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As War with Iraq Looms, Little Help on the Oil Front


With President Bush ramping up the rhetoric on Iraq, you might expect Washington to be working overtime to reduce U.S. dependence on Middle East oil. After all, a war with Baghdad could disrupt international oil supplies and cause a price spike that would hammer corporate profits.

But Congress is about to produce Energy Lite. As lawmakers put the finishing touches on a bipartisan energy plan, key elements of the President's agenda are missing, including building at least one power plant a week through 2020. The package, in the final stages of talks between the House and Senate, is likely to be a setback as well for Vice-President Dick Cheney, who oversaw the White House energy plan and is in court battling to keep secret the details of its development.

Bush's aggressive drill-and-pump plan hit a wall after strong public opposition doomed drilling in Alaska's Arctic National Wildlife Refuge. The end of California's energy crisis also diminished the sense of urgency for new power plants, and the corporate crime wave made it more difficult to justify sweeping tax breaks to energy concerns. A handful of smaller tax incentives is likely to pass, though at $20 billion, they are far less than the $37 billion proposed by Republicans. And the Federal Energy Regulatory Commission's finding that three companies may have manipulated California prices undercut another Bush priority: utility deregulation. Bush wants to repeal the Public Utility Holding Company Act, the 1935 law that limits utility mergers.

Congress may well have ended the year without adopting an energy bill of any sort were it not for the looming confrontation with Saddam Hussein. While the U.S. is not a significant importer of Iraqi oil, tension in the region might threaten supplies from nearby nations. And lawmakers don't want to be blamed for failing to act in the face of a potential energy disruption. "Congress won't want to go home without [passing a bill]," says Thomas R. Kuhn, president of Edison Electric Institute, the utility lobby.

That means deals that give both sides small victories. Conservation-minded Democrats are likely to win some efficiency measures such as tax credits for hybrid vehicles. And Republicans may get a little more than half the oil, clean coal, and natural gas production incentives they wanted.

In addition, the bill will contain some fat political goodies. Corn growers will get a windfall from a requirement that oil refiners add more ethanol, the corn-derived fuel additive, to gasoline. This could lead to a near-tripling in yearly ethanol sales, from $2.4 billion to $6.8 billion, by 2012. Senate Majority Leader Tom Daschle (D-S.D.), House Republicans, and the White House all favor the new mandate. The issue is crucial to Daschle's home state, where fellow Democratic Senator Tim Johnson is in a tight race with GOP Representative John R. Thune.

While energy interests fell far short of what they hoped for when a onetime Texas oilman moved into the White House, industry supporters will take what they can get. "We don't want to miss this chance," says House Energy & Commerce Committee Chairman W.J. "Billy" Tauzin (R-La.).

Environmentalists succeeded in protecting the Alaskan wilderness, but they are unhappy that the Senate backed away from higher fuel economy standards. "Congress should be embarrassed," says Anna Aurilio, legislative director at U.S. PIRG, the lobby for the Naderite state Public Interest Research Groups. "They've missed an opportunity to decrease dependence on foreign oil." As Washington moves toward another face-off with Iraq and the possibility of an energy crunch, President Bush may well agree. Give the flyboys an "A" for effort. As part of an Air Force campaign to avert more cuts in its F-22 Raptor program, the service has renamed the aircraft the F/A-22. By adding a single letter, the Air Force is trying to convince Pentagon and congressional skeptics that the Cold War-era plane is not just an air-to-air fighter but also can attack ground sites. Critics say the Raptor--with or without a new name--still has too short a flight range at a time when access to bases in the Middle East and elsewhere remain uncertain. With President Bush praising his good friend Teddy Kennedy in speeches across the country, Republicans have been forced to find a new Public Enemy No. 1 to vilify. The landslide winner: New York Senator Hillary Rodham Clinton. In the latest example, GOP TV spots say that Democratic Senate candidate Ron Kirk of Texas would vote with Clinton, while rival John Cornyn would support Bush. The ads fail to note that, as Dallas mayor, Kirk backed Bush's 2001 tax cut. To cope with rising health-care costs, Uncle Sam is joining a handful of companies and giving some employees an annual allowance for health benefits, a controversial option known as consumer- driven health care. As of January, 2003, some 4 million people in the Federal Employees Health Benefits Program will be eligible. Critics say the plan encourages consumers to skip doctor visits and forgo preventive care.


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