Congress' energy policy: tax breaks for oil and gas

By DON McINTOSH, Associate Editor

In closed door meetings the last several months, Congress went to work solving America’s energy problems.

Maybe you thought the problems were high gas prices, dependence on foreign oil, and pollution and global warming.

The problems they identified were that local electric monopolies can’t be easily combined into giant national companies, and oil, gas and other energy companies aren’t making enough money.

So Congress put together the Energy Policy Act of 2005.

It’s what Jeff Rickert, interim executive director of the Apollo Alliance, called “a missed opportunity.” The Apollo Alliance, a coalition of labor and conservation groups, was formed to promote an energy policy that would create good jobs and a clean environment. Its founders include the Steelworkers Union, the Sierra Club, and Washington Democratic U.S. Senator Maria Cantwell.

“The times call for big plans,” Rickert said. “Something like 92 percent of Americans say they’re concerned about energy independence.”

But the Energy Policy Act of 2005 — the biggest energy bill to come out of Congress since 1992 — does almost nothing to address America’s reliance on foreign oil, Rickert and other critics say.

Instead, at a time when oil and gas companies are reporting record profits, it gives $14.5 billion in tax breaks and direct subsidies to the oil, gas, coal, nuclear and electricity industries. Some $1.3 billion of that would support energy conservation, including tax credits for individuals purchasing efficient cars and appliances.

The law also encourages construction of new nuclear power plants through federal loan guarantees and other means.

And it pre-empts state authority over the siting of natural gas pipelines and liquification and gasification facilities, giving it instead to the Federal Energy Regulatory Commission.

Separate versions of the bill passed the House and Senate in April, and delegates from both bodies met in conference committee to hammer out those differences. Their compromise, weighing in at 1,700 pages, was then sent to the House and Senate to be passed in final form.

Two controversial provisions that had passed the House were removed from the final bill — one would have allowed oil drilling in Alaska’s Arctic National Wildlife Refuge; the other would have limited companies’ legal responsibility for a carcinogenic gasoline additive known as MTBE. [The Teamsters and the Building and Construction Trades Department of the AFL-CIO supported oil drilling in Alaska and lobbied Congress for its inclusion in the bill.]

California Congressman Henry Waxman discovered that after the Democratic negotiators to the House-Senate conference committee went home at 4 a.m. — thinking the committee had concluded its work — Republican House Majority Leader Tom DeLay of Texas inserted an additional provision. The new language called for the government to hire a private consortium controlled by the oil and gas industry to hand out over $1 billion to oil and gas companies. The consortium, located in DeLay’s home district, includes Halliburton, which Vice President Dick Cheney led as chief executive officer prior to taking office. It would be allowed to charge up to 10 percent, or $100 million, for “administrative costs,” to handle the grants, which would be used to fund oil and gas exploration.

Despite Waxman’s protests, the DeLay insertions remained in the bill, which passed the House July 28 by a vote of 275 to 156. It was supported by 87 percent of Republicans and 38 percent of Democrats. All Oregon and Southwest Washington representatives voted with their party’s majorities.

The bill passed the Senate the following day 74 to 26. Oregon’s Ron Wyden and Washington’s Patty Murray voted against it. Both are Democrats.

Wyden said he opposed it because it does nothing to reduce America’s dependence on foreign oil. “That’s not good enough when America is at war and our dependence on foreign oil is putting our citizens at risk each and every day,” he said.

One of the act’s lesser-known provisions is certain to have an impact on Oregon’s two large privately-owned electric utilities: The repeal of PUHCA, the Public Utility Holding Company Act of 1935.

Michelle Poyourow, an economist with the Portland-based Public Power Council, said PUHCA has had a sobering and stabilizing effect on the utility industry over the years, because it discouraged mergers that would create multi-state utilities.

Prior to PUHCA, state regulators were unable to control multi-state electric utility holding companies, Poyourow said. And a wave of mergers, financed by debt and stock schemes, resulted in high-cost electricity for consumers and a slew of utility bankruptcies. That scandal, most closely identified with Wall Street manipulator Samuel Insull, was the Enron of its day, and led to PUHCA’s passage.

Now, PUHCA’s repeal will lead to the loss of independent regional utilities, says Bob Jenks, executive director of the Oregon Citizen’s Utility Board (CUB). CUB, a non-profit organization created by a 1984 ballot initiative as an advocate for utility consumer interests, opposed the repeal of PUHCA. Jenks said the repeal could mean that electric utilities could be bought by unrelated companies, like oil companies, banks or insurance companies.

The repeal has already fueled interest in Oregon’s two big electric utilities — Portland General Electric (PGE) and PacifiCorp. Billionaire investor Warren Buffett is seeking state regulators’ approval for a company he owns to buy PacifiCorp. And Enron, which owns PGE, rejected a purchase offer from the City of Portland in favor of a plan to distribute PGE stock to its defrauded investors and stiffed creditors. At Portland-based Electrical Workers Local 125, the union that represents PGE employees, newly elected business manager Travis Eri said the stock distribution plan was the most appealing, because it would return PGE to its pre-Enron status as a stand-alone utility, and preserve the right of PGE employees to conclude their pension lawsuit. Because of PUHCA’s repeal, other companies would likely seek to buy up PGE stock to establish a controlling interest in the profitable utility.

In July, Governor Ted Kulongoski vetoed two alternative purchase proposals that the Oregon Legislature passed.

The Energy Policy Act of 2005 took five years to pass, and it’s not clear when critics like the Apollo Alliance will have another opportunity to debate energy policy.

The Apollo Alliance has advocated a plan for conversion to clean energy that it says would create 3 million jobs and free the U.S. from dependence on unstable and unsavory foreign regimes for its energy needs. The group’s name reflects its hope that the U.S. could undertake something as inspiring and significant as John F. Kennedy’s Apollo Project — committing resources to do what was then un-thinkable — send a man to the moon. Apollo envisions something similar for energy — a vast commitment to solving the nation’s energy problems. Apollo called for a public investment of $300 billion over 10 years, with provisions to ensure domestic job creation and efficiency and environmental gains. It would create a new generation of high-paid industrial jobs, and reduce emissions that contribute to pollution and global warming. The plan has the endorsement of the Oregon AFL-CIO and numerous other state federations, as well as by the Machinists, Electrical Workers, the American Federation of State, County and Municipal Employees, Laborers, Service Employees, and other unions.

Some of its ideas were contained in the New Apollo Energy Act of 2005, a bill sponsored by Washington Democratic Representative Jay Inslee. Inslee’s plan got nowhere in the Republican-controlled House.

The group hopes it can pass a scaled-down version of the Apollo idea at the state level. In Oregon, the group worked with State Representative Brad Witt, who is secretary-treasurer of the Oregon AFL-CIO, to introduce a bill in the 2005 legislative session. House Bill 3328 would have required an energy audit of public buildings, followed by retrofitting to improve energy efficiency. The House Environment Committee gave the bill several hearings, and referred it to the Budget Committee. Witt said it seemed unlikely the bill would get a vote.

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