Energy Policy Act of 2005

The Energy Policy Act of 2005 (Pub.L. 109-058) is a statute that was passed by the United States Congress on July 29, 2005 and signed into law by President George W. Bush on August 8, 2005 at Sandia National Laboratories in Albuquerque, New Mexico. The Act, described by proponents as an attempt to combat growing energy problems, provides tax incentives and loan guarantees for energy production of various types.

Contents 1 Provisions 2 Provisions in the original bill that were not in the act 3 Tax reductions by subject area 4 Congressional Budget Office (CBO) cost estimate 5 Change to daylight saving time 6 Commercial Building Deduction 6.1 Energy Management 7 Criticisms 8 Legislative history 8.1 Analysis 8.2 Senator Wyden's Objections 8.3 Senator Clinton's Objections 8.4 Preliminary Senate Vote 8.5 Conference Committee 8.6 Final Senate Vote 8.7 Legislative History 9 See also 10 References 11 External links 11.1 Government 11.2 News 11.3 Non-Profit

 

Provisions

• Authorizes loan guarantees for "innovative technologies" that avoid greenhouse gases, which might include advanced nuclear reactor designs (such as PBMR) as well as clean coal and renewable energy;

• Increases the amount of biofuel (usually ethanol) that must be mixed with gasoline sold in the United States to triple the current requirement (7.5 billion gallons by 2012);

• Seeks to increase coal as an energy source while also reducing air pollution, through authorizing $200 million annually for clean coal initiatives, repealing the current 160-acre cap on coal leases, allowing the advanced payment of royalties from coal mines and requiring an assessment of coal resources on federal lands that are not national parks;

• Authorizes subsidies for wind energy, and other alternative energy producers;

• Adds ocean energy sources including wave power and tidal power for the first time as separately identified renewable technologies;

• Authorizes $50 million annually over the life of the bill for a biomass grant program;

• Contains several provisions aimed at making geothermal energy more competitive with fossil fuels in generating electricity;

• Requires the U.S. Department of Energy to study and report on existing natural energy resources including wind, solar, waves and tides;

• Requires the U.S. Department of Energy to study and report on national benefits of demand response and make a recommendation on achieving specific levels of benefits and encourages time-based pricing and other forms of demand response as a policy decision;

• Provides tax breaks for those making energy conservation improvements to their homes;

• Provides incentives to companies drilling for oil in the Gulf of Mexico;

• Exempts oil and gas producers from certain requirements of the Safe Drinking Water Act;

• Extends daylight saving time by approximately four weeks (see below);

• Requires that no drilling for gas or oil may be done in or underneath the Great Lakes;

• Requires that Federal Fleet vehicles capable of operating on alternative fuels be operated on these fuels exclusively (Section 701.)

• Sets federal reliability standards regulating the electrical grid (done in response to the Blackout of 2003);

• Nuclear-specific provisions:^[1]

• Extends the Price-Anderson Nuclear Industries Indemnity Act through 2025;

• Authorizes cost-overrun support of up to $2 billion total for up to six new nuclear power plants;

• Authorizes a production tax credit of up to $125 million total per year, estimated at 1.8 US¢/kWh during the first eight years of operation for the first 6.000 MW of capacity^[2] ; consistent with renewables;

• Authorizes $1.25 billion for the Department of Energy to build a nuclear reactor to generate both electricity and hydrogen;

• Allows nuclear plant employees and certain contractors to carry firearms;

• Prohibits the sale, export or transfer of nuclear materials and "sensitive nuclear technology" to any state sponsor of terrorist activities;

• Updates tax treatment of decommissioning funds;

• A provision for the U.S. Department of Energy to report in one year on how to dispose of high-level nuclear waste

In Congressional bills an "authorization" of a discretionary program is a permission to spend money, while an "appropriation" is the actual decision to spend it; none of the authorizations above will mean anything if the money is never appropriated.

Provisions in the original bill that were not in the act

• Limited liability for producers of MTBE.

• Drilling for oil in the Arctic National Wildlife Refuge (ANWR).

• Increasing vehicle efficiency standards (CAFE).

• Requiring increased reliance on non-greenhouse gas-emitting energy sources similar to the Kyoto Protocol.

