NARUC Staff Subcommittee on Accounting and Finance

1
National Energy Policy Legislation

• NARUC Staff Subcommittee on Accounting and
  Finance
• Salt Lake City, Utah
• September 19, 2005
• Jeffrey M. Petrash
• American Gas Association
• Washington, D.C.

2
American Gas Association

• National, nonprofit trade association serving the
  interests of 195 investor-owned and municipal
  natural gas utilities
• Actively advocates for natural gas utilities in
  Congress, before the Executive Branch of the
  Federal Government, and before the Federal Energy
  Regulatory Commission
• Does not represent the interests of natural gas
  producers or interstate natural gas pipelines

3
American Gas Association Issues

• Supply, demand, and prices
• Infrastructure to meet demand
• Assistance to low-income consumers
• Energy efficiency
• New technologies

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Natural Gas Supply And Demand

• Natural gas demand is growing and will continue
  to grow
• Natural gas supply is having difficulty keeping
  pace

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(No Transcript)
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Source Environmental and Energy Analysis
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Natural Gas Supply Limited By Politics, Not By
Geology
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Major Portions of the Gas Resource Base Are Not
Accessible
21 TCF
346 TCF
40
100
31 TCF
100
RestrictedPercentage
43 TCF
56
Approximately 29 trillion cubic feet (TCF) of the
Rockies gas resources are closed to development
and 108 TCF are available with restrictions.
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National Energy Policy Bill

• Process began in early 2001
• Senate Republican and Democratic bills in 2001
• Vice President Cheneys National Energy Policy
  Development Group issues report in May, 2001
• Change in control of the Senate in Spring, 2001
• House passes H.R. 4 in August 2001
• September 11, 2001
• The Daschle gambit
• Senate passes H.R. 4 in April 2002 after more
  than 40 days of floor debate

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Comprehensive National Energy Policy Bill2002
Conference (N.B. An Election Year)

• Conference process is to reconcile House and
  Senate bills
• Conference stretched over June-November, 2002
• Ultimately conference deadlocked
• ANWR
• Electricity title
• Ethanol
• Renewable portfolio standard

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Comprehensive National Energy Policy Bill2002

• The conference process failed to produce a
  comprehensive national energy policy bill
• But pipeline safety was split off and passed
  separately in November 2002
• Pipeline Safety Improvement Act of 2002

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National Energy Policy Legislation 2003

• Continuation of 2001-2002 process
• House bill approved April, 2003, by a vote of
  247-175
• Senate debates in the summer for two months, with
  no result

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National Energy Policy Legislation 2003
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National Energy Policy Legislation 2003

• Crazy Ivan(??????? Ivan)Republican Senate
  adopts 2002 Democratic bill
• Northeast Blackout
• Conference produces a November 2003 conference
  report based on House-passed bill and Senate
  Republican bill
• Approved in the House
• Failed in the Senate by two votes

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National Energy Policy Legislation 2004

• Hopes that two more votes can be found to clear
  bill in the Senate
• In fact more Senate votes would probably defect
  if a vote were held

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(No Transcript)
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2004-2005 Three-Way Standoff

• House
• ANWR
• MTBE liability waiver
• Senate
• No ANWR
• No MTBE liability waiver
• White House
• ANWR
• Bill costs too much

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2004 Comes and Goes With No Action (Almost)
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A Bright Spot in 2004

• Congress passes a series of bills that include a
  number of provisions deemed essential to
  construction of an Alaska natural gas pipeline
• Loan guaranties and favorable tax treatment
• A number of procedural provisions

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Comprehensive National Energy Policy
LegislationHouse2005

• Three House Committees approve bills in April
• Energy and Commerce (39-16)
• Resources (voice vote)
• Ways and Means (26-11)
• House approves a bill April 20, 2005 (249-183)
• Bulk of the bill is identical to H.R. 6
  conference report from 2003

21
Comprehensive National Energy Policy
LegislationSenate2005

• Energy and Natural Resources Committee approves a
  bill 22-1 in May, 2005
• A blend of prior energy bill and natural gas
  bills prepared by Senator Lamar Alexander
  (Tennessee)S.726 and S.727
• Senate approves bill June 28, 2005 (85-12)

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Comprehensive National Energy PolicyConference20
05

• Conference to reconcile House and Senate bills
  begins early July, 2005
• Conference Committee produces a conference report
  July 26, 2005
• House approves July 28, 2005
• Senate approves July 29, 2005

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Comprehensive National Energy Policy2005

• President signs the bill at Sandia National
  Laboratory in New Mexico (August 8, 2005)
• Domenici-Barton Energy Policy Act of 2005, P.L.
  109-58, 119 Stat.594

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Why Now?

