CLIMATE:

Reid's decision leaves D.C. scrambling to pick up the pieces

Senate Democrats yesterday abandoned their summer efforts to pass a broad energy and climate bill, essentially declaring it dead for the year. But in a town where nothing stays down for long, advocates are already trying to determine what they can salvage.

It remains unclear if Senate Majority Leader Harry Reid (D-Nev.) has the votes to pass his smaller energy and Gulf-spill related bill before the August recess. Questions also loom about the dropped renewable electricity standard (RES) and other provisions from the bipartisan bill the Energy and Natural Resources Committee approved last year.

Reid's decision to cut limits on greenhouse gas emissions and the RES from the bill does not mean some Democrats and environmentalists won't keep pushing those measures through the remainder of 2010.

"I think their exclusion now demonstrates how difficult it is to reach consensus even among Democrats, let alone Democrats and Republicans," said Joe Stanko, an industry attorney at Hunton & Williams and a former GOP counsel to the House Energy and Commerce Committee. "I'm certain they will try to reach consensus in September, but I don't think it gets any easier as we approach elections and the close of the session."

A former Senate Democratic aide involved in climate negotiations said it is "not impossible to do RES and some other elements in September, but if they intend to do a broader bill, it's unclear why they would try a limited one," that person said. "I think it's fairly clear that they've made their decision on what has to pass."

A renewable energy standard was a key pillar of the bipartisan "energy only" package that the Energy and Natural Resources panel passed last summer. That bill -- which has been widely expected to serve as the foundation for large parts of Reid's larger package -- would require utilities to provide 15 percent of their power from renewable sources by 2021, with slightly more than a fourth of the requirement that could be met through energy-efficiency measures.

But with a dwindling legislative timeline and a potentially bruising political fight over the RES, Reid opted to punt on both the renewable standard and carbon caps.

Andrew Wheeler, a former Republican staff director for the Environment and Public Works Committee who now works for B&D Consulting, said that makes sense, given the amount of time an RES debate would have required and a likely debate over the stringency of the mandate.

"There's a number of more liberal Democrats that want to go much higher than 15 percent, and I don't think there are 60 votes to do that," Wheeler said.

A number of key Democrats, such as Sen. Byron Dorgan of North Dakota, had lobbied Reid to beef up the standard to the strongest level possible. The group -- including Sens. Sheldon Whitehouse (D-R.I), Ben Cardin (D-Md.), Bernie Sanders (I-Vt.) and Jeff Merkley (D-Ore.) -- was eyeing a standard above 20 percent and possibly in the 25 percent range.

"I think that there is much more to do," Dorgan said yesterday of Reid's decision. "I think the leader has calculated that this is all that he is able to do. But having spent 10 weeks marking up an energy bill that does a lot of good things, I think it's disappointing that we will not be able to consider it."

Some remain hopeful that an RES can be finalized once the Senate returns from the August recess, but that also appears to be a long shot.

"I think that the renewable energy industries are very concerned about coming out of this Congress with neither a price on carbon nor an RES," said David Moulton, director of climate policy at the Wilderness Society. "And so there will be a strong push for RES, but you know, those votes have always proved to be very difficult in the Senate. We need it badly, but we need a carbon cap badly, too, and that doesn't seem to be enough to move this particular legislative policy."

One way to win additional votes for the measure could be to develop a "big tent bipartisan approach" that would expand the renewable electricity standard to a "clean electricity standard" including nuclear, carbon capture and storage and natural gas, said the former Democratic aide.

"You could see a scenario where that kind of negotiation could occur over the recess and lead to a pretty big bipartisan deal," that person said. "The question would be: Who has the political motivation and/or the legislative drive and momentum to carry that off?"

Others doubt that an RES or any other controversial energy or climate package can pass the Senate this year.

"It's a pretty tough political environment right now to do something big and controversial," Sen. Lindsey Graham (R-S.C.) said Wednesday.

Graham co-authored an economywide cap-and-trade bill earlier this year with Sens. John Kerry (D-Mass.) and Joe Lieberman (I-Conn.), but dropped out of the negotiations in April two days before a planned press conference to unveil the measure.

"Until November comes and goes, from a political perspective, it's both highly unlikely that anything can happen in the early fall given the tight timeframe of the congressional calendar," or during a lame-duck session when lawmakers will lack interest, said Eric Ueland, who served as chief of staff to former Senate Majority Leader Bill Frist (R-Tenn.).

Holding out hope for a carbon cap

Despite the odds, some lawmakers and environmentalists are still optimistic that the Senate can eke out a bill that caps carbon emissions this fall.

"I think there's a chance to get some sort of a cap. I also think there's a chance to get some really meaningful clean energy provisions," said Nathan Willcox, Environment America's federal global warming program director.

Willcox said additional votes for a bill to limit emissions could emerge if the utility industry offers its support to legislation that caps just that sector.

Kerry and Lieberman, who have drafted a bill to cap emissions from just the utility sector, have said they might be able to strike a deal with the industry if given more time.

"Harry Reid, today, has committed to giving us that opportunity, that open door, if you will, over the next days, weeks, months, whatever it takes, to find those 60 votes," Kerry said yesterday. "So the work will continue every single day."

And despite an impasse between environmental groups and utilities on how to craft such a bill, it appears as though some progress was made.