Tax reductions by subject area

• $4.3 Billion for nuclear power^[3]

• $2.8 billion for fossil fuel production

• $2.7 billion to extend the renewable electricity production credit

• $1.6 billion in tax incentives for investments in clean coal facilities

• $1.3 billion for conservation and energy efficiency

• $1.3 billion for alternative motor vehicles and fuels (ethanol, methane, liquified natural gas, propane)

Congressional Budget Office (CBO) cost estimate

The Congressional Budget Office review of the conference version of the bill estimated the Act will increase direct spending by $1.6 billion, and reduce revenue by $12.3 billion between 2006 and 2015. The CBO noted that the bill could have additional effects on discretionary spending, but did not attempt to estimate those effects.

Change to daylight saving time

Further information: Time in the United States

The bill amends the Uniform Time Act of 1966 by changing the start and end dates of daylight saving time from 2007. Clocks were set ahead one hour on the second Sunday of March (March 11, 2007) instead of the first Sunday of April (April 1, 2007). Clocks will be set back one hour on the first Sunday in November (November 4, 2007), rather than the last Sunday of October (October 28, 2007). Lobbyists for this provision included the Sporting Goods Manufacturers Association, the National Association of Convenience Stores, and the National Retinitis Pigmentosa Foundation Fighting Blindness; lobbyists against included the U.S. Conference of Catholic Bishops, the United Synagogue of Conservative Judaism, the National Parent-Teacher Association, the Calendaring and Scheduling Consortium, the Edison Electric Institute, and the Air Transport Association.^[4] This section of the act is controversial; some doubt exists as to whether daylight saving results in a net energy saving.^[5]

Commercial Building Deduction

The Act contains provisions for commercial buildings that make improvements to their energy systems.

Energy improvements completed in 2006 and 2007 are eligible for tax deductions of as much as $1.80 per square foot.

The incentives focus on improvements to lighting, HVAC and building envelope.

Improvements are compared to a baseline of ASHRAE 2001 standards.

Many buildings are eligible for tax deductions for improvements completed or planned within the normal course of business, and can thus "free ride" for the new incentives.

Achievement of these benefits requires cooperation between the facilities/energy division of a business and its tax department. A tax advisor with engineers on staff may serve as a bridge between these two historically separate business divisions.

For municipal buildings, benefits are passed through to the primary designers/architects in an attempt to encourage innovative municipal design.

These benefits emanate from the Department of Energy's desire to make all buildings "zero energy" within 20 years.

Energy Management

The commercial building tax deductions can be used to improve the payback period of a prospective energy improvement investment.

Often the deductions are combined with participation in demand response programs where buildings agree to curtail usage at peak times for a premium.

The most common qualifying projects are in the lighting area. Industrial spaces such as Manufacturing, Warehouse and Distribution Centers are typically lit with 400W Metal Halide fixtures. These fixtures are commonly being upgraded with Hi-Bay Fluorescent fixtures that can cut energy use in half as well as qualify the building for tax deductions. In the Northeast paybacks for this project can get below one year.

Criticisms

• The Washington Post contended that the spending bill is a broad collection of subsidies for United States energy companies; in particular, the nuclear and oil industries.^[6]

• Texas companies in particular benefit from the bill. This criticism is heightened by the fact that President George W. Bush, the House Majority Leader (Tom DeLay), and the Chairman of the House Energy & Commerce Committee (Joe Barton) were all from Texas. The fact that the bill passed 66-29 with wide support from Democrats for the bill has not calmed this criticism.

• A Philadelphia Inquirer editorial on July 28, 2005, suggested Congress had a "let's pass it and claim we did something" attitude.

• Supporters of the bill concede that the bill will do little to lower oil prices immediately, and that any changes the bill has enacted will not happen overnight.

• Speaking for the National Republicans for Environmental Protection Association, President Martha Marks said that the organization was disappointed in the bill: it did not give enough of a short to conservation, and continued to subsidize the well-established oil and gas industries that don't require subsidizing.^[7]

• The bill has had the unintended effect of causing shortages of E85, an ethanol and gasoline blend of fuel, in many parts of the country. Section 701 of the bill requires US Federal fleet flex-fuel vehicles (FFVs) to operate on alternative fuels 100% of the time. Formerly, such FFVs were required to be operated by the end of 2005 on alternative fuels only 51% (i.e., the majority of the time) by Executive Order 13149.^[8]. This effectively means that the US Government's use of E85 has been doubled, with the unintended results of limiting public availability of E85 fuel and increasing its price. Although the price of corn has not changed, from which ethanol fuel is derived, the shortage has removed the price incentive to switch to alternative fuel.

