More production key to climate bill, report says
E&E News
March 4, 2010
A bipartisan group of energy experts says climate change legislation must also spur more domestic energy production by offering states a cut of offshore drilling revenues, tax breaks for nuclear and expanding the renewable energy standard to include gas and nuclear.
But the report the National Commission on Energy Policy will release today also supports the restrictions the Obama administration has placed on drilling public lands and calls for a federal role in overseeing hydraulic fracturing.
"Localized environmental impacts caused by domestic energy development should not be underestimated, but neither should the greater national interest be consistently overruled by local concerns," says the report, obtained by E&E.
Past recommendations by the commission have made their way into committee drafts of climate legislation in the Senate. Its members include a range of people in the energy field from Exelon Corp. CEO John Rowe, a co-chairman, to Ralph Cavanaugh, a senior attorney and co-director of the Natural Resources Defense Council's energy program.
The group's recommendations come as Sens. John Kerry (D-Mass.), Lindsey Graham (R-S.C.) and Joe Lieberman (I-Conn.) are putting together the details of a Senate climate bill. Graham has repeatedly said that encouraging more domestic energy legislation will be essential to winning GOP support and the needed 60 votes in the Senate.
"A robust domestic supply agenda is a critical piece of comprehensive energy and climate legislation," said commission spokesman Paul Bledsoe.
The commission's report says that the Interior Department should consider offshore drilling along the entire outer continental shelf but states should be allowed to block development off their shores through an "opt-out" provision. Additionally, states should get 37.5 percent of the money generated by offshore drilling, as Alabama, Louisiana, Mississippi and Texas do now.
The concept of revenue-sharing and the amount that should be shared has been a contentious subject among lawmakers in both parties. Coastal members say they should share in the profits of oil and gas just like interior states with federal lands. Those from landlocked states stress that the drilling will be in federal waters, not state, and therefore belongs to the entire country.
Sen. Mary Landrieu (D-La.) said after a meeting with the three senators Tuesday that they are open to revenue sharing. "They are all on the same page as I am that partnership with the states needs to be established," said Landrieu, who has long pushed for revenue sharing.
Drillers "fracture" by blasting sand, water and chemicals deep into a wellbore to pry open rock and release trapped gas. Though the industry has used the process for decades, questions about the effects to drinking water have mounted in the past few years as the process has opened up vast shale gas reserves in new areas, such as Texas and New York. The commission called it "still-evolving technology."
The oil and gas industry has pressed for more offshore drilling for years, but it has protested the Obama administration's restrictions on drilling federal land and vehemently opposed any federal role in the regulation of hydraulic fracturing.
Several Democratic lawmakers have proposed allowing U.S. EPA to regulate fracturing by rescinding its exemption from the Safe Drinking Water Act (E&ENews PM, June 9, 2009). But the industry has vigorously fought such efforts, saying fracturing is completely safe and regulation is best left to the states.
The commission's report says that EPA should be involved in the regulation of fracturing by coordinating efforts to ensure "effective and efficient" regulation.
"As interest grows in extracting natural gas trapped in shale formations, state and federal efforts to regulate this type of production -- and in particular, to address concerns about the potential for groundwater contamination -- must keep pace," the report states.
The oil and gas industry has decried the new drilling rules announced in January by Interior Secretary Ken Salazar as a "bureaucratic command-and-control system" that will bog down production and cost jobs (Greenwire, Jan. 6).
But the commission raised concerns about the adequacy of the permitting process under the George W. Bush administration. It says Salazar's decision to require more detailed environmental reviews, more public input and allow fewer exemptions was a step toward reform.
"These reforms should be funded fully and implemented as soon as possible," the report says.
It also urged federal support for using captured carbon dioxide to pump more oil out of aging wells in a process called "enhanced oil recovery."
The commission also strongly backs nuclear power as an established technology that is a "critical option" for reducing greenhouse gases.
The report backs the nuclear industry's request to extend the production tax credit for new reactors through 2025, endorses the Obama administration's "Blue Ribbon Commission" to find an alternative to the Yucca Mountain nuclear waste repository, and says the money that had been going to Yucca should now be directed to finding other ways to deal with spent fuel.
A renewable energy standard (RES) is part of the Senate Energy and Natural Resources Committee legislation passed last year as part of the overall climate and energy effort. But the commission is backing the increasingly loud calls to expand the concept to a "clean energy portfolio standard" or CEPS. Such a standard would also give power providers credit for using nuclear, and coal and gas with carbon capture and storage technology.
The report is part of a series of recommendations by the commission to help pass legislation reining in climate change.
The commission is a project of the Bipartisan Policy Center, which was established by former Senate majority leaders Howard Baker, Tom Daschle, Bob Dole and George Mitchell to develop and promote "solutions that can attract public support and political momentum."
The commission emerged during the energy policy debates of the George W. Bush administration, offering ideas on everything from climate change to automobile fuel economy standards and oil production. Senate Energy and Natural Resources Chairman Jeff Bingaman (D-N.M.) leaned on the group as he drafted a climate cap-and-trade bill that incorporated a controversial cost-containment design feature of placing a firm price limit on greenhouse gas allowances.
The "safety valve" approach drew criticism from environmental groups and some Capitol Hill lawmakers who said it would have prohibited the development of low-carbon energy technologies. More recently, the group backed away from an outright safety valve and instead endorsed the strategic reserve concept, which made its way into last year's Senate climate bill.
The commission's two other co-chairs are former EPA Administrator William Reilly, now a senior adviser to TPG Inc., and Susan Tierney, former assistant secretary of energy and now a managing principal at the Analysis Group. Other commission members include Resources for the Future President Philip Sharp; Mario Molina, a University of California, San Diego, professor and winner of the 1995 Nobel Prize in chemistry; and James Woolsey, the former director of the Central Intelligence Agency.
The group's executive director, Jason Grumet, also served as a top energy adviser to President Obama's campaign.
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