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<title>Energy Legislation in the 108th Congress; Now Relevant? </title>
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<span style="text-transform: uppercase"><font size="6"><b>ENERGY
LEGISTATION IN THE 108th Congress;</b></font></span></p>
<p class="MsoNormal" align="center">
<span style="text-transform: uppercase"><font size="6"><b>Now Relevant?</b></font></span></p>
<p class="MsoNormal"><font size="2" face="Arial">
<strong style="font-weight: 400">By<b> </b></strong>John O. Sillin</font><span style="color: black"><font size="2"><br>
</font></span><font size="2">(<em>originally published by PMA OnLine Magazine: 03/06</em>)</font></p>
<p class="MsoNormal" align="left">The 108th Congress is in the midst of
debating the first comprehensive energy legislation since the 1992 Energy
Policy Act. The House has passed legislation (H.R. 6), and the Senate
Energy and Natural Resources Committee reported out its version
(S.14) in early May. Full Senate action is eminent.<br>
<br>
Up until the Senate Energy Committee markup the nuclear energy provisions
were straightforward, of modest significance, but not headliners: Renewal
of Price Anderson; assuring safe transportation of nuclear materials;
supporting increased security at nuclear sites; assuring financial
accountability of Department of Energy contractors; and supporting the
domestic uranium industry. But Senator Domenici’s decision to include
loan guarantees for nuclear power plant construction suddenly made nuclear
power the headliner, with other energy provisions of little consequence.<br>
<br>
The big story was going to be provisions allowing oil drilling in the
Alaska National Wildlife Refuge (ANWR), and construction of a pipeline
bringing natural gas down from the North Slope. Other high profile
provisions were electricity restructuring (repeal of the Public Utilities
Holding Company Act), energy tax credits for renewable forms of energy,
tax incentives for domestic oil and natural gas production, mandates
tripling the use of ethanol, research on turning coal into an emission
free fuel, and getting started on the hydrogen economy.<br>
<br>
But provisions thought to be the main features will not pass, or have
little impact. </p>
<ul>
<li>Getting ANWR passed via the budget process failed (where filibusters
are not allowed), and 60 votes cannot be found in the Senate this
session ending a filibuster. The result, S.14 has no provision on ANWR.
<br>
</li>
<li>The White House opposes production credits for an Alaskan Natural
Gas Pipeline. These credits (in the form of tax floor subsidies) are
included in Senate Finance Committee legislation. The Administration’s
position is that market forces alone should decide the pipeline’s route
and construction. Despite billions of dollars of loan guarantees
provided in S.14, the pipeline may falter without the subsidy. <br>
</li>
<li>The controversy the Federal Energy Regulatory Commission (FERC) has
engendered with its standard market design (SMD) Notice of Proposed
Rulemaking (NOPR), combined with the aftermath of ENRON, the California
electricity debacle, and the financial collapse of much of the energy
sector has reduced support for repealing PUHCA. Irrespective, the 1992
Energy Policy Act largely accomplished power and gas industry
restructuring. <br>
</li>
<li>Windmills, ethanol, and other unconventional fuel forms will make no
significant energy contribution—they are simply too uneconomic even when
heavily subsidized, which both versions of the legislation do. <br>
</li>
<li>Turning coal into an emission free energy source by sequestering
huge volumes of CO2 in the earth is going to be neither economic nor
publicly acceptable. <br>
</li>
<li>Tax incentives for oil and gas production, primarily off the Gulf
Coast, estimated at between $9 and $12 billion, may help sustain
production at existing levels, but increased production will be modest
at most. <br>
</li>
<li>Finally, the Hydrogen Economy is running up against the hard
chemical fact that hydrogen doesn’t exist on Earth as a free element.
Separating hydrogen from petroleum and natural gas doesn't make sense
from the standpoint of reducing reliance on those commodities.
Separating hydrogen from water is energy intensive, but may be
attractive if the separating energy is cheap. In order to produce
environmental benefits the separating energy has to be nuclear power.</li>
</ul>
<p>Thus, by the process of elimination nuclear energy has to be priority
one in any comprehensive energy legislation. Nuclear energy is the only
clean, economic source of energy that SIGNIFICANTLY reduces or slows
growth in dependence on foreign liquid fuels. Senator Domenici has
figured this out and has included in S.14 titles that would provide loan
guarantees for the construction of 8,400 megawatts of new nuclear power
plants (the U.S. has 98,000 megawatts in operation). The long-term
objective is to jump-start nuclear power construction. <br>
<br>
The loan guarantees would be administered through the Department of
Energy. The potential significance; equivalent power generating
facilities using oil or natural gas would require between 200 and 300
thousand barrels of oil per day, or between 400 and 600 hundred million
MCFs per year. This is about half the oil the U.S. currently imports
from OPEC, and about thirty percent of production from the Alaskan North
Slope. <br>
<br>
The loan guarantees would apply to 50 percent of each plant’s development
and construction cost (versus 80 percent for the Alaska Natural Gas
Pipeline), with eligibility limited to advanced reactor designs certified
by the Nuclear Regulatory Commission. Applicants would submit information
demonstrating each project’s financial viability. Assuming all the
projects turn out to be successful the cost to the US Treasury would be
zero, excepting the costs of administration. <br>
<br>
This should be cheaper than the tax credits for windmills and other forms
of renewable generation ($5 billion), the tax incentives for domestic oil
and natural gas production, and the subsidies and use mandates for
ethanol. And while the “moral hazard” issue is always present when loan
guarantees are involved (which is my biggest reservation), some form of
due diligence will be required, private investors will put up at least 50
percent of non-guaranteed funds for each plant. And if we are going to
subsidize energy forms like windmills, ethanol, and oil and natural gas
production, why not nuclear which has a history of producing large amounts
of economic, emission free energy.<br>
<br>
If successfully passed and implemented, the loan guarantee provisions
proposed by Senator Dominici may provide significant reasons for passing
energy legislation; completely refocusing it on a new set of energy
production objectives with real economic and environmental benefits at
little cost to the taxpayer. A side benefit, it may be one of getting
ANWR off the front pages.<font face="Times New Roman"><br>
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