• The bill did not include provisions for drilling in the Arctic National Wildlife Refuge (ANWR) even though some Republicans claim "access to the abundant oil reserves in ANWR would strengthen America's energy independence without harming the environment."^[9] This claim, however, has been rebuffed by scientific and oil industry experts.^{[10] [11]}

Legislative history

The Act was voted on and passed twice by the Senate, once prior to conference committee, and once after. In both cases, there were numerous senators who voted against the bill. Below is a list of only those states that did not have both senators voting for the bill. All other senators voted Yes.

Analysis

"No" votes came from the northeast states of Connecticut, Delaware, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont. In the southwest, senators from Arizona and Nevada voted against the bill. On the Pacific Coast, senators from California, Oregon and Washington voted against. Both senators from Florida opposed the bill.

Both senators from Connecticut changed their votes from Not Voting, to No.

Of all sixteen states with at least one senator that voted no, only one of these had anyone on the conference committee. Not only was senator Ron Wyden the only senator from these states on the conference committee, he was also the only senator on the conference committee to vote against the bill's final passage.

Senator Wyden's Objections

Senator Ron Wyden (D-Oregon) spoke in opposition to the bill including references to the occupation of Iraq and serious flaws in the policy of the energy bill.^[12]

"Our dependence on foreign oil will not be reduced as a result of this legislation. As a result, we have not reduced the prospect of going to war once again in the Persian Gulf in the next decade."

The Senator referred to the relationship between the energy bill and terrorism.

"the Senate is about to pass a pre-9/11 energy policy. After 9/11, it became clear that energy policy was a national security issue and that reducing our dependence on foreign oil had to be a national security priority. That hasn't been done."

"So today Americans continue to pay what I call a terror tax--the price we pay in insecurity for our dependence on foreign oil. I call it a terror tax because when each of us pulls up to the corner gasoline station and pays $2.40 a gallon, or so, for gasoline, a portion of that money goes to foreign governments that in turn send it out the back door to Islamist extremists who use the money to perpetuate hate and terrorist acts."

"This legislation does virtually nothing to reduce our dependence on foreign oil."

Wyden offered an amendment during the conference committee to increase the automobile efficiency standards by 1 mile per gallon for 5 years in a row, offering that this would decrease demand for foreign oil. This amendment was not accepted despite evidence that this was easily in reach of the industry.

Referring to unnecessary subsidies, Wyden quotes the President as saying, "when oil is trading at upwards of $55 a barrel, the oil companies are not in need of any more incentives."

The senator concluded by saying:

"the most patriotic thing this Congress could have done in the summer of 2005 was to write an energy bill that did three specific things: reduce our dependence on foreign oil, lower gasoline prices for working families and businesses, and end the energy subsidy smorgasbord that has offered these heaping helpings of taxpayer dollars to the energy industry for decades."

"I am sad to say, as one who was involved in this from the outset as a member of the committee and the conference committee, that the final product does not accomplish any of those three things. It doesn't reduce our dependence on foreign oil. Nobody has to take my word for it. That has been on the front pages of the papers all this week. It doesn't lower gasoline prices. And, again, you don't have to take my word for it. The President has already stated that. It doesn't end the subsidy buffet for the big energy interests, and you won't have to take my word for that either. You are going to hear those special interests breaking out the champagne bottles all over town in the next few days."

Wyden was the only member of the conference committee to vote against the bill.

Senator Clinton's Objections

Senator Hillary Clinton's vote was notable because it changed from Yes on the first vote, to No on the final vote.^[13]

In the Congressional Record, she points out various failings of the bill, and repeatedly mentions that the bill will do nothing to reduce dependency on foreign oil.

She said "I oppose the bill for two reasons. First, it contains a number of highly objectionable provisions. Second, it simply ignores several of our most pressing energy challenges, such as our dependence on foreign oil."

The Senator cited problems in the bill including:

• "billions in subsidies for mature energy industries, including oil and nuclear power"

• "exempt[s] hydraulic fracturing from coverage under the Safe Drinking Water Act"

• "exempt[s] oil and gas construction sites from stormwater runoff regulations under the Clean Water Act"

• "accelerates the siting procedures for liquid natural gas terminals and weakens the State role in the process"

• removes moratorium on oil drilling off most of the U.S. coast by authorizing an inventory of oil and gas resources there

Senator Clinton objected to the following items being removed in conference committee or omitted from the bill:

• "a provision that would reduce U.S. oil consumption by 1 million barrels of oil per day by 2015"

• "a modest provision to increase the percentage of electricity generated from renewable sources to 10 percent by the year 2020"

• "a mandatory program to start reducing the greenhouse gas emissions that are contributing to climate change"

Senator Clinton concluded by saying,

"I see a major missed opportunity. By the President's own admission, this bill won't do anything to reduce gasoline prices, but we know for a fact that it will give billions in tax breaks to companies like Exxon Mobil. It doesn't do nearly enough to push the development and commercialization of clean, next-generation energy technologies, but it gives huge tax breaks to nuclear power, a technology that has been with us for 50 years. And given what we now know about the looming threat of climate change, it makes no sense to make energy policy without integrating a cost-effective strategy to reduce greenhouse gas emissions. But that is exactly what this bill does."

