CLIMATE:

Kerry, Lieberman to end the suspense with energy bill rollout today

Sens. John Kerry (D-Mass.) and Joe Lieberman (I-Conn.) will release long-awaited climate and energy legislation today that reflects eight months of closed-door negotiations with Sen. Lindsey Graham (R-S.C.), while still leaving wide open additional room for changes as they search for the magic 60 votes.

Coming in at just under 1,000 pages, the bill includes 12 titles covering a cross section of the nation's top environmental and energy issues, from expanded nuclear power and carbon capture and sequestration to revenue sharing for states that want to conduct more offshore oil and gas production. It also would set the first-ever mandatory caps on greenhouse gas emissions, according to a 21-page summary obtained yesterday by E&E.

Graham won't be at today's press conference because of what he describes as uncertainty over the Gulf of Mexico oil spill and immigration politics. Even so, Lieberman said the bill contains most of the deals that Graham helped cut to get it ready for its unveiling, including concessions to moderate Democrats on offshore drilling and a delay before heavy manufacturers must curb their climate changing emissions.

The Kerry-Lieberman legislation will call for a 17 percent reduction in carbon pollution from 2005 levels by 2020; 42 percent by 2030 and 83 percent by 2050. Power plants will face the first restrictions, followed six years later by energy-intensive manufacturers.

Transportation emissions will be regulated under the national carbon cap, though under a separate trading program. Producers and importers of refined petroleum products also will be kept out of the carbon market, but they still must purchase allowances at a fixed price from the allowance auction.

The bill dives into the thorny subject of emission allowances that already threatens to divide Senate Democrats along regional lines. Local distribution companies that service electric utilities and natural gas consumers can expect free allowances through 2029. But the senators face a war over exactly what formula to use when giving the credits out to the power companies.

The House-passed climate bill split the credits up 50-50 between companies based on their historic emission levels and retail sales, adopting a system created by key members of the Edison Electric Institute. Several Senate Democrats from the Midwest and Great Plains, led by Tom Harkin of Iowa, have complained that the House bill created regional inequities unfavorable to coal and urged that 100 percent of the allowances be given for free to companies based on their historic emissions.

Responding to those concerns, Kerry, Graham and Lieberman floated a 75-25 split favoring historic emissions. Still, Harkin said yesterday he was not satisfied. "It ought to be 100 percent," he said. "There's no reason why any of it should go to anything other than emissions. Seventy-five is a nice step in the right direction, but that just doesn't do it."

Pushing in the other direction are coastal state senators, including Dianne Feinstein (D-Calif.) and Tom Carper (D-Del.). Both have said the Senate should stick with the EEI-approved formula. "We asked the industry. We said, 'OK, this is above our pay grade. Why don't you guys figure it out?' They did. God bless them. And we should just declare victory and take what they negotiated," Carper said yesterday.

Elsewhere, starting in 2016, energy-intensive and trade-exposed industries -- a complete list will be drawn up by U.S. EPA -- will receive allowances to help offset their compliance costs, with an emphasis on rewarding efficiency improvements. In terms of revenue, the senators are aiming to send two-thirds of the total that does not go to deficit reduction toward energy bill discounts and direct rebates.

The Senate legislation also would provide additional assistance to people disproportionately affected by increases in energy prices.

Answering concerns from major industries and moderate Democrats, the Senate bill includes a hard price collar for carbon, with an introductory floor set at $12 -- increasing at 3 percent over inflation annually -- and a ceiling set at $25, which will increase by 5 percent over inflation.

And the legislation would pre-empt the ability of states to implement mandatory greenhouse gas reductions and provide credit through allowances for states that already have cap-and-trade policies set to be terminated because of the federal law. While handing U.S. EPA authority over a number of the new climate programs, the bill restricts the agency's ability to regulate greenhouse gases under several sections of the Clean Air Act.

Answering demands from many Midwestern lawmakers, the Kerry-Lieberman bill includes a border-protection mechanism that punishes developing countries with trade sanctions if an international climate agreement cannot be reached and then they do not do enough to curb their own greenhouse gas emissions.

In response to the recent oil spill in the Gulf of Mexico, the Kerry-Lieberman bill would allow states to opt out of drilling up to 75 miles from their shores. States will also have the ability to veto drilling plans "if they stand to suffer significant adverse impacts in the event of an accident," according to a summary of the bill.

