All eyes on renewables as Sen. Bingaman sprints to finish markup

By KATHERINE LING
Greenwire
New York Times
May 18, 2009

The Senate Energy and Natural Resources Committee will attempt to finish marking up comprehensive energy legislation this week, including a renewable electricity standard, if Chairman Jeff Bingaman (D-N.M.) and panel members can work out an agreement by Thursday.

Tomorrow, the committee will mark up provisions on nuclear waste, cybersecurity and a refined petroleum products reserve. Thursday, the panel could take up the renewable electricity standard, or RES, as well as remaining provisions on building efficiency, oil and gas development on public lands, carbon capture and sequestration, and energy market regulations.

Last week, Bingaman said that he had reached a "general agreement" on a RES, which requires utilities to supply increasing amounts of power from sources like wind, solar and biomass, but added he was not ready for an official announcement.

According to a committee aide, senators have agreed to a 15 percent standard with about 4 percent that could be met by energy efficiency. But it appears options like an "off ramp" if prices get too high and other details such as what sources for biomass are eligible are still on the negotiating table.

Whether the RES will show up on Thursday's schedule depends on Bingaman getting three votes, most likely from Democrats Sens. Blanche Lincoln of Louisiana, Evan Bayh of Indiana and Debbie Stabenow of Michigan. If Bingaman could get a Republican to sign on, he would only need two of the three Democrats to support the final bill.

If the committee cannot find a compromise on an RES, the matter is likely to be taken up on the floor, according to Bingaman.

The House Energy and Commerce Committee negotiated a compromise of 15 percent by 2020 and utilities must provide an additional 5 percent energy savings from efficiency measures. But the renewable energy target could fall to 12 percent for a state if the governor rules that utilities cannot meet the mandate, much to the disappointment of many environmental groups.

Earlier this month and in March, the committee marked up provisions on appliance efficiency; energy and water nexus; the manufacturing sector's efficiency; workforce training; a clean energy bank administration; and transmission siting, planning and financing.

Tuesday

The committee's first battle this week will be on nuclear waste, and panel Republicans are keen on expanding the role of nuclear power in the comprehensive energy measure.

"I think it is imperative that we offer more in terms of a policy statement on where we go with nuclear in this country," ranking member Lisa Murkowski (R-Alaska) said earlier this month. "We want to advance something that states very clearly that nuclear is a part of that policy, and we need to be up-front and rational about how we deal with the waste issues."

Murkowski plans to offer an alternative nuclear amendment that would increase incentives for the construction of new nuclear units by expanding the production tax credit offered in the 2005 Energy Policy Act from 6,000 megawatts to 12,000 megawatts. The expansion would allow about 10 more reactors to benefit from the incentive. It would also create a 10 percent tax credit for construction expenditures for advanced nuclear reactors and setup a public-private cost-share program for two commercial reprocessing centers.

The Republican plan would also place stricter timetables and targets for a blue ribbon commission, which is the main focus of Bingaman's draft bill.

Bingaman's 11-member commission would have two years to study alternative solutions for the nation's nuclear waste, including permanent disposal in a repository, long-term storage on-site, long-term storage in one or more regional sites, reprocessing or a combination of them. The commission would also review and identify mistakes made in the repository project at Yucca Mountain, Nev.

Perhaps courting more Republican votes, Bingaman also added language directing the commission to study all aspects of opening a commercialized reprocessing facility -- including waste forms, environmental and health impact and cost, whether nuclear waste management may best be handled by a private corporation or other federal entity, and an examination of the management of funding nuclear waste solutions.

With President Obama's budget proposal cutting almost all funding for the Yucca Mountain repository, Sen. John McCain of Arizona and other Republicans have pushed for the government to give back the more than $20 billion in fees nuclear energy consumers have paid to fund the repository. McCain has said he may offer an amendment requiring such refunds.

For the refined petroleum products reserve, Bingaman's draft bill would empower the Energy Department to decide what type of products and storage location would be most useful and least costly. The 30-million-gallon reserve could only be used in times of severe supply disruption, such as the gasoline shortage that traumatized the Southeast last fall after Hurricanes Gustav and Ike.

Murkowski said she is still not convinced the reserve is necessary given the expense and logistics of keeping the products that must be rotated much more often than crude oil. "This may be an idea whose time hasn't come," she told reporters last week.

But Sen. Bob Corker (R-Tenn.), whose region has been especially affected by refined product shortages, said the idea may have merit but also does not account for "panic" buying, which may use up supplies before the reserves can reach the problematic region.

As for cybersecurity, it appears the real debate is between regulators and industry about how far the Federal Energy Regulatory Commission's authority should reach into the grid, and whether the committee acquiesces to industry's request that emergency and interim rulemaking authority lie within one authority, preferably FERC.

The Bingaman cybersecurity draft would give DOE 90-day emergency authority to order utilities to enact certain measures to protect their systems from an attack. It would also give FERC authority to order interim rules -- with or without public hearings -- to protect the grid from vulnerabilities, which are identified to be a problem in the short term.

Calls for enhanced protection for the nation's critical electric infrastructure have increased recently as reports of cyber attacks on the system from Russia, China and other foreign entities have increased and the grid is becoming more digitized to take advantage of efficient and intelligent management of electricity, also known as the "smart grid." The White House and industry officials will hold a meeting today on the plan to develop smart grid standards, including cybersecurity.

Thursday

The schedule has not been finalized yet for the provisions that will be marked up Thursday, but Bingaman said last week building efficiency codes would be on the schedule.

