Do big energy companies need incentives to drill for oil in the Gulf of Mexico? President Bush doesn't think so. On Apr. 20 he told the U.S. Hispanic Chamber of Commerce: "With oil at more than $50 a barrel, energy companies do not need taxpayer-funded incentives to explore for oil and gas." But on Capitol Hill, lawmakers figure they know better than any former oilman. The energy bill under consideration on the Senate floor would reduce royalty payments for oil and gas producers drilling in federal waters -- a break worth almost $100 million over 10 years, according to the nonpartisan Congressional Budget Office.
After two attempts, Congress appears ready to move a major energy bill, and industry and lawmakers are piling on. The bill's authors have included a slew of sweeteners to reward narrow slices of the energy industry. These targeted receipts are usually located in the districts and home states of powerful leaders -- or of wavering lawmakers whose votes are needed. Business lobbyists, who haven't had a significant energy bill to carry pet projects since 1992, are positively giddy.
But some of the breaks may be too over-the-top even for Congress. The House version, for example, includes about $2 billion to help producers of gasoline additive MTBE. The argument: The feds required MTBE or other oxygenators to help gasoline burn more cleanly until it was discovered that the chemical was contaminating groundwater; now they should help producers switch to making different additives. House Majority Leader Tom DeLay (R-Tex.) wants to go further by protecting MTBE makers from liability. The fight over the additive killed the bill in 2003, and Senate Energy Committee Chairman Pete V. Domenici (R-N.M.) says he doesn't want any MTBE provisions in this year's bill. Grouses Senator Richard J. Durbin (D-Ill.): "The House bill is just a gusher of giveaways to the oil patch."
But the Senate has been fertile territory, too, for lobbyists wildcatting for obscure goodies. This year's favorite theme: Anything that can claim to promote cleaner use of coal deserves a break. For example:
-- The Basin Electric Power Cooperative in North Dakota would benefit from loan guarantees in the Senate bill for the construction of a clean lignite-coal facility. That may help win the support of Senator Byron Dorgan (D-N.D.) to whom the co-op's PAC donated $6,500 in the 2004 election cycle. "We talk to our congressional delegation all the time on this and a lot of issues," says Basin Electric spokesman Daryl Hill.
-- Senator Ken Salazar (D-Colo.) pushed through loan guarantees for a coal gasification project "at an altitude of greater than 4,000 feet." Such curious specifications don't come out of thin air: Critics figured this one was designed to benefit Xcel Energy (XEL), a utility serving Colorado. But Salazar's provision drew headlines when Public Citizen, a Ralph Nader-founded group, discovered that it could also cover DKRW Energy, a company set up by four former Enron Corp. executives. A spokesman for Salazar says he backed the plan to prove that gasification can work at Colorado's mile-high altitudes, not to benefit any specific company.
-- The House bill establishes a consortium to dole out up to $2 billion over 10 years for oil-drilling research. The most likely candidate to handle the money: The Research Partnership to Secure Energy for America, a nonprofit in DeLay's home town of Sugar Land, Tex. That group shares members and office space with the Texas Energy Center, whose executives have made contributions to DeLay's campaign.
Even when Congress isn't doling out dollars, it's changing rules to help industry. If the Environmental Protection Agency rejects refineries' permits to operate in certain areas, the House bill would let them appeal to the Energy Secretary -- a friendlier judge, critics say. Another clause would let natural gas drillers use "hydraulic fracturing" to crack open coal beds -- sometimes injecting diesel fuel directly into the ground -- without having to worry about the Safe Drinking Water Act. Halliburton (HAL) Co. is among the companies employing the method.
Energy companies argue that these breaks are policy -- not pork -- needed to reduce dependence on foreign oil. Supporters of offshore royalty relief, for example, say it will spur exploration for domestic natural gas and inject over $500 million into the economy.
But critics say the incentives are just not necessary. "The only beneficiary is the bottom line of these companies," says Keith Ashdown, vice-president of Taxpayers for Common Sense. "It will really do little to increase production." Exxon Mobil (XOM), a beneficiary of the royalty proposal, would not comment on the bill's specifics but released a statement saying the company "supports passage of comprehensive energy legislation." Comprehensive, in this case, means big enough to shoulder the weight of many wish lists.
Corrections and Clarifications
"Lobbyists are gushing over this energy bill" (Washington Outlook, June 27) described a proposal to select a consortium to handle $2 billion in federal funding for oil-drilling research. The proposed consortium will manage $1.5 billion for research on extracting natural gas and oil; the remaining $500 million is earmarked for the National Energy Technology Laboratory.