• Energy prices generally
• Gasoline prices particularly
• ANWR
• MTBE
• Not an election year

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Natural Gas Provisions
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Natural Gas ProductionPermitting

• Expeditious compliance with NEPA, streamlined
  procedure for NEPA, require best management
  practices, improve enforcement activities, and
  authorizes additional funds for processing
  applications (362, 390)
• Deadlines for processing applications under the
  Mineral Leasing Act (366)
• Review of onshore leasing practices (361)

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Natural Gas ProductionPermitting

• MOUs on leasing practices and utilities on public
  lands (363, 372)
• Steps to ensure timely action on leases and
  permits (362)
• Rocky Mountain pilot project to improve federal
  permitting (365)

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Natural Gas ProductionIncentives

• Royalty relief for ultradeep wells (20,000 feet)
  in shall Gulf waters (200 meters) (344)
• Royalty relief for deepwater wells in Gulf (345)
• Two-year amortization for geological and
  geophysical costs (1329)

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Natural Gas ProductionOther

• Royalty-in-kind program (342)
• Hydraulic fracturing fix (322)
• Federal Water Pollution Control Act fix (323)
• DOE study of natural gas supply and demand
  (1818)
• Interior to identify restrictions and impediments
  to development (364)

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Natural Gas ProductionOther

• Orphaned, abandoned, and idled wells program
  (349)
• Study of impact of coalbed methane development on
  land and water in Intermountain West (1811)
• Coastal zone impact assistance (384)
• Comprehensive inventory of oil and gas resources
  under Outer Continental Shelf (357)
• Stay tuned!

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Natural Gas ProductionMarching To The Rear

• Withdraws land from leasing in Finger Lakes
  National Forest (370)
• Bans drilling under the Great Lakes (386)

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Natural Gas InfrastructureLNG

• Confirms exclusive FERC jurisdiction over LNG
  siting (311)
• Codifies Hackberry doctrine (311)
• Confirms state jurisdiction under CZMA, CAA, and
  FWPCA (311)
• Designates FERC as lead agency and allows it set
  deadlines for state and federal agencies
  reviewing under federal law (313)
• States may perform safety inspections but not
  enforce safety requirements (311)
• FERC must require emergency response plans (311)
• At least three LNG forums to be held (317)
• DOE study of open-rack vaporization systems
  (1828)

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Natural Gas Infrastructure

• Designates FERC as lead agency and allows it set
  deadlines for state and federal agencies
  reviewing under federal law (313)
• FERC record is the consolidated record for
  federal authorizations (313)
• Court review of failure of federal or state
  agencies to act under federal law (313)
• CZMA fixes (381, 382)

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Natural Gas Infrastructure

• Accelerated depreciation for new LDC facilities
  (1325)
• Confirms accelerated depreciation for gathering
  facilities (1326)
• Enhances FERC authority to permit market-based
  rates for new storage facilities (312)
• DOE study of storage capacity (1801)
• Requires updating values for royalties on
  crossing federal lands (367)
• Designation of energy corridors on federal lands
  (368)

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Natural Gas Energy Efficiency

• Study of Total Energy Efficiency (1802)
• Tax credit for existing homes (1335)
• Contractors tax credit for new homes (1332)
• Manufacturers tax credit for refrigerators,
  dishwashers, clothes washers (1334)
• Deduction for commercial buildings (1331)

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Natural Gas New Technologies

• Oil and gas RD (965, 966, 967)
• RD on methane hydrates (968)
• Royalty incentives for methane hydrates (353)
• Tax credit for fuel cells and microturbines
  (1335, 1336)
• Study of distributed generation (1817)

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Natural Gas Consumers

• Increases LIHEAP authorization to 5.1 billion
  (121)
• FERC directed to facilitate market transparency
  and may require price reporting (316)
• Prohibits market manipulation in purchase of sale
  of natural gas or transportation (315)
• Increases penalties under Natural Gas Act and
  Natural Gas Policy Act (314)

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Electricity Provisions
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ElectricityBig Ticket Items

• Mandatory FERC electric reliability standards
  (1211)
• Backup FERC electric transmission siting
  authority (1221)
• Repeals PUHCA (1261-1277)
• Repeals the PURPA put (1253)
• Expands FERC merger review authority to include
  generation (1289)

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ElectricFERC Rate Issues

• FERC may require unregulated transmission
  entities to follow open-access rules (1231)
• Protection of native load (1233)
• Study on benefits of economic dispatch (1234)
• FERC rulemaking regarding incentive-based rates
  for electric transmission (1241)

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ElectricityFERC Market Rules

• FERC directed to facilitate market transparency
  and may require price reporting (1281)
• Prohibits filing false information (1282)
• Prohibits market manipulation (1283)
• Increases penalties under the Federal Power Act
  (1284)
• Changes FERC refund effective date (1285)
• Refund authority for market-based rates (1286)

42
ElectricityPURPA Proceedings

• PURPA proceedings on net metering and smart
  metering (1251, 1252)
• PURPA proceeding on interconnection (1254)

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Coal Provisions

• Clean coal initiative (401-404)
• Clean power projects (411-417)
• Coal gasification (414)
• Petroleum coke gasification (415)
• Coal leasing (431-438)

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Nuclear Provisions

• Reauthorizes Price-Anderson Act (601-610)
• Next generation nuclear plant project (641-645(
• Nuclear security (651-657)
• Numerous other provisions (621-639)

45
Hydroelectric Provisions

• Licensee may propose alternative conditions
  (241)
• Hydro production incentives (242)
• Hydro efficiency improvement (243)

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Renewable Provisions

• Assessment of renewable energy resources (201)
• Federal purchase requirement (203)
• Geothermal provisions (221-237)

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Hydrogen (Title VIII)
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Research and Development (Title IX)
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Ethanol (Title XV)
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Climate Change (Title XVI)
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Questions?
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Thank You!

• jpetrash_at_aga.org
• 202.824.7231