Bipartisanship marks initial stage, but difficult debates may lie ahead

The US Senate and House of Representatives have taken significant steps in recent days to advance the first comprehensive energy legislation since the passage of Energy Independence and Security Act of 2007.

Much has changed in the US energy landscape since 2007. The widespread use of hydraulic fracturing, horizontal drilling and other technologies have unlocked vast US unconventional oil and gas resources, which have decreased US imports and spurred economic growth and jobs. Wind and solar power generation has dramatically increased due to a variety of factors, ranging from the maturation of the technologies to policy incentives. At the same time, the US energy system also faces new and growing challenges from cybersecurity attacks, extreme weather events, and an aging infrastructure.

After months of hearings and negotiations and the introduction of scores of individual proposals, the energy committees in the Senate and House have worked to produce comprehensive bills at this first stage of the legislative process that have significant bipartisan support, with a focus on energy infrastructure, efficiency, supply, security, accountability and workforce development. Set aside or treated separately are more politically contentious issues such as lifting the ban on crude oil exports, proposals to block the EPA's Clean Power Plan regulations, and approval of the Keystone XL pipeline.

On July 23, the House Energy and Commerce Committee’s Energy and Power Subcommittee unanimously approved, without amendment, a bill based on elements of the Committee's "Architecture of Abundance" legislative framework.   Subcommittee chairman Rep. Ed Whitfield (R-KY) stated at the markup of the bill that it represents areas of bipartisan agreement and is a "starting point." He noted that "continuing discussions are necessary to allow for the right policies to be put in place." Despite voting for this version of the bill, some Committee Democrats expressed concern that the legislation does not promote clean energy and address climate change. Committee members will work to resolve these other issues and expand the bill before it is considered by the full House Energy and Commerce Committee in September. Floor consideration will likely follow soon thereafter.

The Senate's Energy Policy Modernization Act of 2015 also represents a bipartisan compromise between Senate Energy and Natural Resources chair Senator Lisa Murkowski (D-Alaska) and ranking member Senator Maria Cantwell (D-WA), but it is broader in scope than the House version and includes a number of provisions about which there is still significant bipartisan disagreement. The full Committee approved the bill on July 30 by a vote of 18-4 after three days of debate and consideration of dozens of amendments. Many of the amendments were defeated in largely party-line votes.  Sponsors of some of the more controversial amendments did not press for a committee vote, but vowed to raise their issue during debate on the Senate floor. Committee leaders have said they will push for floor consideration in the fall, but it is uncertain when or if the legislation will be debated by the full Senate.

The following is a title-by-title summary and analysis of major provisions in the Senate and House bills, including where relevant a comparison of how the Senate and House treated a particular issue.

Senate bill highlights

Title I: Energy efficiency

The energy efficiency title of the Senate bill largely mirrors widely supported bipartisan legislation authored by Senators Rob Portman (R-OH) and Jeanne Shaheen (D-NH).  That bill was approved during the last Congress by the committee and considered on the Senate floor, only to be derailed by procedural complications unrelated to its substance.  (Indeed, the committee voted separately at the July 30 markup to approve the freestanding Portman-Shaheen bill.)

In fact, of the 26 energy efficiency provisions in the bill, 20 come directly from the Portman-Shaheen bill.  The bill does not include efficiency mandates on the private sector, but would encourage greater energy efficiency in building codes, extend the maximum potential contract period of utility energy service contracts, reauthorize the Weatherization Assistance Program and the State Energy Program, and require a revision of federal building energy efficiency performance standards.

Nevertheless, a significant provision of Portman-Shaheen was not included in the energy efficiency title. The SAVE Act provision requires federal mortgage agencies to recognize the energy efficiency upgrades in a home during the mortgage underwriting.  Senator Murkowski expressed concerns that the provision is essentially a financial services proposal and arguably outside the jurisdiction of the committee.

The energy efficiency title also departs from Portman-Shaheen by addressing an existing mandate and a proposed rule, and these provisions have created some controversy.  The legislation would repeal of the requirement established by the 2007 energy bill that new or renovated federal buildings phase out fossil fuel use by 2030, and it would delay the Department of Energy from acting to finalize a new standard for residential gas furnaces.  A number of environmental organizations, including the Environmental Defense Fund, the League of Conservation Voters, the Natural Resources Defense Council and the Sierra Club, cited these provisions among others in a letter to the committee as reasons they cannot support the legislation.

