2. CLIMATE: Energy bill's fuels language was hidden in plain sight (E&E Daily, 04/16/2008)

Ben Geman, E&E Daily senior reporter

It has become an urban myth in Washington energy policy circles: In the dead of night, Democrats slipped a far-reaching fuels provision into last year's big energy bill. Before the measure's reach dawned on anyone, it was too late.

Section 526 of last year's new energy law is a single -- if long -- sentence that basically says federal agencies cannot buy alternative fuels if they have higher greenhouse gas emissions than conventional petroleum fuels. The provision did not attract attention when the House debated broad energy legislation in August, or December, when a House-Senate deal was struck that President Bush signed.

But now, some GOP lawmakers trying to repeal the language are crying foul.

"Section 526 is a perfect example of a misguided provision being covertly tucked into a broad piece of legislation shortly before it was passed," said Rep. Jeb Hensarling (R-Texas), chairman of the Republican Study Committee, in a recent press release.

"This misguided provision was surreptitiously inserted into the 2007 energy bill shortly before final passage. Despite the potential enormity of the provision's consequences, no public hearings, discourse, or examination occurred before its inclusion," said Sen. James Inhofe (R-Okla.), the top Republican on the Environment and Public Works Committee, in his own press release last week announcing legislation to repeal it. Several industry lobbyists have also made similar claims.

Critics of the provision worry it could slow efforts to develop domestic alternatives to conventional oil, and perhaps stymie reliable supplies of Canadian tar sands as well.

There is, to be sure, a tradition in Washington of slipping provisions into major legislation at the last minute. But in this case, the provision was in plain sight for much of the year in the House.

The short history goes like this: In June, House Oversight and Government Reform Chairman Henry Waxman (D-Calif.) introduced the Carbon Neutral Government Act, a measure that would require a host of actions to reduce greenhouse gases associated with federal buildings and fleets. It included the provision.

The committee marked up and passed the bill in mid-June and it was later folded into major energy legislation the House passed in August, a bill that rolled together energy measures approved by several different House committees. The Senate had passed a separate major energy bill in June that did not contain the provision.

Last fall, lawmakers were unable to convene a formal conference committee and instead held what came to be known as the "non-conference conference." That eventually yielded a bill that boosted auto mileage standards, expanded that national biofuels mandate and improved lighting efficiency, among a suite of smaller-scale provisions -- including Waxman's.

The biggest part of his "Carbon Neutral Government Act" -- a measure to make the entire government release zero net emissions by midcentury -- did not make the cut into the final bill. But the fuels procurement and a few other sections did, such as language on federal building energy efficiency and a measure requiring federal purchases of low-emissions cars.

At the time, Republicans complained they did not have enough time to adequately review the bill.

"What we have here today is a bill that was written in secret, written by a handful of people on the majority side in each chamber that we didn't see until last night," House Minority Leader John Boehner (R-Ohio) said on the floor Dec. 6. "Nobody knows what is in this bill because nobody has had time to read it."

Under the radar?

The procurement provision was aimed largely at Air Force plans to buy jet fuels that would be made from domestic coal supplies. The Defense Department is interested in helping spur development of a domestic coal-to-liquids (CTL) industry, but producing coal-to-liqids fuels would produce far more greenhouse gas emissions than conventional fuels if the carbon dioxide is not captured and stored.

The coal industry and Air Force have said that carbon controls would accompany domestic CTL plants, but critics of the provision say they are nonetheless concerned how it will be implemented and what standard will be used. Questions have also surfaced in recent weeks about whether -- or to what degree -- the provision could also capture fuels made with oil from Canada's booming tar sands sector, where extracting oil also generates more emissions than conventional wells.

The controversy about the language has prompted speculation that Waxman wanted to keep the measure free of attention in the months leading up to final passage. Waxman did not call attention to the provision during the August House debate when he touted the Carbon Neutral Government Act. Nor did he highlight it when a deal struck between House and Senate Democrats resurfaced on the House floor in early December. Also, critics note the provision's brevity.

"He kept it below the radar to make sure it never engendered any opposition," said one oil industry lobbyist.

Thomas Corcoran, a former Illinois GOP congressman who is an advocate for unconventional fuels, said the legislative history of the provision is unusual, noting the absence of floor debate as well as report language that expands on the provision. Corcoran is a lobbyist for O'Connor & Hannan who recently helped launch a group called the Center for Unconventional Fuels.

"It would have been, in my opinion, proper for Chairman Waxman to take the floor and explain Section 526 and let the legislators know what the purpose of the legislation was and ... what he was trying to accomplish," Corcoran said. "But no. Not one word."

"They were hiding it. It is the only conclusion one can draw," he said.

Waxman and his staff dispute these characterizations. A Waxman aide said the measure was discussed at the staff level during the House-Senate talks -- with GOP staff present -- and it spurred no opposition at the time, and that there was no opposition when the measure was in committee.

"The Air Force and coal-to-liquids advocates say that with advanced technology, coal-to-liquids fuels will be as clean as conventional fuels -- all this provision does is hold them to their promises," Waxman said a statement to E&E Daily. "As individuals, businesses, and states take action to fight global warming, the federal government shouldn't spend taxpayer dollars to make global warming worse and negate these efforts.

"It's just common sense, and that's why no one opposed this provision in the eight months it moved through the legislative process," Waxman said.

Also, committee staff said that in May of last year, the committee asked the Defense Department and other agencies to comment on the committee bill, and that DOD declined while the Energy Department and other agencies did not raise any concerns about the language.

Nonetheless, the reach of the provision -- which federal agencies are reviewing -- has prompted confusion.

The issue came into public view prominently in February when Canadian Ambassador Michael Wilson wrote to Defense Secretary Robert Gates urging against an expansive interpretation that could block government purchases of fuels derived in part from Alberta's booming oil sands region.

The Canadian concerns prompted aides to Senate Energy and Natural Resources Chairman Jeff Bingaman (D-N.M.) to ask Waxman's staff about the possible link to oil sands. When the provision was discussed in the House-Senate staff talks, it has been discussed in light of military interest in coal-to-liquids fuels, according to Bill Wicker, a spokesman for Bingaman.

That prompted a letter from Waxman to Bingaman last month that attempted to clarify the provision's reach. The letter said the provision is not meant to affect "generally available" fuels made in part using Canadian oil sands but would apply if a future contract that supported refinery expansions aimed at processing more oil from that source.

But critics say Waxman's letter underscores their argument that the provision was not adequately vetted before it became law. "It was a very irregular legislative process that led to very unsatisfactory legislation that, like putting lipstick on a corpse, they are trying to correct by letters in the following year," Corcoran said. "It is the most strange procedure I have ever seen."

Click here to read the Carbon Neutral Government Act as introduced in the House. The fuels procurement provision appears on page 13.

Click here to read the broad energy bill the House approved in August. The fuels procurement provision appears on page 154.

Click here to read the broad energy bill approved by the House and Senate and signed by President Bush in December. The fuels procurement provision appears on page 203.

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