States that do go ahead with drilling will receive 37.5 percent of the revenue -- a provision that is key to gathering the support of coastal-state lawmakers from both sides of the aisle. "If they leave drilling out, it'd be very problematic for me," said Sen. Mark Begich (D-Alaska), who said revenue sharing was one of his "big asks" in the negotiations.

Lieberman said what is being released now is not anywhere close to the final product.

"Let's begin the next phase of the negotiating process," he said. "This is not an edict from on high. This is a proposal from the three of us, and we welcome input."

Industry, environmental group support

Reaction to the Kerry-Lieberman bill from on and off Capitol Hill will be critical in Majority Leader Harry Reid's decision about whether to take the bill to the floor later this spring or summer.

Reid (D-Nev.) yesterday told reporters he looked forward to the response from "everyone who's interested in the subject" when the Kerry-Lieberman bill comes out. Reid plans to huddle with the six major committee leaders with jurisdiction over the issue after the Memorial Day recess to "take a look at what we need to do with energy this year."

Already, officials confirmed to be attending today's Kerry-Lieberman press conference include the presidents from two major industry trade associations: Tom Kuhn of the Edison Electric Institute and Marv Fertel from the Nuclear Energy Institute. Duke Energy Corp. CEO Jim Rogers and FPL Group Inc. CEO Lew Hay also are scheduled to attend, and Lieberman said he expects to get written statements of support from three of the nation's largest oil companies, BP PLC, ConocoPhillips and Royal Dutch Shell PLC.

From the environmental community, Environmental Defense Fund President Fred Krupp, National Wildlife Federation President Larry Schweiger and Republicans for Environmental Protection President Rob Sisson are expected to be on stage.

Lieberman said he expects the speakers to help influence public opinion and broaden support for the legislation as it makes its way to the Senate floor.

"We've got a really impressive set of networks in the environmental and business communities who are prepared to go to work to support this bill," he said. "And to spend a fair amount of money doing it. This is not a pyrrhic effort."

Perhaps most important, Lieberman said he expects the American Petroleum Institute "to be quiet" about the climate proposal. And he sees a similar role for the U.S. Chamber of Commerce, the nation's largest business group and an outspoken opponent of every previous legislative effort to address global warming with mandatory caps on emissions.

"The chamber will certainly be at least neutral and I hope after will give a generally optimistic or encouraging reaction, but not an endorsement," Lieberman said.

Environmentalists enter the negotiations with some groups cheering and others on the sidelines.

"If members of Congress end this session with no credible and meaningful response to our oil dependence, they will be confirming the view of the public that Congress is fundamentally out of touch with the American people," said Tony Kreindler, spokesman at the Environmental Defense Fund.

David Jenkins, government affairs director at Republicans for Environmental Protection, said his group likes the mix of energy and climate provisions. "If you can't support something this well-balanced, then it's hard to imagine what the magic solution is," he said.

But Friends of the Earth U.S. President Erich Pica questioned the oil and gas provisions and sections to strip EPA of its existing regulatory authority under the Clean Air Act.

"Without dramatic improvements, this bill should not be passed, and senators should consider alternatives," Pica said. "In the meantime, existing tools like the Clean Air Act must be put to work. More broadly, we must end a system in which polluter lobbyists exercise effective veto power in Congress. Our economy, global security and the health of the public are all at stake."

'It is a long shot'

Kerry and Lieberman expect to remain at the forefront of the negotiations after their bill's release, though Lieberman said Reid and the White House will have a much larger role to play as well.

"We have to go into battle at the head of our troops, but we want and expect support from the Democratic leadership of the Senate and President Obama," he said.

Reid last weekend said he probably would not bring the climate bill to the floor this year without more help from Republicans. So far, many of the moderate GOP senators he will need are taking a wait-and-see approach until they have had a better chance to review the Kerry-Lieberman legislation.

During a conversation on the Senate floor yesterday, Sen. George LeMieux (R-Fla.) said Lieberman offered to brief him on the bill after today's press conference. "I'm sure they'd like some" Republican support, LeMieux said. "My thing is I'd like to see what's in it."

"We'll watch their presentation with great interest," added Sen. Richard Lugar (R-Ind.), who is working on an alternative proposal that would promote energy efficiency, set stronger vehicle fuel standards and a minimum "clean energy" requirement for utilities. It also would include nuclear power and incentives to shut down the highest-emitting coal plants.

