program will address indoor air quality issues.

• Restored recycled mineral component provision (not included in the discussion draft).

• Clarified Energy Star process language to avoid unintended effects and ensure flexibility for EPA and DOE to promote energy efficient products under the program.

• Restored energy labeling requirement for products subject to new energy efficiency requirements (not included in discussion draft).

• Tripled the funding authorization for energy efficient public buildings (to $30 million).

At the request of Democratic staff, the geothermal provision has been revised to incorporate more of the bipartisan language from S. 14. These changes:

• Deleted the proscriptive language redefining how geothermal leasing will be conducted on federal lands by providing the Secretary of the Interior broad direction and more discretion for establishing new procedures.

• Deleted proscriptive language establishing new geothermal royalties, providing guidelines and deferring to the Secretary of the Interior rulemaking authority to establish royalty methodology for future geothermal leases.

• Revised the language mandating an MOU between the Forest Service and the BLM regarding future geothermal leases and permits. The revised language is less proscriptive, providing, instead, general guidelines regarding what should be in the MOU.

The guidelines include: identifying geothermal potential, establishing a common administrative procedure for processing lease applications and establishing a joint data-retrieval system.

• Outlined a procedure for timely completion of the backlog of existing geothermal lease applications.

The new discussion draft makes mostly technical, drafting and clarifying changes to the hydrogen title. These changes:

• Increased the scope of demonstration projects and expand selection criteria to include cost-effectiveness and environmental impacts.

• Clarified cost sharing and information disclosure sections through reference to existing statutes in the Energy policy Act of 1992.

• Changed the optional program review by the National Academy of Sciences to a mandatory program.

In response to specific Democratic suggestions and concerns raised during the staff walk-through on the hydroelectric section, the staff draft discussion piece has been amended in the following ways:

• To address the concern that the trial type hearing should not create additional delay in the process, new language specified that the agency trial-type hearing of any disputed issues of material fact must be expedited.

• In response to the concern that the procedures for an agency trial-type hearing were unclear, new language authorized the resource agencies, in consultation with FERC, to establish procedures by which to conduct the trial-type hearings. With this new authorization to establish the needed procedures, the Administration fully supports the staff draft's hydroelectric licensing procedures.

• To protect the agency's ability to approve or deny alternative conditions or fishways, new language revised the standard for agency review of an advisory from FERC's Dispute Resolution Service to be consistent with the statutory standard for establishing the original condition and review of proposed alternatives.

• Expanded the Administration's study of the potential for increasing electric power production at existing federal facilities to also consider the impact of increased hydroelectric power production on irrigation, fish, wildlife, Indian tribes, river health, water quality, navigation, recreation, fishing, and flood control.

• Amended the directive to the Federal government to consider shifting water pumping activities to off-peak periods to include recreational uses among the Secretary's existing obligations, which are not to be affected.

Significant extension to appropriation authorizations have been included as well as numerous conforming and technical changes have been made to the Indian Energy title in S. 14.

It is important to recognize that changes are primarily the result of bipartisan negotiations that have occurred since S. 14 was approved by the Senate Energy Committee. Hence, S. 14 was the underlying language for these revisions.

• Additional language was included pertaining to the Secretary's trust evaluation to require the Secretary to make "site inspections." This language was requested by Senator Bingaman's staff.

• Language was inserted to ensure that tribes were eligible to receive funding to gain scientific and technical data as well as funding to help tribes develop a Tribal Energy Resource Agreement. This change was requested by Senator Bingaman's staff.

• Two changes were made to clarify that the new authorities provided under Section 2604 apply only to those activities that apply to the "energy resource development" of "energy mineral resources." This is intend to prevent the creation nuclear waste dumps under this title. Nuclear waste won't meet the test as either a "energy resource" or "mineral resource"

• The requirement that provisions in the lease that are inconsistent with the terms of Tribal Energy Resource Agreement are to be found null and void.

• The insertion of the requirement that the Secretary "carry out activities in a manner consistent with the trust responsibilities" (e)(6)(A)(I).

