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Saturday, November 15, 2003 - Page updated at 12:00 A.M.

Industry tax breaks fill GOP energy bill

By Seth Borenstein and Sumana Chatterjee
Knight Ridder Newspapers

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WASHINGTON — Congressional leaders yesterday forged a national energy bill that contains tens of billions of dollars worth of tax breaks and subsidies to oil, gas, coal and nuclear industries while emphasizing production over conservation.

A cornerstone of President Bush's energy policy — the controversial drilling for oil in the Arctic National Wildlife Refuge — was eliminated because of a lack of support in the Senate. Also missing is the oil industry's desire to test fo oil and natural gas along the Atlantic and Pacific coasts.

Details of the legislation remain under wraps to all but a handful of Republican lawmakers and their aides, who promised to make it public today. Those who wrote the bill, however, acknowledged the details may not look good.

"We know that as soon as you start reading the language, we're duck soup," said Senate Energy Committee Chairman Pete Domenici, R-N.M., one of the bill's two major authors.

Draft highlights

Major provisions in the Republican energy draft released yesterday:

• A doubling of ethanol production for gasoline to 5 billion gallons a year by 2012.

• Billions of dollars in tax incentives for producers of oil, natural gas, clean coal and nuclear power. The size of the tax package has yet to be made public, but discussions have ranged from $16 billion to $20 billion, most going to traditional energy industries.

• Authority and financial help to build a $20 billion pipeline to bring natural gas from Alaska's North Slope.

• Mandatory reliability requirements for high-voltage power lines and incentives to spur power-line production.

• Tax incentives aimed at improving energy efficiency of homes and some appliances and at encouraging use of renewable energy sources such as solar, wind and biodiesel.

• A requirement to speed up permits and easing of some environmental rules to promote energy development on public lands.

• Authority for the Energy Department to build a $1 billion reactor in Idaho to produce hydrogen, and tax breaks to spur development of six next-generation commercial power reactors.

— The Associated Press

The bill was negotiated by Republicans with no participation by Democrats, and its approval is less than certain. First it must clear a House-Senate conference committee.

Next it will go to the full House, which is expected to pass the bill easily, and the Senate, which is not.

In the closely divided Senate, many Democrats who complain that the bill favors production over conservation have hinted at trying to block it with a filibuster.

They could be joined by Republicans displeased with the bill's cost — up to $100 billion over 10 years — and a provision that would limit the liability of manufacturers of a fuel additive blamed for contaminating water supplies from California to New Hampshire.

Congress has struggled for years to come up with a national energy bill. This one reflects Bush's general philosophy to boost domestic production, but the overall costs are substantially higher than what the administration sought.

Lobbyists say there are at least $20 billion in tax breaks for the oil, gas and coal industries in the new bill. The size of the tax breaks may be a problem because the Senate allowed for only $16 billion worth of energy tax cuts in its annual budget while Bush wanted only $8 billion.

With subsidies, loan guarantees and direct spending, the total cost of the bill is well past $100 billion.

"It's an Iranian bazaar, not an energy bill. It's a leave-no-lobbyist-behind bill," said Sen. John McCain, R-Ariz. He vowed to oppose the measure. Industry lobbyists and some Republicans worry Democrats will filibuster to stop the bill.

"The comprehensive energy plan may not be the sexiest or most tangible legislation we pass this year, but there are few other issues that are more critical to job creation, our security, and our quality of life," said House Majority Leader Tom DeLay, R-Texas.

Over the years, there have been several energy problems, but it was the Northeast blackout in August that prompted legislators to rewrite decades-old laws governing electrical transmission, power-company ownership, reliability standards and connection costs for new power plants.

House Energy Committee Chairman Billy Tauzin, R-La., said the new bill would have some kind of federal, but still voluntary, oversight for new reliability standards.

While drilling for oil in the Arctic refuge is out, Congress would give the industry a loan guarantee, estimated at $18 billion, to build a natural-gas pipeline from Alaska to Chicago, Domenici said. Environmentalists also said the bill would increase drilling for oil and natural gas on public land in Western states.

The energy bill won't mandate an increase in car-gasoline mileage as environmentalists and many lawmakers wanted, Domenici said. But it will give the makers of a gas additive that taints water supplies protection from multimillion-dollar lawsuits, he said. Industry lobbyists said the bill adds $800 million to clean up tainted water.

To encourage farm-state Democratic support, the energy deal would eventually nearly double the amount of ethanol used in gasoline to 5 billion gallons.

There also is language allowing some smoggy areas, such as the Dallas-Fort Worth region, more time before they have to clean up their air, contrary to federal court orders that ban such extensions. Environmentalists complain this provision undermines the Clean Air Act.

Republicans say the bill would stimulate domestic energy production and create 1 million jobs.

"This is, in essence, a jobs bill," Tauzin said at a news conference. "This bill will begin the process of stopping the erosion of jobs in our economy."

Democrats were skeptical about the number of jobs promised and the bill.

"This is a grab-bag of goodies for special interests at a time when we desperately need a comprehensive energy policy to deal with the very real energy problems our nation faces," said Sen. Charles Schumer, D-N.Y.

Material from The Washington Post is included in this report.


Copyright © 2003 The Seattle Times Company

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