Never knew a weekend could be so much fun! Late yesterday, while analyzing the various titles and awaiting the tax package, we wondered if it was not a bad idea to borrow some of those cots that Sen. Frist rolled out with great theatre last week. Speaking of bad ideas, we think we’ve found plenty in the 1,148-pp GOP energy bill. (We also found good things … but reporters don’t seem interested in those.) Now that Democrats have finally seen text and finished an initial analysis, discussions have started on potential amendments that may be offered when House and Senate energy conferees gather tomorrow for a second (and last) meeting. So, after 71 days of closed-door negotiations, Republicans have produced an energy conference report replete with serious deficiencies and larded with billions of dollars in special-interest giveaways. We tried to limit this list of problems to the traditional “dirty dozen,” but couldn’t: TOP PROBLEMS IN THE REPUBLICAN ENERGY CONFERENCE REPORT 1. Damaging Future Electric Grid Reliability and Discouraging New Electric Transmission through “Participant Funding,” a Cost-Shifting Gimmick – The basic lessons of the August 2003 blackout are that strong Regional Transmission Organizations are needed to ensure that any reliability rules are carried out, and that additional transmission upgrades are needed to maintain reliability. The “participant funding” provision shifts the costs of building new electric transmission such that transmission construction will be discouraged and utilities will be encouraged not to participate in Regional Transmission Organizations. This provision, which mostly benefits big utilities in the Southeast, thus works against the two needs highlighted by the blackout, and makes future blackouts more likely. In one of many special-interest fixes in the bill, it overturns a FERC decision in a dispute involving Louisiana-based Entergy Corporation that had gone against Entergy. 2. Ushering in an Era of Merger Mania for Electric Utilities – Repeals the public-interest restrictions on mergers now in law, with little protection for ratepayers when electric utilities acquire generating assets, or gas companies, even if it gives them the ability to dominate markets and gouge ratepayers. Mergers can be approved even if they result in corporate structures that prevent oversight by State regulatory commissions to protect their consumers. If merger proposals aren’t acted upon by the Federal Energy Regulatory Commission within 180 days (with a possible extension of another 180 days), they would be automatically approved. Many electric utilities are struggling with the financial consequences of past forays into businesses outside their competence – this provision will ensure that many more utilities can be acquired by companies with no track record in providing reliable and affordable electric service to consumers. 3. No Prohibition for Most of the Price-Gouging Schemes Used by Enron – Broad and effective prohibition against electricity market manipulation, supported 57-40 in the Senate this month, is excluded from the bill. 4. Legal Limbo for Federal Regulators of the Electric Utility Industry – Between now and 2007, any rule promulgated by the Federal Energy Regulatory Commission that would generally apply to electricity markets in a region or across the country will be subject to legal challenge under a provision that both says that such rules are prohibited and that the authorities and obligations of FERC haven’t been modified or diminished. The result is that all such rules will be trapped in endless litigation, and FERC will be powerless to respond to market crises like the California electricity crisis of 2000. 5. Dirtying the Air We Breathe – In a major rewrite of existing clean air law, postpones ozone attainment standards across the country. This is a matter never considered in either House or Senate bill that has been inserted into the conference report. 6. Liability Protection for MTBE Producers. – Provides immunity to MTBE producers (large petrochemical companies) from “defective product” liability arising from the contamination of groundwater supplies by MTBE across the country. In another particularly blatant special interest provision, terminates a lawsuit filed by the State of New Hampshire against the industry for groundwater pollution by reaching back to provide immunity as of September 5, 2003. The MTBE industry also benefits from a $2 billion “transition assistance” program (again made retroactive to benefit Texas producers that have already ceased production), while a “ban” in the bill of MTBE in 2014 can be overturned by Governors for their States and the President for the nation. 