To say it’s been a busy month of September in Washington, DC is a bit of an understatement. Congress returned from its August recess early in the month and hit the ground running. Energy, as expected, was a leading topic of debate and deliberation. It was ultimately pushed aside by the U.S. financial crisis and by a decline in the price of oil, but one can be sure that energy will once again be front and center in the New Year.
As I write this, Congress is close to adjourning, almost a week later than planned. Both House and Senate had hoped to have concluded legislative business by Friday, Sept. 26, but that didn’t happen. Among other things, the financial crisis intervened.
Before I address the financial crisis and the rescue package, which curiously now has an energy component, let’s review what’s happened on the hill on the energy front.
Offshore Development. As reported in an “On the Hill” email update in mid-September, the U.S. House of Representatives at long last took up debate mid-month on opening U.S. offshore oil and natural gas resources to development. Both Democrats and Republicans introduced bills, the Republican bill being the Peterson-Abercrombie bi-partisan bill (HR 6709) mentioned in the email. It lost, however, to the Democrat bill because Democrats have the most votes these days. The bill that passed (HR 6899) would allow offshore development from 50-100 miles offshore subject to the approval of the state to which the offshore acreage corresponds. From 100 miles outward there would be no restrictions on development, except in Florida where restrictions passed previously would remain in effect. The bill that passed would allow no oil and natural gas development from the coastline through 50 miles offshore (effectively extending the moratoria in this zone). The Democratic bill also did not include revenue sharing for the coastal states impacted and imposed $17 billion in taxes on domestic oil and natural gas producers, including, apparently, small domestic onshore producers.
The bill that passed the House, however, will not become law, at least not before the election because the Senate opted not to tackle the offshore issue before the election recess. The Senate leadership concluded that there were going to be substantial differences between the House and Senate bills and that it was too close to the elections to be able to come to agreement. The Senate bill that was gaining traction was one being championed by the so-called “Gang of 20” co-lead by Senators Conrad (ND) and Chambliss (GA). So unless there’s a “lame duck” session after the election, there is not likely to be any offshore bill until the new Congress in January and under a new president. It is, however, looking likely that at least the Senate will convene for a few days the week of Nov. 17, so anything is possible. The terms of the House adjournment has apparently left open the possibility of such a session in the House in November as well.
Continuing Resolution. Since Congress didn’t complete the appropriations process this year it was necessary that a Continuing Resolution (CR) be passed by both Houses and signed by the President by Sept. 30, to keep government running past that date. The $600 billion plus CR (HR 2638) that passed and was signed by the President on the 30th will run through March 6, 2009. For most departments and agencies, including the U.S. Department of Energy, funding until then will be at last year’s levels. By March 6 congress will have to pass an omnibus budget covering the remainder of the fiscal year, about the same time they’ll be beginning work on the FY 10 appropriations bills. The biggest energy consequence of the CR was that it did not include, as it has for many years now, the moratoria on offshore drilling. It’s assumed that the House and Senate leadership realized that there was no harm in letting the moratoria expire. Besides giving them the ability to claim before the election that they had responded to the public’s demand that the offshore be opened to development, they undoubtedly realized that legislation clarifying what can and can’t be drilled would be passed long before the Minerals Management Service completed their Five-Year Plan, a necessary precursor to any new development.
Tax Extenders Bill. For some months now there has been an effort to pass what has come to be called the “tax-extenders” bill. It is a bill to extend certain expiring tax credits, mostly for renewable energy and energy efficiency. The bill also includes a lot of other things, including a patch for the alternative minimum tax, disaster aid, new taxes on the oil industry, as well as tax breaks for refineries using oil from unconventional sources. According to the Washington Post, it has come up 10 times on the Senate floor since June 2007. The problem has been that the Senate and House haven’t been able to agree as to the terms of a bill. The primary difference is that the House legislation would fully offset all of the business tax breaks contained in the bill whereas the Senate legislation would only partially offset those revenue losses. Furthermore, many of those offsets are tax increases aimed at the oil and natural gas production industry. It is one reason that House Republicans have supported the Senate extenders bill rather than the House extenders bill. This brings us to the next and last topic.
Financial Rescue Legislation. I mentioned at the beginning that the financial crisis and passage of a rescue bill has assumed center stage in Washington but now curiously also contains an energy component. That component is none other than the Senate Tax Extenders Bill, inserted by the U.S. Senate as a part of their proposed financial rescue package. That package passed the Senate on Oct. 1, by a vote of 74-25. The Senate vote followed by 3 days the House vote which rejected the administration and congressionally negotiated rescue package by a margin of 228-205. For many of us who’ve lived in Washington a while, the Monday House vote was one of the most shocking and surprising votes we’d witnessed and its impact on the stock market, as we all by now know, was immediate.
As readers will no doubt be aware by now, the House upon reconsideration of the rescue bill on Friday, Oct. 3, 2008, passed it by a vote of 263-171. What the House passed was exactly the same bill (HR 1424) as cleared the Senate on Oct. 1. The bill was modified noticeably, however, from the bill initially rejected by the House. The “sweeteners,” in addition to the tax extenders provisions, also included an increase in the amount of FDIC insurance on individual depositors from $100,000 to $250,000, as well a provision allowing the Securities and Exchange Commission to suspend “mark to market” accounting rules that required companies to mark down assets to estimated market value. In the interim House members had also been lobbied intensively by a coalition of groups from business to labor that advocated passage of the bill.
It’s also been announced that the House will hold its opening session of the 111th Congress on Jan. 6, 2009, with the counting of the electoral votes for president occurring on Jan. 8.