According to a July 19 draft memo obtained by The Hill, a "working group" of utility chiefs and environmentalists have reached agreement on the schedule, distribution of emissions allowances, cost controls and offsets.

Short-term scramble

Despite their decision to drastically scale back their summer energy agenda, Senate Democrats will still have plenty of work to do to pass their small energy package in the two weeks they have before August recess.

Reid said yesterday that he was confident that he would have the 60 votes to pass the bill, but Republicans have previously expressed concerns about several of the provisions, meaning bipartisan support is not necessarily a foregone conclusion.

"To be clear, we are not putting forth this bill in place of a comprehensive bill," Reid said. "But we will not pass up the opportunity to hold BP accountable, lessen our dependence on oil, create good-paying American jobs and protect the environment."

Further clouding the outlook for the package is a tight Senate schedule. Democrats want to vote on the Supreme Court nomination of Elana Kagan before recess, and they still hope to pass a small-business jobs bill.

Of the four provisions Reid has said he will include in the bill, at least three have drawn GOP fire in the past. While none appear destined to be a deal-breaker, the concerns -- and Reid's expected decision to limit amendments -- could easily cause a series of procedural hurdles that would eat up some, if not all, of the remaining summer floor schedule.

At the least, Republican leadership appears to have plenty of incentive to attempt to deny Democrats an easy legislative victory ahead of the looming November elections.

The oil spill response legislation that is expected to headline the package is likely to prove the most heavily contested.

Ueland said that if Reid's bill is too aggressive for Republicans, "he faces the challenge of dealing with the potential consequences of that."

Reid suggested yesterday that the spill title would be based on legislation from Sen. Robert Menendez (D-N.J.), but it was not immediately clear if he was speaking of his original bill, which would raise the $75 million cap to $10 billion, or the one that ultimately came out of the Environment and Public Works Committee, which would eliminate it completely.

A Reid spokeswoman said that more details would be available next week.

Regardless, the proposal is expected to draw plenty of criticism from the GOP. Republicans blocked a previous attempt to fast-track the original $10 billion limit through the Senate, and attempted unsuccessfully to amend the EPW Committee bill to require the White House to set case-by-case liability caps based on a dozen factors, including the availability of insurance for offshore facilities.

At the time, EPW Committee ranking member James Inhofe (R-Okla.) accused Democrats of playing political games with the spill and said that eliminating the cap would mean "drilling in the Gulf will dry up, and the only players left standing will be BP and China's National Offshore Oil Corporation -- in other words, Big Oil."

Republicans could also raise objections to the "Home Star" energy-efficiency retrofit program and the natural gas vehicle tax incentives, although both of those have Republican co-sponsors in Graham and Orrin Hatch of Utah.

Some Republicans have worried aloud that the rebates would be caught up in Energy Department bureaucracy, dampening its job-creating impact. The Congressional Research Service has also cautioned against possible bottlenecks the program could encounter -- echoing problems DOE's weatherization program had after receiving $5 billion in stimulus funds.

The final provision in Reid's four-part package -- adding funds to the Land and Water Conservation Fund, which uses oil royalties to pay for federal and state acquisition of park and recreation lands -- could cause trouble within his own caucus.

At an Energy and Natural Resources Committee markup of offshore drilling reform legislation last month, Sen. Mark Udall (D-Colo.) withdrew an amendment to fully fund the program because of opposition from several Democrats on the energy panel.

Despite the short schedule, many observers believe that Reid -- who has already ushered controversial health care and financial reform bills through his chamber -- has what it takes to squeeze out a small Senate victory on energy.

"Reid's a very good vote counter, and I assume his selection of these issues demonstrates that there is some consensus to move forward," said Stanko of Hunton & Williams.

Ocean conservation

Some environmental lobbyists are eyeing the pared-down bill as an opportunity to advance other smaller oil-spill related efforts.

Ocean conservation advocates hope a long-sought effort to create a special ocean endowment, which Whitehouse and Olympia Snowe (R-Maine) introduced yesterday, can be attached to the oil spill bill.

Marine advocates have pushed for such a fund for years -- some say it is unfair that royalties from offshore oil leasing go to the Land and Water Conservation Fund, while oceans and coasts do not have the same sort of dedicated funding.

A similar effort to create an ocean trust fund is advancing in the House, where the Natural Resources Committee included an ocean trust fund in the energy package it passed last week.

The Whitehouse-Snowe bill would create a "National Endowment for the Oceans, Coasts, and Great Lakes," dedicated to conservation of oceans and coastlines. Funding would come from some of the money collected from the oil spill liability trust fund and a percentage of revenues from offshore energy development.

"As we stand here and BP's oil poisons our Gulf of Mexico, it is time to ask our political system to put the stewardship of our natural resources, our ocean resources, at the forefront of our national agenda," Whitehouse said on the Senate floor yesterday afternoon.

An aide for Whitehouse said it is unknown if the move could be a part of the energy package.

"He just introduced this today, but we're looking for every avenue we can to move this bill forward," said Whitehouse spokesman Seth Larson.

The Pew Oceans Commission and the U.S. Commission on the Oceans both recommended the creation of a special, dedicated ocean trust fund in comprehensive ocean recommendations they issued more than five years ago.

Reporters Allison Winter, Alex Kaplun, Noelle Straub and Patrick Reis contributed.

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