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ENERGY POLICY ACT OF 2005 - SUMMARY OF TITLES
To all members
of the Alliance for Energy and Economic Growth, thank you for all of your
support over the past four years. This bill would not be a reality
today without your efforts.
For your information, a summary of the titles contained in the
final report follows. We apologize for the length of the summary,
approximately eight pages, summarized from a 1,700 page bill, however, we are
confident that you will some its content helpful.
On Friday, July 29, 2005, the full Senate passed the energy conference report
by a vote of 74 to 26. The full House had passed the report on July 28,
2005, by a vote of 274 to 156. With passage by the Senate, the Energy
Policy Act of 2005 is now headed to the president who is expected to sign the
bill into law this week.
With
the exception of the Energy Policy Act of 1978, which focused on synthetic
fuels, the Energy Policy Act of 2005 is the first comprehensive rewrite of
energy laws in 70 years. The Energy Policy Act of 2005 will impact
energy policy for decades to come as the many new programs are implemented.
Title I – Energy Efficiency
The goal of this title is to promote energy conservation through three
different mechanisms: first, the title increases conservation at federal
buildings by 20% and assists state and local facilities in becoming more
energy efficient. Second, the title includes weatherization assistance
and reauthorizes the Low Income Home Energy Assistance Program
(LIHEAP). Third, the title establishes energy efficiency standards for
a number of manufactured products, including residential appliances and
commercial equipment. The title also reauthorizes the energy savings performance
contract program (section 105). During conference, the title was
amended to require the U.S. Department of Energy (DOE) to report to Congress
when the agency fails to issue new efficiency standards according to the
statutory schedule. Additionally the conference report clarifies
Congress’ intent regarding the labeling of energy-efficient products and
removes language that would allow DOE to set efficiency standards for
component parts of residential furnaces. The conference report also
contains a new daylight savings schedule. Daylight savings will run
from the second Sunday in March through the first Sunday of November,
effective March 2007. DOE is required to perform a study of how this
change impacts the U.S. economy before the new schedule takes effect.
Title II – Renewable Energy
This title requires the federal government to increase its use of renewable
energy to 7.5% by 2012 and contains incentives, programs, and provisions for
insular, biomass, hydroelectric, and geothermal energy production. The
title also includes provisions to expedite and streamline the hydropower
re-licensing process. The title authorizes a sugar cane ethanol program
and provides grants to improve the commercial value of forest biomass.
Despite being debated heavily, the final conference report does not contain a
Renewable Portfolio Standard.
Title III – Oil and Gas
This title contains a wide range of provisions, including increased access to
onshore exploration on federal lands; authorization for coastal assistance;
and increased regulatory certainty for natural gas infrastructure, including
the grant of exclusive authority to Federal Energy Regulatory Commission
(FERC) over natural gas siting. The conference report includes the
Outer Continental Shelf inventory provision (Section 357), and also grants
FERC exclusive siting authority over liquefied natural gas terminals. The
report also contains a provision that directs the DOE to study the use of
radiation to refine petroleum products as a way to increase oil production.
Title III addresses orphaned, abandoned and idled wells, and includes a pilot
program to offer incentives to private companies to encourage them take
responsibility for these wells. After much debate, the final conference
report does not contain an oil savings provision. Also left out of the
final report is a lease repurchase provision from the House version of the
bill. The provision would have allowed a leaseholder to force the
federal government to repurchase a lease that it had issued for exploration
and development where the government later refused to issue the permit needed
to conduct those exploration and development activities on the leased
property.
Other
important provisions in this title include:
- Exempt
hydraulic fracturing from the Safe Drinking Water Act’s Underground
Injection Control program.
- Amend the
Clean Water Act definition of oil and gas exploration to include
construction activities, which exempts oil and gas construction
activities from the act’s National Pollutant Discharge Elimination
System permitting program.
- Provide
incentives for marginal property production, natural gas production from
deep wells in the shallow waters of the Gulf of Mexico, and gas hydrate
production.
- Encourage
enhanced oil and natural gas production through CO2 injection.
- Reforms
permitting practices and management of federal leasing programs,
including a pilot program to improve coordination.
- Designate
energy rights-of-way corridors on federal lands.
- Authorize
programs for oil shale, tar sands, and other strategic unconventional
fuels.
- Establish
coastal assistance programs.
- Establish
“categorical exclusions” from National Environmental Policy Act for five
oil and gas exploration activities if they are conducted pursuant to the
Mineral Leasing Act.
Title IV – Coal
This title authorizes funds for clean-coal technologies research, allocating
70% of the funds to the study and development of coal gasification (also
known as Integrated Gasification Combined Cycle, or IGCC) and 30% to other
technologies. The title provides a range of grants and incentives for
clean-coal research and implementation. The bill also streamlines the federal
coal leasing program and repeals the 160-acre limit on federal coal leases.