The House had considered the repeal of the fossil fuel phase out mandate, but did not include it in its version of the energy bill.  The House addressed the residential furnace issue in a less prescriptive way, simply ensuring that gas furnace stakeholders have a full opportunity to negotiate with DOE before the rule is finalized.

Title II: Infrastructure

The Senate bill includes provisions in its infrastructure title related to cybersecurity, the Strategic Petroleum Reserve, LNG exports, and electricity and energy storage.  On the last day of its markup on the legislation, the Committee accepted an amendment from Senator Shelley Moore Capito (D-WV) to expedite the permitting of interstate natural gas pipelines (see full discussion of similar language in House bill summary below).  The Committee bill does not include language to streamline the approval of cross-border projects such as the Keystone pipeline.  Senator John Hoeven (R-ND) withheld an amendment to reform that process (among other things, it would impose a 120-day time limit on the State Department's cross-border project approval following completion of environmental reviews) during the markup session, but he indicated he would likely offer the provision as a floor amendment.

Cybersecurity

The legislation provides the Secretary of Energy with emergency authority to protect the bulk power system from cybersecurity threats, and it authorizes the Federal Energy Regulatory Commission to adopt regulations to allow entities subject to emergency orders to recover costs associated with implementing them.  The bill also establishes and authorizes funding for a research, development and demonstration program at DOE for advanced cybersecurity applications.

Strategic Petroleum Reserve

In response to proposals to use the proceeds of sales of crude oil from the SPR to help fund priorities unrelated to energy (e.g., the highway bill), Senator Murkowski included in the bill a provision restricting the use of funds in the SPR account to a variety of activities related directly to the SPR's energy security mission. The legislation also tracks the recommendations of the Administration's Quadrennial Energy Review (QER) by directing DOE to examine the SPR's purpose, operational parameters, configuration and performance, and long-term effectiveness.

LNG exports

The bill directs DOE to issue a final decision on applications to export liquefied natural gas exports to non-Free Trade Agreement countries no later than 45 days after FERC (or in certain cases the Maritime Administration) completes its environmental review.  The LNG export issue has been a point of contention on the committee, with members such as Senator Debbie Stabenow (D-MI) arguing that the DOE reviews should not be subject to a congressionally-mandated deadline and urging caution regarding the potential impact of increased LNG exports on domestic natural gas prices.  The Committee rejected an amendment offered at the markup by Senator Angus King (I-ME) and supported by Stabenow and other Democrats that would have required DOE to complete another economic impact analysis before approving additional applications of exports above a certain volume.

The House passed a stand-alone bill earlier this year that imposes a 30-day deadline (post-FERC environmental review) for a DOE decision on applications to export of LNG to non-FTA countries; it did not include a provision related to LNG exports in its initial version of the comprehensive energy bill.

Electricity and energy storage

The legislation directs DOE to establish a grid energy storage research, development and demonstration program and authorizes $50 million per year for the program between fiscal years 2017 and 2026.  It requires DOE to establish a collaborative process to develop model grid architecture and a program to promote the development of hybrid micro-grid systems for isolated communities.  The Secretary is also required, upon the request of a State, to partner with that State and regional organizations to facilitate the development of State and regional electric distribution plans.  The bill establishes a formal "Interagency Rapid Response Team for Transmission" made up of representatives of FERC, DOE, and the Departments of Interior, Defense, Agriculture and Commerce, as well as the White House Council on Environmental Quality (CEQ), to coordinate and improve the efficiency of electric transmission permitting processes.

The bill also requires Regional Transmission Organizations (RTOs) to submit a report to FERC identifying barriers to their deployment of distributed energy systems and micro-grid systems and directs the Secretary of Energy to issue guidance on criteria for net metering studies conducted by the Department.

Title III: Supply

The Senate's supply title includes subtitles for renewables, oil and gas, helium, critical minerals, coal, nuclear, workforce development and recycling.  To the disappointment of many renewable energy advocates, the renewables subtitle does not address wind and solar.  It focuses instead on hydroelectric, geothermal, marine hydrokinetic and biomass, providing support for these technologies by identifying high priority areas, streamlining federal permitting reviews and authorizations, supporting demonstration projects, and directing additional research and development activities.

