Federal Energy Legislation: Gas Prices Drive Up the Rhetoric

Blog Post | May 24, 2006 - 8:00 pm

With gasoline prices hovering around $3 per gallon, and the prices of many other energy sources high as well, dozens of bills have recently been introduced in Congress to address our continuing energy problems. However, most of these bills are "message bills" designed to send a message back home rather than serious attempts to pass legislation.

In terms of whether any legislation will pass this year, that's very iffy. With Congressional elections coming up, there are only 39 days Congress will be in session after the Memorial Day recess, just enough time to deal with the most important issues. It's unclear if energy will "make the cut." Furthermore, energy bills tend to pass only when there is bipartisan agreement on provisions and it's unclear whether there is the inclination or time to get such agreement. On the other hand, if hurricanes again strike energy facilities in the Gulf of Mexico or if oil prices rise further, the chance of action will increase.

Given these considerations, there will be attempts by both the House and Senate to pass legislation. If legislation is enacted, many of the provisions are likely to deal with oil and natural gas supplies, such as provisions to encourage refinery construction or to open up an area off the Alabama and Florida (portions of Lease 181) coast to gas drilling. The focus is likely to be on oil but some other provisions could be included as well. From an energy efficiency perspective, provisions that could be enacted include the following:

Oil savings targets: Bills have been introduced to set targets for future oil savings, with targets increasing over time. The Executive branch would need to develop and implement a plan to meet the targets, and would need to regularly report on progress and take corrective steps if the targets were not being met. Meeting the targets would require some combination of energy efficiency with fuel substitution such as with bio and other alternative fuels.

CAFÉ authority: The President has asked to clarify Executive Branch authority to revise Corporate Average Fuel Economy Standards (CAFÉ), including moving to a system under which CAFÉ requirements vary with the average size of a manufacturer's fleet. There will be attempts made to require that in setting new standards, at least certain minimal targets be met.

Tax credit extensions: The 2005 federal energy bill included a variety of energy efficiency tax incentives (see www.energytaxincentives.org), most of which expire at the end of 2006. Some of these could be extended, such as credits for efficient new homes and commercial buildings. The credit for hybrid and advanced diesel vehicles could also be expanded by lifting the present cap of 60,000 vehicles per manufacturer before the credits per vehicle are reduced.

Regardless of whether legislation passes this year, energy issues are likely to be on the agenda when the new Congress meets in January since at best only a few issues will be dealt with this year, and many issues will remain unresolved. And if nothing happens this year, the pressure to do something next year will increase.