Title V – Indian Energy
This title streamlines the approval process for Indian tribes to
enter into leases, and business agreements. It grants rights-of-way for
the development of resources located on Tribal lands by establishing one
“master” approval process between the tribe and the federal government.
This agreement allows tribes to enter into contracts and lease agreements
with private entities pursuant to the master agreement without having to seek
separate authorization for each agreement. The report also includes a
provision that would grant Indian tribes additional decision-making authority
over energy projects located on Indian lands and provides for the use of
energy-efficient measures in federally assisted housing located on tribal lands.
Title VI – Nuclear Matters
This title reauthorizes the Price-Anderson Act amendments,
extending indemnification authority and increasing the maximum assessment
amounts. The report contains a provision to allow the Nuclear
Regulatory Commission to offer incentives, such as grants and loans, to
recruit students into nuclear-related fields of study. The title adopts
a number of new security provisions, including a requirement to conduct
security response evaluations of nuclear facilities every three years.
The conferees agreed to adopt an amendment requested by the Bush
Administration that would include a risk insurance program, also known as
“stand-by support,” for the construction of six new nuclear power
plants. The title contains provisions for the design, construction, and
operation of next generation nuclear power plants. Further, the report
contains a provision that allows for the export of highly enriched uranium
for medical isotope production, under prescribed circumstances, to five designated
“recipient” countries: Belgium, Canada, France, Germany, and the
Netherlands. This title addresses the safe disposal of
greater-than-Class C radioactive waste and authorizes a demonstration project
to produce hydrogen at existing nuclear power plants.
Title VII – Vehicles and Fuels
This title primarily addresses alternative fuel use and fuel cell
technology, and includes a number of miscellaneous provisions, including a
“Conserve by Biking” program.
The conferees agreed on two amendments. The first requires that
dual-use vehicles be labeled in order to notify drivers of the alternative
fuel type that can be used. Otherwise, the vehicle cannot qualify for
fuel economy incentives. The second allows vehicles used in emergency
transmission line repair and electricity service restoration to qualify for
the emergency exemption to the alternative fueled vehicle purchasing
requirements contained in the act. The title contains a provision that
makes grant money available to states that implement voluntary diesel
emissions programs. Additionally, the title contains a provision that
instructs the Secretary of Transportation and the National Highway Traffic
Safety Administration to evaluate a number of conditions, including
scientific feasibility and economic impact, before increasing fuel economy
standards.
Title VIII – Hydrogen
This title addresses the continued development of hydrogen and
fuel cell technology through research and demonstration projects.
Provisions create a hydrogen and fuel cell task force, authorize projects
that use solar and wind power to produce hydrogen, and direct the Secretary
of Energy to ensure that technology developed under this title is transferred
to the private sector.
Title IX – Research and Development
The purpose of this title is to establish research goals and allocate funding
for multiple resource and technology research programs in the following
categories:
- energy
efficiency;
- distributed
energy and electric energy systems;
- renewable
energy;
- agricultural
biomass research and development programs;
- nuclear
energy;
- fossil
energy, including carbon capture, coal mining technologies, low volume
oil and gas reservoir
- research
and methane hydrate research;
- science,
including fusion and fission technology; and
- ultra-deepwater
and unconventional natural gas and other petroleum resources.
Title X – Department of Energy Management
The purpose of this title is to elevate the DOE staff positions that oversee
science matters at the agency and to expedite the movement of new
technologies into the market. Additionally, the title provides for
increased technology transfer from DOE to the private sector.
Provisions are included for small business advocacy and assistance, as well
as competitive prizes to be awarded for “grand challenges” in science and for
measures that decrease the United States’ dependence on foreign sources of
oil.
Title XI – Personnel and Training
The purpose of this title is to address the concern about a lack
of qualified scientists in the energy field by creating grants, fellowships,
and other incentives to encourage Americans to enter into energy research
professions. Additionally, this title provides for skilled technical
training and creates competitive continuing education programs for math and
science teachers at the National Labs.
Title XII – Electricity
The title establishes a mandatory framework to ensure
transmission grid stability. The Electric Reliability Organization
replaces the existing voluntary scheme with mandatory standards and
enforcement authority. The title grants the federal government
exclusive authority to site electric transmission facilities in designated
“corridors of national interest.” Additionally, the Public Utility
Regulatory Policy Act is amended to include requirements for net metering and
“smart,” or time-based, metering. The title provides for the creation
of joint regional boards to study the issue of security constrained economic
dispatch. The boards are directed to consider how this mode of
operating an electric energy system impacts reliability and affordability.
The
conferees debated, at length, eminent domain issues related to transmission
line siting in designated “national interest” corridors and eventually agreed
to specify in the title that rights-of-way obtained for transmission grids
cannot be used for any other purpose. It was also agreed to grant
utilities and transmission owners expedited access to facilities located on
federal lands in order to comply with new reliability standards. Within
the title, there are two amendments that address regional concerns. The
conferees approved an amendment that allows New York to establish reliability
rules that are more stringent than the proposed national standard. The
conferees also agreed to a “sense of Congress,” a compromise to address the
concerns of New England legislators regarding a new FERC policy that
regulates locational installed capacity pricing in New England. In
order to include more consumer protection, the title includes a provision to
provide relief from termination payments associated with manipulated
contracts for the sale of electric energy. The title repeals the Public
Utilities Holding Companies Act and grants additional authority to FERC over
mergers and acquisitions involving public utilities. The title also
contains a provision regarding native load service obligations.