The oil and gas section is limited to work on methane hydrates, authorizing $35 million per year between 2017 and 2021 for research to identify, explore, assess, and develop methane hydrate as a commercially viable source of energy.  The critical minerals subtitle requires the Secretary of the Interior to establish a methodology for the designation of critical minerals and to identify and quantify critical mineral resources throughout the US  The bill also expands the parameters of the clean coal research program at DOE, and it requires DOE to submit a report that assesses its capability to host privately-funded fusion and fission reactor prototypes up to 20 megawatts in size at DOE-owned sites.

While workforce development is less central to the bill than it is to the House energy legislation (where is has its own title), the Senate version would establish a 21st Century Energy Workforce Advisory Board at DOE and create a pilot job training program.  The recycling subtitle directs DOE to conduct a study on the recycling of carbon fiber and production waste carbon fiber.

Title IV: Accountability

This title of the Senate bill would reform the much-criticized DOE guaranteed loan program by requiring applicants to cover at least 25 percent of the credit subsidy cost of a loan, promote better inter-agency coordination on energy and water issues, and authorize energy-related sections of the America COMPETES Act such as DOE's Office of Science and the Advanced Research Projects Agency-Energy (ARPA-E).  A Working Group on Energy Markets is also established to investigate the effects of financial investment in energy commodities and to conduct a study of the pricing of crude oil and refined products.

Reliability

The legislation requires FERC to provide a statement assessing electric reliability impacts of major federal rules -- a Reliability Impact Statement (RIS) -- to the agency issuing the rule, and requires that agency to include a detailed response to the RIS in its final rule.  This section also requires regional reliability entities to submit a report that describes the state of and prospects for electric reliability within the region to Congress and FERC within six months of enactment, and every three years.

Title V:  Land and Water Conservation Fund

The legislation permanently reauthorizes the Land and Water Conservation Fund and the Historic Preservation Fund.  It also creates a New National Park Maintenance and Revitalization Fund.

House bill highlights

Title I: Infrastructure

The House legislation includes infrastructure-related provisions intended to expedite the federal approval process and address reliability issues associated with a variety of concerns, including physical and cyber-security attacks, electromagnetic pulse attacks, geomagnetic disturbances, seismic events, and severe weather.

Interstate natural gas pipelines

The legislation includes a proposal to expedite the federal government's review of interstate natural gas pipeline applications.  While the Senate bill originally did not include similar language, the Energy and Natural Resources Committee added an amendment to reform the application process late in the markup process.

Specifically, the legislation states that the Federal Energy Regulatory Commission (FERC) shall identify all agencies considering an aspect of an interstate natural gas pipeline application and establish a schedule for review.  Further, the legislation would require that federal agencies make final decisions on their respective federal authorizations for an interstate natural gas pipeline application within 90 days after FERC releases its final environmental impact statement for the project.

If a federal agency fails to meet deadlines set by FERC, then the Commission can establish a recommended implementation plan to ensure a final decision is reached.  In this respect, this draft provision departs from legislation the House passed earlier this year that would automatically approve interstate natural gas pipeline applications if federal agencies miss deadlines set by FERC.  The Committee pursued the more moderate language to attempt to garner support of Democrats, who are generally opposed to previous provisions that would have automatically approved interstate natural gas pipeline applications if federal agencies miss FERC-imposed deadlines.  The Interstate Natural Gas Pipeline Association of America, however, has expressed concerns about the streamlining provisions in the draft bill, because they would lack provisions penalizing federal agencies if they miss FERC-imposed deadlines.

Critical electric infrastructure security

The legislation proposes establishing a new section to the Federal Power Act to address "critical electric infrastructure security."  Under this section, the President could issue a written directive identifying a grid security emergency to the Secretary of Energy, who then, with or without notice, hearing or report, may issue such orders he or she views as necessary in order to restore the reliability of critical electrical infrastructure.  The legislation states that the Secretary shall consult with Canadian and Mexican government officials if necessary in issuing emergency orders.  Such orders will expire after 15 days, though the Secretary maintains the authority to reissue the order for additional 15 day periods.