The Kerry-Lieberman bill also requires support from a cross section of Senate Democrats who have been anxious to review the proposal.

Finance Chairman Max Baucus (D-Mont.) said he wanted to "see what kind of traction it gets" upon its release. Asked what he would do with the bill in his committee, if anything, Baucus replied, "I want to see it."

Sen. Maria Cantwell (D-Wash.), author of a competing climate bill that avoids creating a trading market for greenhouse gases, said she was skeptical of the Kerry-Lieberman plan even though it is inspired in part by her ideas. "They still have a market," she said. "They still have trading."

"Good luck to them," Cantwell added. "I can't wait to see details of the bill. Ask me in a day."

Sen. Mark Pryor (D-Ark.) said he thought the Senate did not have enough time this year to tackle a controversial climate bill, but it could make progress on a slimmed-down proposal that promotes renewable energy. "I think we can get energy done this year," he said. "My thought is if you put some sort of climate change provision in there, I think it gets a lot harder."

Even some of the climate bill's most fervent supporters conceded yesterday that there is significant uncertainty around the Kerry-Lieberman bill. "It's important to try to get it done," said Sen. Ben Cardin (D-Md.). "Whether we can succeed or not, I don't know. It is a long shot."

'Clean' transportation

The draft proposal would require states and cities to set greenhouse gas emissions reduction goals for the transportation sector and to develop plans to reach those targets.

Similar language was included in H.R. 2454, and in the climate bill that came out of the Senate Environment and Public Works Committee (S. 1733) earlier this year.

The draft does not say how much federal money will be devoted to "clean" transportation, but the language makes it apparent that at least a portion of the revenues generated from the legislation will be.

Section 1712 of the draft, for instance, requires the Transportation Department to distribute allowances to states and cities for "approved transportation and greenhouse gas emission reduction programs."

The proposal also says that any money the bill funnels to the Highway Trust Fund -- which currently relies almost exclusively on federal fuel tax revenues -- will be spent "to promote safety, effectiveness and transportation in the United States through measures that are consistent with transportation efficiency planning."

Biomass studies

The bill would call on the National Academies of Sciences to study how different sources of biomass contribute to energy independence, protect the environment and reduce global warming pollution, according to the document. The study would be passed to U.S. EPA, which would submit recommendations to Congress on any adjustments on which biomass sources should be recognized as "renewable."

A second study -- a collaboration among EPA, the Interior Department and the Agriculture Department -- would report on the current and future effects of the use of biomass on food production and the environment and make recommendations to Congress based on their study.

A bigger role for USDA

The proposal gives the Agriculture Department the lead role in overseeing agriculture offsets -- a victory for farm groups and lawmakers with a heavy agricultural interest, who wanted to make sure the program would not fall to EPA.

USDA would have primary authority for the domestic agriculture and forestry offset projects that would create a new "multibillion-dollar revenue stream" for the agriculture sector, according to a four-page draft summary.

The voluntary offset projects would pay farmers and other landowners for activities that sequester carbon. Farmers would be exempt from mandatory pollution compliance obligations in the bill, the document states.

The question of which agency -- USDA or EPA -- would oversee agricultural offsets projects has been a point of some contention among lawmakers, farm groups and environmentalists.

Farm groups and members of the House and Senate Agriculture committees have said USDA should have control, since the department is trusted by farmers and has tens of thousands of employees already involved in monitoring farmland conservation. But environmentalists have been concerned the agriculture agency may be too lax in oversight.

The issue was a major sticking point in House negotiations on the climate bill last year. The original bill from the House Energy and Commerce Committee put EPA in charge of the program, with the option to work with other federal agencies. But House Agriculture Chairman Collin Peterson (D-Minn.) and other farm-state lawmakers insisted on giving oversight of the program to USDA.

After weeks of negotiation, Peterson won, and the House bill gave authority to USDA.

In S. 1733, the Senate Environment and Public Works Committee gave the president jurisdiction over the potential program, rather than defining clear roles for USDA and EPA.

The agriculture title would also support the Rural Energy for America Program, according to the draft summary. REAP is a farm bill program that offers cost-share assistance for producers who want to start energy projects or improve efficiency on their farms and ranches.

Click here to read the 21-page summary.

Click here to read the four-page draft summary.

Reporters Patrick Reis, Josh Voorhees and Allison Winter contributed.