Senate Passes Bill to Produce More Energy, Save Fuel (Update2)
By William Roberts
Washington, April 25 (Bloomberg) -- The U.S. Senate passed energy legislation that would provide $14 billion in tax breaks for alternative energy sources, open electric power to new investment and triple the $2.5 billion U.S. ethanol market. The vote was 88-11.
The bill lacks many of the incentives to boost oil production that President George W. Bush requested last May, such as opening Alaska's Arctic National Wildlife Refuge to drilling.
Bush issued a statement saluting passage, saying that most of his energy proposals were contained in either the Senate bill or legislation the House passed last year. Republicans said they hope to include proposals such as the Alaska drilling plan in a final compromise version to be written in a House-Senate conference.
``It is imperative that America increase its energy independence and I look forward to working with the conferees to ensure that we enact a balanced and comprehensive energy policy this year,'' Bush said.
Senator Jeff Bingaman of New Mexico, Democratic chairman of the Senate Energy Committee, said Democrats would refuse to accept much of the House-passed bill. ``There is no requirement that we have an energy bill,'' Bingaman said.
Showdown
The bill has been on the Senate floor for six weeks, highlighted by a showdown vote last week that rejected Bush's Alaska proposal by a 54-46 vote. Democrats lost favorite conservation provisions when the Senate earlier defeated a proposal to raise automobile fuel economy standards, a win for Ford Motor Co., and others. Today, the Senate dropped a provision to increase the energy efficiency of large air conditioners, a victory for Texas-based Lennox International Inc.
The Senate agreed to include $14 billion in tax incentives for oil, gas and alternative fuel production. The House legislation called for $33.5 billion in tax breaks and incentives mostly focused on oil, gas and traditional energy producers.
``We are going to take a step or two to make ourselves less energy-dependent,'' said Senator Max Baucus, a Montana Democrat and chairman of the Senate Finance Committee.
Domestic oil and gas companies would get $4.4 billion in production subsidies over the next three to five years under the Senate plan. That includes a $3 per barrel credit for oil produced from shale or tar sands.
Tax credits worth $2.3 billion would be aimed at boosting renewable energy sources such as wind, biomass and solar power over three to 10 years. Conservation and energy efficiency tax incentives would amount to $2.2 billion in credits or deductions for energy efficient buildings, homes and appliances.
Clean coal tax incentives would be $1.9 billion over 10 years, according to a summary document provided by the Senate Finance Committee.
Utility Consolidation
The Senate bill would repeal the Public Utility Holding Company Act of 1935, a Depression-era law that restricts ownership and investment in about 140 electric utilities nationwide.
If the House agrees to the repeal, large, well-capitalized companies such as Duke Energy Corp. and Public Service Enterprise Group likely would acquire smaller utilities across the country.
``We will definitely see a wave of consolidation,'' said Jim Lucier, Washington analyst at Prudential Securities Inc. ``All of the small to mid-size utility companies are acquisition targets.'' Companies with weakened balance sheets such as Dynegy Inc. and El Paso Corp. may also be targets, Lucier said.
Transmission Lines
The Senate approved an amendment that would give Duke, Edison International and other investor-owned utilities a tax break when federal or state regulators require sales of transmission lines, towers or other assets.
The amendment would allow the companies to pay taxes on the gains from such sales over eight years, rather than all at once.
Other tax-related amendments added to the bill would encourage use of renewable fuels. One would expand tax credits for utilities that generate power through steam turbines. Another would give tax breaks for use of coal that reduces mercury emissions.
The Senate bill also reauthorizes the liability limits for owners of nuclear power plants, known as the Price-Anderson Act. That's a benefit for U.S. nuclear power plant owners including Exelon Corp. and Entergy Corp.
MTBE vs Ethanol
The Senate voted 57-42 today to give oil refiners and marketers protection against legal liability for using corn-based ethanol as a gasoline additive.
The vote was a defeat for California and New York senators who oppose a mandate in the bill that would triple the use of ethanol over 10 years. It was a win for Archer Daniels Midland Co., the No. 1 maker of ethanol, and U.S. refiners and marketers of gasoline such as Exxon Mobil Corp.
``If ethanol is so safe, why did the companies involved in its production press for liability protection in the bill?'' said Senator Barbara Boxer, a California Democrat who failed in her attempt to strip the liability protection from the bill. ``The oil companies are pushing for this.''
California recently banned the use of a petroleum-based alternative, MTBE, because it poisons groundwater. Its senators argued that being forced to replace it with ethanol would raise gasoline prices.
Decatur, Illinois-based Archer Daniels Midland Co. has 41 percent of the U.S. ethanol production capacity. Dozens of small farmer-owned groups in the Midwest and Great Plains control about 22 percent. |