• Language inserted to reflect the Secretary's trust obligation to ensure the rights and interest of an Indian tribe are protected under the terms of a specific lease or business agreement. (e)(6)(c).

• Language revised to limit the Secretary's liability arising from any negotiated terms to apply to only those business agreements or leases negotiated in compliance with a TERA.

Several major changes were made to the Nuclear Title (primarily the Nuclear Security subtitle) in response to several requests from Conferees, including several major changes made at the request from the Democrats. These changes:

• In the Nuclear Security subtitle, authorized security guards at nuclear power plants to use deadly force and to use a range of upgraded firearms to defend nuclear power plants.

• In the Nuclear Security subtitle, increased the penalty for acts of sabotage at a nuclear facility from $10,000 to $1,000,000.

• Added a new section to the Nuclear Security subtitle to tighten oversight and controls on exports and imports of nuclear materials regulated by the NRC, including background checks on individuals handling these materials.

• Added a new section to the Nuclear Security subtitle to require the NRC to consult with the Department of Homeland Security on the location and design of a proposed new nuclear plant in order to ensure that the facility provides for adequate public health and safety in the event of a terrorist attack.

Substantive changes were made to the oil and gas section, primarily at the request of Democratic staff. These changes:

• Strategic Petroleum Reserve - Delete language in Section 2 and 3 that requires the President to build out and fill SPR to a billion barrels and authorizing $1.5 billion to accomplish this. This language and authorization already exists in law under the Energy Policy Conservation Act of 1992.

• Marginal Wells - Extend the period for the Dept. of the Interior has to promulgate rules from one year to 18 months.

• Incentives for Natural Gas Production from Deep Wells in the Shallow Waters of the Gulf of Mexico - As a result of staff discussion, it was decided that current rulemaking proceed to provide royalty relief for wells less than 20,000 feet. New language directs that a separate rulemaking be undertaken to provide additional royalty relief for 'ultra deep' wells drilled 20,000 feet and beyond.

• Royalty Relief for Deep Water Production - Adopt a staff recommendation that the Secretary of the Interior utilize market-based commodity price triggers when providing royalty relief on specific suspension volumes dictated in this section. This is new language not included in either bill.

• Oil and Gas Leasing in the National Petroleum Reserve in Alaska -Limit the extension of existing leases to one ten-year-term instead of proposed language providing for successive renewals. Dropped language that would have allowed for Endangered Species Act evaluations required pursuant to NEPA to be done on a incremental basis.

• Orphaned, Abandoned, or Idled Wells on Federal Land - Narrow the scope of the liability provisions in the Orphaned well pilot program. This program authorizes the Secretary of the Interior to allow producers to take royalty credits for reclaiming orphaned wells on federal lands. Liability provisions are narrowed to ensure that a lessee is not liable for pre-existing conditions but only for gross negligence and misconduct.

• Alternative Energy-Related uses on the OCS - Expand MMS authority to cover energy-related purposes for oil and gas structures in the OCS. Previous language would have allowed these structures to be used for any other purpose regardless of proposed use. Provisions also requires the Secretary of the Interior to implement all other proposed regulations and activities before it adopts this new authority provided in this section.

• Reimbursement for Costs of NEPA Analysis - Narrow the scope of the House language which would have permitted a lessee to take royalty relief for government-required NEPA costs against any lease. The Conference language allows a lessee to recover cost from the lease for which the NEPA work is performed.

• Onshore Reserves Program - Delete this program and merge it with the ultra-deep proposal included in the R&D section.

• Increased Natural Gas Penalties - Increase the penalties in the Natural Gas Act to levels consistent with the Federal Power Act. This change reflects the intent of an amendment proposed earlier by Senator Bingaman.

• Rocky Mountain Front - Include a new study requested by Sen. Baucus to evaluate the feasibility of exchanging, cancelling or purchasing leases in Montana's eastern front in the event that the ongoing environmental evaluation determines that development should be permitted.

• Alaska Natural Gas Pipeline - Several minor changes were made to correct drafting errors including a provision limiting the term of the federal coordinator to one year beyond the completion of the project.

Updated information on Senate committee work on the energy bill can be found at:

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