Energy package offers little immediate relief

John W. Schoen Senior producer • Profile • E-mail

After four years and two rounds of effort that failed to produce a law, the Senate has approved a sweeping energy bill designed to boost domestic production of oil, natural gas, coal, nuclear power and alternative energy.

With energy prices rising -- including a recent spike in prices at the gas pump -- the measure passed by a heavy margin, 85-12. The White House also recently stepped up pressure on the Senate to deliver an energy bill. At $16 billion, the bill's cost is nearly three times what the White House said it would like to see. A separate energy bill passed by the House in April would cost $8 billion.

But with oil prices breaking $60 a barrel and gasoline prices up sharply at the pump, the bill offers no immediate relief from surging energy prices.

“This isn't going to change the gas price immediately,” Sen. Craig Thomas, R-Wyo., a member of the Senate Energy Committee, told CNBC last week. “But I do think it will have an impact when we start to say, look we're going to look for conservation, we're going to look for alternatives and we're going to look for efficiency.”

But it remains to be seen whether those solutions will be found in the final version of the bill sent to President Bush for his signature. The Senate and House bills must now be merged -– kicking off a round of negotiations that doomed two previous attempts to enact a complete overhaul of U.S. energy policy. Once again, the two sides will have to agree on a controversial provision that has derailed the energy bill twice.

The House bill includes a waiver for makers the gasoline additive MTBE — now banned in a number of states after it was discovered leaking into water supplies. The Senate has once again opposed the waiver. Reliable estimates of cleanup costs have been hard to come by, but various estimates have suggested the final bill could come to tens of billions of dollars.

"It's going to be a tough conference (with the House)," Sen. Pete Domenici, R-N.M., who will lead the Senate negotiations with the other chamber, said last week.

The Senate also went further than the House to encourage conservation, including tax breaks for energy-efficient homes and purchases of energy efficient appliances and gas-electric hybrid cars.


But those measures will do little to cut oil consumption, since some 70 percent of oil consumed in the U.S. is used for transportation. A measure calling for a substantial increase in automobile fuel economy -– a major antidote to the “oil shocks” of the 1970s — was defeated late last week. Sen. Dick Durbin, D-Ill., proposed an amendment calling for an increase in automobile fuel economy standards to an average of 40 miles per gallon over the next decade. Instead, the Senate passed an auto industry-friendly measure that requires the Transportation Department  to consider a dozen criteria — including safety and economic impact — before raising fuel economy standards.

Opponents of increased mileage standards, including Sen. Christopher Bond (R-Mo.) called Durbin's proposal "politically inspired" and said it would force motorists into smaller cars, "result in more fatalities" and lead to lost auto industry jobs.

“You’ve just got substantial bipartisan opposition to them from the auto-producing states,” said James Lucier, an energy analyst at Prudential Equity Group in Washington. “Both the unions and management are both opposed the standards. Unfortunately I think that’s proven to be a disaster.”

Lucier says that policy has painted the U.S. car makers, which are now heavily invested in building relatively low-mileage light trucks and SUVs, into a corner.