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Energy Policy Act Summary

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 Energy Policy Act 2005 summary, which is approximately eight pages as condensed from a 1,700 page bill, however, we are confident you will [find] some its content helpful. 

The full House passed the 2005 Energy Policy Act on July 28, 2005, by a vote of 274 to 156. And on Friday, July 29, 2005, the full Senate passed the Conference Report H.R.6/Energy Policy Act of 2005, by a vote of 74 to 26. With passage by the Senate, the Energy Policy Act 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 2005 Energy Policy Act will impact energy policy for decades to come as many new programs are implemented.

Title I – Energy Efficiency

The goal of Title I is to promote energy conservation through three different mechanisms: first, the title increases conservation at federal buildings by 20 percent 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, Title I establishes energy efficiency standards for a number of manufactured products, including residential appliances and commercial equipment. Title I also reauthorizes the energy savings performance contract program (section 105). As part of Conference Report H.R.6 and the Energy Policy Act of 2005 Summary, 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 the 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. The 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

Title II requires the federal government to increase its use of renewable energy to 7.5 percent 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. Title II 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 H.R.6, which was signed into law as the Energy Policy Act of 2005, it does not contain a Renewable Portfolio Standard.

Title III – Oil and Gas

Title III 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 grants the 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 H.R.6 and Energy Policy Act 2005 summary 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 issued for exploration and development, where the government later refused to issue the permit needed to conduct exploration, as well as development activities on the leased property.

Other important provisions in Title III 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 and 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

Title IV authorizes funds for clean-coal technologies research, allocating 70 percent of the funds to the study and development of coal gasification (also known as Integrated Gasification Combined Cycle or IGCC) and 30 percent to other technologies. Title IV 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

Title V streamlines the approval process for Indian tribes to enter into leases and business agreements. It grants rights-of-ways for the development of resources located on Tribal lands by establishing one “master” approval process between the tribes and 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 Energy Policy Act of 2005 final summary 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

Title VI reauthorizes the Price-Anderson Act amendments, extends indemnification authority and increases the maximum assessment amounts. The Energy Policy Act of 2005 summary report contains a provision that allows 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. Title VI contains provisions for the design, construction and operation of next generation nuclear power plants. Further, the 2005 Energy Policy Act summary 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, which includes Belgium, Canada, France, Germany and the Netherlands. Title VI also 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

Title VII primarily addresses alternative fuel use and fuel cell technology and includes a number of miscellaneous provisions, such as a “Conserve by Biking” program. The conferees agreed on two amendments as part of the Energy Policy Act of 2005 summary. The first requires that dual-use vehicles be labeled in order to notify drivers of alternative fuel types 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. Title VII also 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 impacts before increasing fuel economy standards.

Title VIII – Hydrogen

Title VIII addresses the continued development of hydrogen and fuel cell technology through research and demonstration projects. Provisions contained within the Energy Policy Act 2005 summary 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 Title IX 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-deep water and unconventional natural gas, in addition to other petroleum resources.

Title X – Department of Energy Management

The purpose of Title X 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, Title X provides for increased technology transfer from the DOE to the private sector. Provisions within the Energy Policy Act of 2005 summary 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 Title XI is to address concerns over 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, the title from that provides for skilled technical training, and creates competitive continuing education programs for math and science teachers at the National Labs. 

Title XII – Electricity

Title XII 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 2005 Energy Policy Act summary directs the boards 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 the rights-of-ways obtained for transmission grids cannot be used for any other purpose. It was also agreed to in the Energy Policy Act of 2005 summary to grant utilities and transmission owners expedited access to facilities located on federal lands in order to comply with the new reliability standards. Within Title XII, 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. In Conference Report H.R.6, the conferees also agreed to a “sense of Congress,” which is 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. Title XII 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

Title XIII, the Energy Policy Tax Incentives 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 from the Energy Policy Act of 2005 summary, 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 capacities of 60 million gallons, which is increased from 30 million gallons.

Conservation and Energy-Efficiency Provisions

  • Creates a 30 percent tax credit for the purchase of residential solar water heating, photovoltaic equipment and fuel cell property.
  • Creates a 10 percent 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

Title XV 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 Energy Policy Act 2005 summary 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,” as part of the Energy Policy Act of 2005 summary, 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, in addition to a new Climate Change Technology Program at the DOE. The interagency committee is tasked with developing greenhouse gas intensity reducing technology strategies. Title XVI also provides for the deployment of greenhouse gas reduction technologies to developing countries.

Title XVII – Incentives for Innovative Technologies

The goal of Title XVII 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, efficient electrical generation, transmission and distribution projects. 

Title XVIII – Studies

Title XVIII 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 DOE, DOD 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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