News

October 10, 2007

Senate Delays Energy Conference, Speaker Pelosi Says no Formal Process

Senate and House leaders had been preparing for a formal conference of the House and Senate versions of their respective energy bills passed this summer. And, key Senate staff shared advance conference positions with ASERTTI last week - a positive sign about the potential for a final bill.

However, in late breaking news, Speaker Pelosi held a meeting with House Democrats today that led to a decision to ditch a formal conference committee in favor of an informal approach. Top Senate Democrats have said they believe Republicans intend to block efforts to proceed to a formal conference. Nevertheless, reaching an agreement on a final bill appears to have strong backing from the Speaker and Majority Leader Reid.

Among the many challenging issues in reaching agreement on a final bill is reconciling the lack of both a Renewable Fuel Standard and higher auto efficiency standards in the House bill, and a lack of a Renewable Electricity Standard in the Senate bill. Add to this an ongoing threat of a Presidential veto and the reasons for the bill's uncertain future becomes clear. A comparison of the bills can be access by clicking here. If you have questions, please contact David Terry at DTerry@asertti.org.

Defense Authorization Bills Contain Greater Levels of Clean Energy and Climate Activities

House and Senate conferees will soon take up the now passed versions of their respective Defense authorization bills. The bills contain an increase in the level of renewable and efficiency options that point to the military’s continuing leadership in implementing clean energy efforts within the Federal Government. Of particular note are: 1) a requirement by the House for the purchase of 25 percent of electric power from renewables by 2025; 2) a requirement by the Senate to allow for 10-year renewable power contracts; and 3) a requirement in both bills for the Defense secretary to incorporate climate mitigation strategies in the next quadrennial national security and defense plan.

EIA and Private Energy Analyst Predict Higher Heating Fuel Costs and Higher Gasoline Prices for Next Year

At the October 10, 2007, DOE Winter Fuels Outlook meeting in Washington, DC, Guy Caruso, Administrator of the U.S. Energy Information Administration (EIA) gave the agency’s outlook for winter heating fuel prices. Mr. Caruso said that on average winter heating fuels (natural gas, electricity, heating oil, and propane) would be about 10 percent higher than last year. Of particular note, “stocks of propane are below normal” he said. Caruso also noted that a colder than expected winter could exacerbate the propane problem. However, climate forecasters are predicting a nationwide warmer than average winter this year.

Edward Morse, a noted private oil analyst with Lehman Brothers also provided an excellent presentation on the global oil price and supply outlook. Of note, Mr. Morse suggested that refiners struggling to build distillate (heating oil and diesel fuel) inventories will likely be behind in building gasoline inventories later this year for the 2008-driving season. This will lead to gasoline prices that are somewhat higher than the record levels of 2007. Two bright spots in Mr. Morse’ predictions included a view that refinery expansion investments globally will result in spare refining capacity in late 2009 or 2010 – the first time in nearly a decade that there will be spare capacity. He suggested the capacity could grow to about 4 million barrels a day of refined petroleum products in 2010. This compares to effectively zero spare capacity today, and 20 million barrels a day in 1980. The second positive item in his view is that the contribution of biofuels and certain petroleum “alternatives” such as tar sands will offset some of the increasing demand for oil and become a more significant piece of the supply puzzle. However, Mr. Morse sees world demand rising “relentlessly” in the future with no demand dip in sight for non-OECD countries such as China. Mr. Morse’s presentation can be accessed by clicking here.

Senate Finance Committee Tax Provisions Target Farm Energy Programs

Senate Finance Chairman Max Baucus announced his Committee's approval of a multibillion-dollar tax package that would provide tax benefits for a variety of farm bill related energy and conservation measures, including a $0.67 a gallon cellulosic biofuels credit. The $15 billion measure in support of many Farm energy programs (and other energy programs) also includes a number of controversial items such as support for coal-to-liquids. Passage of the bill by the finance committee provides some needed momentum to the reauthorization of the five-year farm bill, which has stalled in the Senate as Agriculture Committee Chairman Tom Harkin has tried to secure funding for the act. The tax package does not provide any funding since it spends all of the money it generates. However, it helps pay for some of the conservation programs for example. Senator Harkin indicated that he expects the farm bill to come to a committee vote soon. The House passed its version of the Farm bill in late July. A summary of the House farm bill can accessed at: agriculture.house.gov/inside/2007FarmBill.html.