Title XIII – Energy Policy Tax Incentives
The tax title provides incentives in the following categories:
electricity infrastructure, domestic fossil fuel security, conservation and
energy efficiency provisions, and alternative motor vehicles and fuels
incentives. Specific provisions include:
Oil
and Gas
- Reduces
the depreciation period for national gas distribution lines from 20
years to 15 years.
- Allows
two-year amortization of geological and geophysical costs incurred in
connection with oil and gas exploration.
- Increases
eligibility for small refiner percentage depletion deductions from
50,000 barrels to 75,000 barrels and bases the limit on average daily
production.
- Affirms
that natural gas gathering lines are subject to seven-year
depreciation.
- Establishes
three tax credits for investments in clean-coal facilities that produce
electricity.
Electricity
Infrastructure
- Reduces
the depreciation period for assets used in the transmission and
distribution of electricity from 20 years to 15 years.
- Creates a
production tax credit for new nuclear power facilities at a rate of 1.8
cents per kWh for electricity produced over an eight-year period.
- Extends
the renewable electricity production credit through December 31, 2007,
for qualified facilities including: wind, closed-loop biomass, open-loop
biomass, geothermal, small irrigation power, landfill gas, trash
combustion, and incremental hydropower.
Alternative
Motor Vehicles and Fuels Incentives
- Provides
tax credits for the purchase of hybrid, fuel cell, advanced lean-burn
diesel and other alternative power vehicles.
- Expands
the small ethanol producer credit to producers with annual production
capacity of 60 million gallons (up from 30 million gallons).
Conservation
and Energy-Efficiency Provisions
- Creates a
30% tax credit for the purchase of residential solar water heating,
photovoltaic equipment, and fuel cell property.
- Creates a
10% personal tax credit for energy efficient improvements to existing
homes.
Title XIV – Miscellaneous
Provisions address:
- Energy
production incentives for electricity produced using coal that is mined
within a state, so long as the utility employs clean-coal technology.
- Oxygen
fuel development and distribution.
- “Set
America Free:” establishes a U.S. Commission to make recommendations for
a North American energy policy that will achieve energy self-sufficiency
by 2025 within Canada, Mexico, and the United States.
- Cold
cracking, the application of radiation to petroleum at standard
temperature and pressure to refine petroleum products.
Title XV – Ethanol and Motor Fuels
The title contains a 7.5 billion gallon Renewable Fuels Standard
(RFS) and does not include liability protection for ethanol. Of the 7.5
billion gallon RFS, 250 million gallons are dedicated to ethanol produced
from cellulosic biomass. The title also contains an “Advanced Biofuel
Technology Program” to fund demonstration projects for cellulosic biomass
with an emphasis on encouraging geographic diversity for the production of
ethanol. The report is largely silent on MTBE, although parties are
given the opportunity to move MTBE lawsuits to federal district courts.
The oxygen content requirement for reformulated gasoline is eliminated.
The
title also addresses underground storage tank compliance and aims to decrease
the proliferation of boutique fuels.
Title XVI – Climate Change
The conferees rejected the “Sense of the Senate,” which addressed
the need for a mandatory cap-and-trade program to address greenhouse gas
emissions, but did adopt a climate change title that creates a committee of
cabinet-level officials to develop a national strategy on climate change and
creates a new Climate Change Technology Program at DOE. The interagency
committee is tasked with developing greenhouse gas intensity reducing
technology strategies. The title also provides for the deployment of
greenhouse gas reduction technologies to developing countries.
Title XVII – Incentives for Innovative Technologies
The goal of this title is to encourage the development of
innovative technologies that do not adversely impact air quality. The
title creates a loan guarantee program for innovative technology projects in
categories such as renewable energy systems; nuclear generation; advanced
fossil energy technologies; coal gasification; and efficient electrical
generation, transmission, and distribution projects.
Title XVIII – Studies
This title authorizes the completion of 40 studies, including:
- telecommuting;
- coal bed
methane;
- Indian
land rights of way;
- fuel cell
and hydrogen technology;
- renewable
energy on federal land; and
- split
estate federal oil and gas leasing and development practices.
The
title also contains a requirement that the departments of energy, defense,
and homeland security assess the impacts of China’s energy needs on U.S.
interests. The Energy, Defense, Homeland Security study will run concurrently
with the Committee on Foreign Investments in the United States (CFIUS)
inquiry, and must be complete within 120 days of enactment. CFIUS is
not permitted to issue its decision until 21 days after the Energy, Defense,
Homeland Security report is released.
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