The committee released a new building efficiency draft bill (pdf) last week that would require a review of building codes at least every three years to reach a 30 percent energy savings through 2010, based on 2006 standards, and 50 percent by a yet determined time. DOE would provide technical assistance for creating the new model codes and the draft provides an exception if federal funding is less than $50 million per year.

Bingaman's draft would also create a grant to improve building efficiency in multifamily units and manufactured housing constructed before 1976. DOE's weatherization assistance program would receive $1.7 billion and $250 million would be allocated for the state energy program, both for fiscal 2011 through 2015. It would also provide grants linked to set levels of efficiency savings in residential and commercial buildings achieved through retrofits made available through the state energy efficiency grant programs.

Also included in the draft is a framework for voluntary advanced model codes, building labeling programs and federal efficiency, renewable energy and performance contracts. The draft says the goal is to achieve 2.5 percent per year efficiency improvement of overall energy productivity each year to 2012 and to maintain that rate to 2030.

The rest of Thursday's schedule is more uncertain, but Bingaman has introduced a bill on carbon capture and sequestration (CCS), draft bills for energy market transparency and "cease and desist" authority for FERC in the natural gas markets that have yet to be marked up.

Bingaman held a hearing on the bipartisan CCS bill last week, but the measure has yet to convince Murkowski, who questions the precedence for such a policy and the financial risk for undertaking liability for 10 large-scale demonstration projects. The bill would authorize DOE to indemnify parties and provide financial and technical assistance for the demonstration projects, which aim to show the commercial application for "integrated" systems for capture, injection, monitoring and long-term geologic storage.

Corker said he was skeptical that transportation and sequestration of carbon emissions on a large scale would ever be possible, given the siting problems for transmission and to some-extent natural gas pipelines. "Are we talking 'when pigs fly' scenario?" Corker asked last week. The senator said he would rather see more focus given to projects that utilize carbon emissions, such as growing algae to make biofuel or to capture it in concrete.

Under Bingaman's draft energy market transparency bill, the Energy Information Administration -- DOE's statistical arm -- would incorporate activities in the energy commodity futures market under its purview for the first time. Under the bill, if an entity owns energy futures contracts or swaps over a level to be determined by the DOE secretary, EIA would assess the amount of physical product and storage the company owns and the quantity of contracts it is buying and selling.

EIA would also collect company data identifying the ownership of all commercial inventories of oil and natural gas, the volumes of the product, and the storage and transportation capacity. The draft bill would also create a working group on energy markets led by the secretary of Energy and include the heads of FERC, the Commodity Futures Regulatory Commission, the EIA and others that would investigate how the investment in energy commodities has affected energy prices and energy security, including the price formation of crude oil and refined petroleum products, the status of relevant international regulatory regimes and market transparency. A final report on their review and recommendations would be due to the committee in one year.

But EIA's acting administrator, Howard Gruenspecht, said in a hearing in March it would be difficult for the agency to undertake such data collection and oversight of the markets. And if the data is intended to be used for regulatory purposes, EIA may not be the best choice. "We are not a regulator," he said.

Finally, Bingaman has a draft bill that allows FERC to issue a temporary "cease and desist" authority to prevent actions that would inflict "significant harm" on the natural gas market or the public and allows the commission to temporarily freeze or cancel electricity rates in the case of an emergency to ensure continued reliability of service or to protect customers from potential abuse of market power or market manipulation in wholesale markets. Both emergency authorities could be given with or without a public hearing. They build on expanded enforcement authority given to FERC in the 2005 Energy Policy Act after the 2000-01 California energy crisis.

Sen. Maria Cantwell (D-Wash.) said she would like additional provisions that would allow FERC to retroactively change natural gas rates if the commission finds them to be unjust or unreasonable anytime starting from the time a complaint was submitted until 150 days after it was submitted -- a provision the natural gas pipeline industry does not favor.

Oil and gas provisions

Bingaman has yet to release any drafts on the issue of oil and gas drilling on public lands. But Bingaman has said there needs to be better information about the energy potential of the outer continental shelf (OCS) and an undated draft obtained by E&E earlier this month would authorize funds to inventory offshore petroleum reserves, the potential alternative energy resources and an assessment of navigation and fisheries. A committee spokesman had no comment on the draft (E&ENews PM May 8).

The draft would give two years and $400 million for the inventory, which would focus on areas thought to have the greatest resources that have not been leased and are not scheduled to be leased soon. Recreation, habitat, conservation and military use would also be analyzed. It would also lower barriers to the "co-production" of geothermal energy at oil and gas sites and make the head of the Minerals Management Service a Senate-confirmed position.

Also considered by the draft would be land and resource rights, to create a lease and permit processing office for Alaska's OCS region, and to extend funding past 2015 for a program to streamline and coordinate the onshore oil and gas permit program created by the 2005 EPAct. The draft would authorize $20 million annually for fiscal 2016 through 2020.

Taking up the oil and gas provision would also provide an opening for Republicans and some Democrats to renew discussions on expanding domestic drilling -- a topic that heated up during last year's high gasoline prices.

Murkowski has also noted her interest in having more coastal states share in federal leasing and royalty revenues, but Bingaman opposes such a plan.

Schedule: The nuclear, cybersecurity, refined product markup is tomorrow at 2:15 pm in 366 Dirksen.

Schedule: The second TBA markup is Thursday at 10 a.m. in 366 Dirksen.

Reporter Peter Behr contributed.

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