The legislation also attempts to facilitate the protection and exchange of information between the federal government and industry.  For instance, the legislation would prohibit the unauthorized disclosure of information on critical energy infrastructure submitted by industry.  FERC would also be required to develop protocols with Canadian and Mexican government officials on the voluntary sharing of critical electric infrastructure information.

PURPA standards

The legislation would make changes to the Public Utility Regulatory Policies Act by mandating  that electric utilities develop plans to use resiliency-related technologies to address potential threats from physical and cyber-security attacks, electromagnetic pulse attacks, geomagnetic disturbances, seismic events, and severe weather and other environmental stressors.  The legislation would allow state regulators to consider allowing electric utilities to recover costs associated with procuring, deploying and operating resiliency technologies.  Similarly, the legislation would require that electric utilities develop and implement plans to deploy advanced energy technologies, such as cloud based computing solutions, and encourage state regulators to allow utilities to recover the costs associated with these technologies.

The legislation would also require that electric utilities adopt or modify their integrated resource plans to ensure the availability of "reliable generation" over a 10-year planning period.

Conflicts between the Federal Power Act and environmental laws and regulations

The legislation also includes provisions that would shield power plants receiving “must-run” orders under the Federal Power Act from liability for any violation of federal, state, or local environmental laws or regulations.  The House passed legislation similar to this provision in 2012.  This provision may be relevant as states develop implementation plans for the US Environmental Protection Agency's Clean Power Plan that aim to ensure reliability while attempting to meet the CO2 emission reduction obligations under the rule.

Other provisions

Other provisions in the draft legislation address potential resiliency and emergency preparedness issues related to US energy infrastructure, including the following provisions:

  • requiring that the Department of Energy (DOE) develop and adopt procedures to enhance engagement with states and the oil and gas industry on emergency preparedness for potential energy supply disruptions;
  • requiring that DOE develop a plan to establish a Strategic Transformer Reserve; and
  • requiring that DOE establish a Cyber Sense program to identify and promote cyber-secure products in the bulk power system.

Title II: 21st century workforce

The workforce title of the House bill, designed to improve education and training for energy and manufacturing-related jobs, is based in part on legislation introduced by Energy and Power Subcommittee ranking member Representative Bobby Rush (D-Ill.) to help address the underrepresentation of minorities and disadvantaged individuals in these highly skilled careers.  The Committee’s hearing on the topic explored that disparity and the challenges created by the expanding needs of the energy industry as production increases even as many older workers in the field are retiring.

The bill directs the Secretary of Energy to work with the energy and manufacturing industries to identify the highest areas of need and develop guidelines for the skills necessary to qualify for the workforce.  The workforce title builds on the “Minorities in Energy Initiative” established by the Department of Energy in 2013 to increase the participation of minorities and minority businesses in energy sector careers and business opportunities.  The bill directs the Secretary to give assistance (which can include financial assistance, awards, technical expertise, mentorships, internships, and partnerships) to schools, community colleges, apprenticeship programs, and minority serving institutions to help individuals prepare for and obtain these jobs.  The legislation establishes a clearinghouse of information and resources on training and workforce development programs, and it encourages a wide range of collaboration between executive branch officials, particularly the Secretary of Energy, and industry to help identify and prepare persons from traditionally underserved communities such as minorities, women and veterans for the energy and manufacturing workforce.  The bill would also place a special emphasis on helping displaced and unemployed energy and manufacturing workers to obtain jobs.

Title III: Energy security and diplomacy

This title includes a "Sense of Congress" underscoring the theme of energy abundance by finding that North America's energy "revolution" has enhanced US energy security and that the US has an opportunity to promote greater stability and affordability of energy supplies for its allies and trading partners.  The bill directs the Secretary of Energy to establish US energy security valuation methods to assess the potential impact of energy-related actions on energy security, energy supply, energy markets, the US trade balance and national security objectives.

The bill directs the Secretary of Energy to develop a plan to improve coordination and collaboration on energy matters with Canada,  Mexico and partners in the Caribbean and Central American.  And similar to provisions in the Senate bill and building on recommendations in the QER, the bill directs DOE to conduct a long-range strategic review of the Strategic Petroleum and recommend an action plan to optimize its capabilities.