Senator Clinton's source for these findings and calculations is the Energy Policy Act of 2005.

Preliminary Senate Vote

June 28, 2005, 10:00 AM Yeas - 85, Nays - 12

Conference Committee

The conference committee, including 14 senators and 51 house members. The senators on the committee were: Republicans Domenici, Craig, Thomas, Alexander, Murkowski, Burr, Grassley and Democrats Bingaman, Akaka, Dorgan, Wyden, Johnson, and Bacus.

Final Senate Vote

July 29, 2005, 12:50 PM^[14] Yeas - 74, Nays - 26

Legislative History

Stage	House of Representatives	Senate
Initial Debate
Introduction	April 18, 2005	June 9
Committed	April 18	June 14
Committee Name(s)	Energy and Commerce Education and the Workforce Financial Services Agriculture Resources Science Ways and Means Transportation and Infrastructure
Committee Stage	April 18 to 19
Committee Report	April 19
Floor Debate	April 19 to 21	June 14 to 23   Cloture invoked June 23, [15]
Passage	April 21, [16]	June 28, [17]
Conference Stage
Conference Demanded/Accepted	July 13	July 1
Conference Meetings	July 14 to 24
Report Filed	July 27
Final Passage
Final Debate	July 28	July 28 to 29 Budget Act waived, July 29, [18]
Concurrence and Passage	July 28, [19]	July 29, [20]
Presented to President	August 4
Signed	August 8

See also

• Demand response

• Energy crisis

• Energy efficiency

• FutureGen, zero-emissions coal-fired power plant

• Hydrogen economy

• Nuclear Power 2010 Program

• Oil depletion

• Oil industry

• Power plant

• Price-Anderson Nuclear Industries Indemnity Act

• Public Utility Holding Company Act of 1935

• Renewable energy

• Synthetic Liquid Fuels Act

• Year 2007 problem

References

1.  nei.org, nei.org

2.  UtiliPoint Issue Alert: New Nuclear Plants Coming to the United States?, January 17, 2007

3.  Detailed 2005 breakdown nei.org - PDF, 29kB)

4.  Alex Beam. "Dim-witted proposal for daylight time", Boston Globe, 2005-07-26. 

5.  Ryan Kellogg; Hendrik Wolff (2007-01). "Does extending daylight saving time save energy? Evidence from an Australian experiment". CSEM WP 163. University of California Energy Institute.

6.  Washington Post

7.  MSNBC

8.  Executive Order 13149, at the U.S. Dept. of Energy, April 21, 2000

9.  nationalcenter.org

10.  [1]

11.  [2]Energy Information Administration: Annual Energy Outlook 2006

12.  Senate Record

13.  Congressional Record

14.  Votes from all Senators

15.  92-4 senate.gov

16.  249-183 clerk.house.gov

17.  85-12 senate.gov

18.  71-29 senate.gov

19.  275-156 clerk.house.gov

20.  74-26 senate.gov

External links

Government

• Department of Energy spotlight on the bill - listing consumer savings

• Official News release and Allocution Bush / Albuquerque / 2005-08-08

• Congressional Budget Office Cost Estimate for the bill conference agreement, July 27, 2005

• Research Service summary

News

• Christian Science Monitor: How Much New Oil? Not a Lot

• Boston Herald: Editorial

• Reuters: brief summary

• MSNBC: news story

• TaxPayer.net: How the Bill Passed – a view of the reasons for the bills passage and its costs to taxpayers. See also: TaxPayer.net on Subsidies

• Yahoo! News: bill signing

• CNN: Bush: Energy bill effects will be long-term

• WashingtonWatch.com page on P.L. 109-58: The Energy Policy Act of 2005

• InfoWorld.com Sustainable IT blog: New Daylight Saving Time not so bright an idea - a criticism of the change to Daylight Saving Time

Non-Profit

• Clean Fuels Ohio - This site focuses on alternative fuels as well as alt-fuels incentives created by the Energy Policy Act of 2005.