July 28, 2005

Energy policy overhaul passes House, goes to Senate

By Tom Doggett and Chris Baltimore

WASHINGTON (Reuters) - The U.S. House of Representatives on
Thursday easily approved an energy bill packed with $14.5
billion in tax breaks and incentives and hailed by Republicans
as a major change in U.S. energy policy.

Environmental and consumer groups criticized the
legislation as a giveaway to an industry enjoying record
profits with crude oil prices near $60 a barrel, while spending
little on ways to curb demand or encourage renewable energy.

The bill passed by a vote of 275 to 156.

The Senate is expected to approve it on Friday, just before
Congress recesses for its summer vacation. President Bush is
expected next week to sign the energy bill, which he called one
of his top priorities in 2005.

"This legislation will help us reduce our dependence on
foreign sources of energy. It will help address the root causes
that have led to high energy prices," said White House
spokesman Scott McClellan.

Industry officials praised the bill.

"For the first time, our energy policy is coming together,"
said William Kovacs at the U.S. Chamber of Commerce.

Republicans admitted the bill won't cut oil imports in the
near term, which comprise about 60 percent of U.S. supply.

"As long as we're consuming 21 million barrels (a day) and
we're only producing 8 million, we're going to be importing
oil," said Texas Republican Joe Barton.

Consumers will be most affected by the bill's extension of
daylight-saving time by two weeks beginning in 2007, which
should save an estimated 100,000 barrels of oil per day.


Of the bill's $14.5 billion in tax breaks and incentives
over 10 years, nearly $9 billion is earmarked for oil and gas,
electricity and coal companies. Less than $5 billion will be
spent on energy efficiency and renewable energy programs.

Republicans say it will revive the nuclear power industry
by encouraging companies to build the first new plants since
the Three Mile Island accident in 1979. Coal is another big
winner, getting billions of dollars to cut pollution.

Energy companies will get royalty relief for production
from deep water in the Gulf of Mexico, an inventory of oil and
gas resources off Florida and other coastal states, and tax
breaks for enlarging existing oil refineries.

American farmers will benefit from the bill's requirement
to nearly double U.S. ethanol use to 7.5 billion gallons by
2012. Ethanol, refined from corn, is added to gasoline to make
it burn more cleanly.

Consumer groups complained that the legislation would hand
over billions in taxpayer dollars to the energy industry.

The U.S. Public Interest Research Group said it calculated
all the tax breaks, guaranteed loans and direct spending were
worth $25 billion to energy firms. "This bill keeps the oil,
coal and nuclear industry firmly in the driver's seat," said
Anna Aurilio, a PIRG spokeswoman.

Democrat Henry Waxman of California criticized last-minute
items added to the bill after House and Senate negotiators
halted debate. Among them was a $1.5 billion fund for drilling
research that would benefit an energy consortium based in House
Majority Leader Tom DeLay's Texas district, Waxman said.

A spokesman for DeLay defended the fund, saying it was in
the energy bill approved by the House in April. The measure was
not in the Senate's version of an energy bill.

Other Democrats said energy companies have ample profits to
fund new projects and don't need more subsidies. On Thursday,
Exxon Mobil Corp. reported a 32 percent jump in its quarterly
profits to $7.64 billion.

"Right now Adam Smith is spinning in his grave so fast that
he would qualify for a subsidy in this bill as an energy
source," said Democrat Edward Markey of Massachusetts. "This
bill is a political and moral and technological failure."

The final version of the bill dropped some environmentally
friendly measures, such as the Senate's requirement that the
federal government find ways to cut U.S. oil demand and improve
fuel mileage for gas guzzlers.

The next big energy issue Congress will deal with is a
Republican plan to open Alaska's Arctic National Wildlife
Refuge to oil drilling. That will be part of a huge budget bill
to fund the government, which cannot be filibustered.