Title IV: Energy efficiency and accountability

Energy efficiency

The legislation’s energy efficiency provisions are focused on improving federal government efficiency programs and encouraging voluntary private sector efforts to reduce energy demand.  As noted in the explanation of the Senate's energy efficiency title, the House did not include the Senate's more controversial proposals to roll back the requirement that federal buildings phase out the use of f fossil fuels by 2030 and to delay the issuance of DOE's residential gas furnace standard.  The House energy efficiency measures are intended to:

  1. Improve federal government agencies’ energy efficiency practices by requiring them to coordinate with the Office of Management and Budget, DOE and the Environmental Protection Agency in the development of an implementation strategy for the maintenance, purchase and use of energy efficient information technologies, and require DOE and EPA to collaborate with stakeholders to improve federal data center energy efficiency.
  2. Promote energy efficient technologies and manufacturing, such as the inclusion of smart grid capability on Energy Guide labels and voluntary verification programs for air conditioning, furnace, boiler, heat pump and water heater products.
  3. Expand and improve Energy Savings Performance Contracts (ESPCs) and Utility Energy Service Contracts (UESCs), public-private partnerships through which private companies make energy efficiency upgrades to federal buildings and receive a portion of the money saved as a result.  This provision includes renewable energy rebates and credits in the definition of “energy savings” under ESPCs.
  4. Assist in identifying programs and financing mechanisms to obtain energy efficiency, distributed generation, and energy retrofitting projects for school buildings.

Accountability

The bill establishes a new Office of Compliance Assistance at the Federal Energy Regulatory Commission (FERC).  The office would give compliance guidance to regulated entities, make recommendations regarding market behavior and enforcement, and do outreach to the regulated community.  The committee minority has raised concerns that the new office is not provided funding and that its functions may be duplicative.

Nevertheless, this language was a compromise.  In earlier drafts of the legislation, committee Republicans had targeted the practices of the Federal Energy Regulatory Commission’s Office of Enforcement for substantial reform.  That office is responsible for overseeing energy markets and assuring compliance with FERC rules, tariffs, regulations and orders, and it was given expanded authorities in the Energy Policy Act of 2005.

This more far-reaching proposal would have required FERC to complete a rulemaking designed to increase the transparency of FERC’s investigations by requiring the disclosure of exculpatory materials and the documentation of communications by FERC investigatory staff and advisory staff.  The mandated rule would have also allowed investigated entities to communicate directly with FERC commissioners regarding settlement considerations.

The proposal, strongly opposed by FERC and Democrats as too favorable to regulated entities, grew out of concerns expressed by members of the Committee majority about the increase in FERC investigations and allegations by those entities that FERC has often not been transparent or has denied them due process.

The comprehensive bill also directs the General Accounting Office to conduct a study of wholesale electricity markets, with a focus on whether and how the market rules, structures and practices of regional transmission organizations (RTOs) produce just and reasonable electricity rates for consumers.  Earlier discussion drafts were more prescriptive, requiring FERC to direct RTOs to develop and submit a plan that describes how those market rules, structures and practices meet certain established criteria, including just and reasonable rates, reliability, fuel diversity and resource adequacy.  Each RTO would have been required to identify those actions it would take to revise or amend its rules to meet the criteria.

The final version of the bill also omits earlier proposals to amend the Public Utility Regulatory Policies Act.  That language would have relaxed the threshold for creating the presumption that a “Qualifying Facility” (QF) -- either a small power production facility or a cogeneration facility -- has nondiscriminatory access to wholesale markets.  Where that access does not exist, utilities are required to sign mandatory purchase agreements with the QF.  Democrats argued that the change would have effectively removed these mandatory purchase requirements even in areas where is no competition, and therefore would have adversely impacted efforts to promote renewable energy.

Conclusion

In a Congress often accused of dysfunction, the House and Senate energy committees have succeeded thus far in moving forward on many areas of bipartisan agreement after nearly eight years of inaction on comprehensive energy legislation.  Both proposals recognize the changing energy landscape and attempt to adapt the nation's policies accordingly.  But serious partisan disagreements on contentious energy and related environmental issues remain, and these bipartisan efforts will be  tested as the legislative hurdles grow steeper.