7. Failing to Secure Domestic Natural Gas Supplies – Fails to provide the necessary fiscal certainty to enable construction of the Alaska Natural Gas Pipeline, to prevent the U.S. from becoming dependent on imports of natural gas. The primary company interested in the Alaska pipeline has stated that it will not pursue it. 8. Endangering the Highway Trust Fund through a Flawed Ethanol Provision – Rewrites the bipartisan Senate ethanol provision in a way that provides no certainty to farmers that its goals will be reached, while threatening deep revenue losses to the Highway Trust Fund and the construction jobs it supports. 9. Threatening Water Supplies by Exemptions of Water Pollution Laws – Exempts all construction activities at oil and gas drilling sites from coverage under the runoff requirements of the Clean Water Act. Removes hydraulic fracturing (an underground oil and gas recovery technique) from coverage under the Safe Drinking Water Act. 10. Gutting the National Environmental Policy Act with Respect to Energy Production on Public Lands – Waives NEPA environmental review process for all types of energy development projects and energy processing facilities (e.g., refineries) on Indian lands, and NEPA compliance for drilling on public lands is subject to unrealistic time limits. 11. Raiding the Treasury for Billions for Regional and Special Interests – $1.1 billion in new direct spending from the U.S. Treasury to Gulf Coast States and Alaska; $1.5 billion in spending for “ultradeepwater oil and gas R&D” principally benefitting a consortium led by Texas A&M, the University of Houston, and Louisiana State University; $500 million for the Denali Commission in Alaska; tens of millions in special royalty payments to the State of Louisiana and 3 Texas- and Louisiana-based oil companies. 12. Preventing Taxpayers from Getting Fair Return for Use of Public Lands – Reduces royalties paid by energy developers for use of Federal lands. Limits the ability of federal land managers to review applications for access to Federal lands and to ensure a fair return to the taxpayers for the use of public lands. 13. Burning Old-Growth Forest for Energy – Authorizes $50 million for companies to remove trees, including large fire-resistant trees important for forest health, and burn them for energy. 14. Imperiling Coastal Resources – Grants the Secretary of the Interior new authority for oil and gas support facilities, even in areas on the Outer Continental Shelf under leasing moratoria; undermines protection of Padre Island National Seashore from impacts of oil and gas development. 15. Changing the Basic Relationship Between Indian Tribes and the Government – Undermines the federal trust responsibility to Indian tribes with respect to energy development on Indian lands. 16. Discriminating Against Tribes, States and the Public – Discriminates against tribes, States and the public in new appeals procedures for hydroelectric relicensing proceedings by letting only industry to initiate appeals. New “trial-type” procedures lets industry hold proceedings hostage for years. 17. Undermining the Senate’s Commitment to Hydrogen – Abandons the bipartisan Senate hydrogen title, reducing funding for hydrogen research, development and demonstration by $1 billion per year and deleting broadly-supported goals for introduction of hydrogen fuel cell vehicles. 18. Undermining Clean Coal – Reduces the percentage of authorized funds required to be spent on the cleanest coal gasification technologies by 20 percent, in favor of more polluting coal-based technologies. Adds pork-barrel loan guarantees for the first time in the 17-year history of program – without environmental safeguards. Creates a new, competing program of up to $1.8 billion Federal grants to utilities and other firms to purchase and install conventional coal-burning technology (reducing any future demand for cleaner coal technology). 19. Subsidies, Subsidies, Subsidies – Provides millions of dollars in direct incentive payments to mature energy industries (e.g., hydroelectric plants, new turbines at existing plants) to undertake equipment upgrades they would normally do otherwise. Authorizes a $1.1 billion nuclear reactor in Idaho, with exempt from normal Federal project management rules, to demonstrate uneconomic hydrogen production technologies. 20. Abandoning Broadly Supported Elements of a Balanced Energy Policy in the Senate Bill – Key issues commanding majority support in the Senate, such as a Renewable Portfolio Standard for electricity, requirements for measures to reduce dependence on foreign oil, and climate change policy and technology have been dropped from the conference report. # # #