This year is shaping up to be a monumental struggle between some of the most influential leaders in Congress and the country as energy bills work their way through the legislative process. Big coal, big oil and big autos are lined up against big environmental and the renewable constituencies, backed by many of America's leading investors.

The show-down is taking place throughout this summer and will go into the fall, under the best of circumstances. Not since the debate on the 1990 Clean Air Act has there been such a divisive scenario.

House Resolution 2337, pushed by Rep. Nick Rahall (D-WV), was the main focus at press time. The bill would roll back many of the upstream-friendly provisions of the Energy Policy Act of 2005, and would limit energy development on public lands in the Intermountain West, a region vital to the nation's energy supply.

Both sides of the aisle have challenges. Despite the desire to legislate quickly, Democratic leaders are struggling to create a comprehensive policy that balances exploration for more resources here at home, an acceptable policy to use the enormous coal resources the U.S. possesses, and addressing climate change while preserving the industrial base.

Optimistically, House Democrats have saved tackling a mandatory emissions cap-and-trade climate change bill for the fall. But leading handicappers in Washington suggest that energy policy will require much more effort and thought than is currently built into the schedule.

While the legendary John Dingell, chairman of the House Energy and Commerce Committee, presides over the initial effort in his committee, it is clear that a significant number of members of his own party will not follow his lead. It appears as though House Speaker Nancy Pelosi has plans of her own as to just how much big oil and big autos ought to "donate" to the legislative effort.

Meanwhile, Republicans must decide whether to engage in this debate and help to move legislation along, or oppose it. Without some Republican support, the possibility of enacting legislation will be slim at best, and given President Bush's call for a reduction of 20% in gasoline use, and 35 billion gallons of renewable fuels, it seems likely they will want to contribute.

Many of Congress' new members are determined to change the direction of the nation's energy policy. Other than Iraq, the twin issues of climate change and energy security have dominated much of the discussion. July 4, Independence Day, became the rallying point for the Democratic leadership, as it wanted to promote energy independence. The Senate and the House scheduled votes on comprehensive energy legislation in the weeks leading up to the Fourth of July celebration.

The debate is being waged on an entirely different field of play than as has been during the past six years, and the results, if they culminate into law, will send a very different signal to the world about the focus and shape of American energy policy.

Lee Fuller, vice president of the Independent Petroleum Association of America (IPAA), says Americans will continue to require more energy. He says that, at a time when the U.S. needs more natural gas, Title 1 and Title 2 of HR 2337 create new barriers to its development. "Taken together, these provisions will result in reduced supply of natural gas to American consumers-industry, farms and communities."

Marc W. Smith, executive director of the Independent Petroleum Association of Mountain States, says, "One has to wonder why Congress would vote for legislation that will decrease domestic supplies of oil and natural gas at a time when consumers are already suffering from high prices.

"Natural gas production in the Intermountain West has increased nearly 70% since 1996, and proved gas reserves in the region grew from 46 trillion cubic feet to 61 trillion between 2000 and 2006-an increase of over 32%. As of last year, the Intermountain West's proved crude oil reserves accounted for nearly 12% of total U.S. Lower 48 reserves."

IPAA executive director Barry Russell says, "HR 2337 is a step backward...It will increase bureaucracy, snarl the permitting process and limit the ability of American producers to invest in American energy.

"There are still members of Congress who fail to recognize that energy legislation designed to limit American access to American energy resources will ultimately deplete supply and boost consumer energy prices."

Other major elements of this energy-policy debate include increasing the amount of mandated renewable fuels used in the U.S., requiring a low-carbon-intensity fuel standard for all of U.S. fuels, and raising the Corporate Average Fuel Economy standard (CAFE) for mileage of all vehicles.

Congress is also debating whether to allow coal-to-liquids to contribute to any alternative/renewable fuels standard on which the Congress may agree, and how to change the tax code to pay for new incentives, while repealing other deductions to pay for them.

The new controlling party will be certain to attempt to raise taxes on the oil industry as a response to record profits and raising prices at the gas pump. Already the House of Representatives has passed HR 6, which repeals many of the tax benefits conferred on oil and gas companies that are part of the Energy Policy Act of 2005. According to the tax estimators for budget purposes, HR 6 garners about $8 billion worth of credits to dole out to providers of alternative fuel sources such as wind and biofuels.

This scenario has representatives of the oil and gas industry scrambling to defend their constituencies. So stay tuned.



-Michael J. McAdams is a lobbyist and executive director of government affairs for Hart's Downstream Energy Service Group in Hart Energy Publishing's McLean, Virginia, office. He can be contacted at mmcadams@hartenergy.com.





Some Major Provisions of HR 2337

Cost Recovery (Section 101) Prohibits use of rental fees to pay for BLM pilot offices. Enacts Bush administration's proposal to impose cost-recovery fees for processing drilling-permit applications.

Permit Processing (Section 102) Repeals provision included in 2005 Energy Act, which created 30-day time frame for BLM to process onshore oil, gas permits.

Categorical Exclusions (Section 105) Eliminates provisions in Energy Act that allow use of categorical exclusions to streamline federal permitting process by excluding five types of activities from NEPA process.

Surface Owner Protection (Section 221) Requires oil, gas operators to notify owners in advance of operations and secure written surface-use agreement with the surface-owner.

Water Resources (Section 223) Requires onshore oil, gas operators to replace underground and surface water, and requires producers to submit water-management plans.

Due Diligence Fee/Healthy Lands (Section 224) Imposes $1-per-acre fee on nonproducing federal onshore oil, gas, coal leases.

Source: IPAA