A Something-for-Everyone Energy Bill


To hear the rhetoric flying over President Bush's energy bill, you would think that this Capitol Hill battle was an all-or-nothing fight over opening the Arctic National Wildlife Refuge (ANWR) to oil drilling. Democrats have portrayed the Administration as little more than a stooge doing the bidding of the oil industry. Republicans have depicted Democrats as enviro-freaks more interested in protecting Alaska's caribou herds than in securing America's energy independence.

However, the energy bill is shaping up as a fairly sizable catch-all for oil and environmental interests alike. As often happens with large pieces of so-called omnibus legislation, the bill is being packed by lawmakers with a little something for everyone as it winds its way through Congress.

The high-stakes struggle over drilling in ANWR, which has been front and center for months, won't get resolved until a conference committee irons out the differences in the Senate and House bills this summer. The House bill, approved last year, calls for limited drilling. The Senate bill, being debated on the floor, is likely to be even more restrictive.

PIPE DREAMS. Beyond this contentious issue, however, a surprising amount of give-and-take is taking place. In some cases, the bill manages to please both environmentalists and energy companies. There's a method to this game: It sweetens the overall measure so that both sides are willing to cut a deal in the end to see all the assorted favorable provisions enacted into law.

Take the amendment added by Senate Majority Leader Thomas Daschle (D-S.D.) that would provide $10 billion in loan guarantees for construction of a natural-gas pipeline from Alaska to the lower 48. As it stands now, gas extracted on the North Slope has to be injected back into the earth because there's no way to send it south. A pipeline would provide a channel for the area's 30 trillion cubic feet of natural gas, 18% of U.S. reserves, according to the nonpartisan Congressional Research Service.

Along with reducing dependence on outside sources of natural gas, this would benefit Phillips Petroleum and Exxon Mobil, which would profit from the pipeline. The proposal is also favored by Senator Frank Murkowski (R-Alaska), who's running for governor in the state. But many environmental groups also support the pipeline. They argue that natural gas -- which is just going to waste now -- is a beneficial alternative to oil because it burns cleaner and is a more efficient fuel.

FARMERS' FRIEND. Another something-for-everyone provision involves one of the Plains States' favorite issues: the corn-derived fuel additive, ethanol. An unlikely alliance of industry and clean-air groups -- including the American Petroleum Institute, the Renewable Fuels Assn., the American Lung Assn., and Greenpeace -- is backing a provision to phase out the use of the suspected carcinogen MTBE (methyl tertiary butyl ether) from gasoline over four years. Their amendment would encourage production of more renewable fuels, such as ethanol and bio-diesel, a soybean-based additive, through subsidies to agribusinesses.

Every agricultural interest group from family farmers to industry giant Archer Daniels Midland likes that. Proponents insist that greater ethanol production would displace more than 1.6 billion barrels of imported oil and raise farm income while clearing the air. And that's music to enviro-ears.

Then there's George W. Bush, who argues that increased use of ethanol and more domestic production will undermine Iraqi dictator Saddam Hussein's threat to cut off oil exports and will "make sure he doesn't hold us hostage," as the President puts it.

BLOWING IN THE WIND. Big Business would get an additional break. The bill would repeal a Depression-era law that imposes limits on how much utilities can invest domestically. The Public Utility Holding Company Act of 1935 was originally aimed at protecting consumers from the electricity-generating giants that dominated the markets in the early 1900s. Today, the law perversely gives utilities an incentive to move investments overseas because it restricts the utilities' size in the home market. Repeal is being pushed by utility holding companies like Des Moines (Iowa)-based MidAmerican Energy Holdings, which is 75%-owned by Warren Buffett's Berkshire Hathaway.

Environmental groups have had their scores, too. Case in point: An amendment to the Senate bill would require utilities to generate 10% of their electricity from renewable sources such as solar or wind power by 2020. Right now, the figure is about 2%.

The Senate version is expected to pass sometime in the next few weeks. And the House bill already includes key Bush priorities -- a slight increase in fuel-economy standards and more than $30 billion in tax incentives for energy companies and some energy consumers. When conferees from both houses sit down to iron out their differences this summer, they'll have a veritable grab bag of goodies to spread out on the table to entice votes for final passage. By Laura Cohn in Washington


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