Energy Policy Act of 2005: Summary and Analysis of Enacted Provisions

Congressional research reportMar 8, 2006

Ask Donna

What actually matters in this document.

Text

Order Code RL33302

CRS Report for Congress

Received through the CRS Web

Energy Policy Act of 2005: Summary and Analysis

of Enacted Provisions

March 8, 2006

name redacted and name redacted, Coordinators

Resources, Science, and Industry Division

Congressional Research Service ˜ The Library of Congress

Energy Policy Act of 2005: Summary and Analysis

of Enacted Provisions

Summary

The Energy Policy Act of 2005 (P.L. 109-58), signed by President Bush on

August 8, 2005, was the first omnibus energy legislation enacted in more than a

decade. Spurred by rising energy prices and growing dependence on foreign oil, the

new energy law was shaped by competing concerns about energy security,

environmental quality, and economic growth. Major provisions in the bill include:

Electricity. The Federal Energy Regulatory Commission (FERC) is authorized

to certify a national electric reliability organization (ERO) to enforce mandatory

reliability standards for the bulk-power system. Federal power of eminent domain

may be used to acquire electric transmission rights-of-way in areas designated as

congested by the Secretary of Energy. The act repeals a requirement under the Public

Utility Regulatory Policies Act (PURPA) that utilities must purchase power from all

qualifying facilities and small power producers at a rate based on the utilities’

avoided cost. Also repealed is the Public Utility Holding Company Act of 1935

(PUHCA), which restricted the structure of holding companies of investor-owned

utilities.

Renewable Fuels Standard. Gasoline sold in the United States must contain an

increasing amount of renewable fuel, such as ethanol or biodiesel. Motor fuels must

contain at least 4.0 billion gallons of renewables in 2006, a level that increases by

700 million gallons each year through 2011 before reaching a level of 7.5 billion

gallons in 2012.

Tax Incentives. Tax reductions of $14.5 billion over 11 years are provided to

encourage domestic energy production and energy efficiency, including about $1.3

billion for energy efficiency and conservation, about $4.5 billion for renewable

energy, a $2.6 billion package of oil and gas incentives, nearly $3.0 billion for coal,

and more than $3.0 billion in electricity incentives (which includes a new production

tax credit for nuclear power).

Energy Efficiency. Improved national energy efficiency is encouraged through

new statutory standards, requirements for federal action, and incentives for voluntary

improvements.

Domestic Energy Production. The act encourages production on federal lands

through royalty reductions for marginal oil and gas wells on public lands and the

outer continental shelf. Provisions are also included to increase access to federal

lands for drilling activities and other energy projects.

Several proposals that were intensely debated during consideration of the energy

bill did not make it into the enacted legislation. The most prominent of these

defeated provisions would have allowed oil and gas production in the Arctic National

Wildlife Refuge (ANWR), increased corporate average fuel economy (CAFE)

standards, and established stronger federal efforts to reduce greenhouse gases. This

report will not be updated.

Key CRS Policy Staff

Name

Subject

Telephone

(name redacted)

Electric utilities

7-....)(

*redacted*@crs.loc.gov

(name redacted)

Nuclear security;

Department of Energy

management

(7-....)

*redacted*@crs.loc.gov

(name redacted) Energy security

(7-....)

E-mail

*redacted*@crs.loc.gov

Carl Behrens

Nuclear nonproliferation

(7-....)

*redacted*@crs.loc.gov

(name redacted)

Federal Water Pollution

Control Act

(7-....)

*redacted*@crs.loc.gov

(name redacted)

ANWR

Bernard Gelb

Gasoline industry

(7-....)

*redacted*@crs.loc.gov

(name redacted)

Native American energy;

general authorizations

(7-....)

*redacted*@crs.loc.gov

(name redacted)

Nuclear energy

(name redacted)

Federal energy leasing; coal

(7-....)

*redacted*@crs.loc.gov

Larry Kumins

Oil and gas

(7-....)

*redacted*@crs.loc.gov

(name redacted)

(7-....)

*redacted*@crs.loc.gov

(7-....)

Hydropower

*redacted*@crs.loc.gov

(7-....)

*redacted*@crs.loc.gov

(name redacted)

Taxes

(7-....)

*redacted*@crs.loc.gov

Jim McCarthy

Clean Air Act; MTBE

(7-....)

*redacted*@crs.loc.gov

Dan Morgan

Science programs

(7-....)

*redacted*@crs.loc.gov

(name redacted)

Conservation and renewable

energy

(7-....)

*redacted*@crs.loc.gov

(name redacted)

Underground storage tanks;

drinking water

(7-....)

*redacted*@crs.loc.gov

Brent Yacobucci

Motor fuels; vehicles;

hydrogen

(7-....)

*redacted*@crs.loc.gov

Jeff Zinn

Coastal Zone Management

Act

(7-....)

*redacted*@crs.loc.gov

Contents

Key CRS Policy Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Major Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Electricity Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Renewable Fuel Standard and MTBE . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Energy Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Nuclear Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Energy Efficiency and Renewable Energy . . . . . . . . . . . . . . . . . . . . . . . 4

Domestic Energy Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Hydrogen and Fuel Cells . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Organization of Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Title I — Energy Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Subtitle A — Federal Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Subtitle B — Energy Assistance and State Programs . . . . . . . . . . . . . . . . . . 8

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Subtitle C — Energy Efficient Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Subtitle D — Public Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Title II — Renewable Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Subtitle A — General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Subtitle B — Geothermal Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Subtitle C — Hydroelectric . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Subtitle D — Insular Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Title III — Oil and Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Subtitle A — Petroleum Reserve and Home Heating Oil . . . . . . . . . . . . . . 19

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Subtitle B — Natural Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Subtitle C — Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Subtitle D — Naval Petroleum Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Subtitle E — Production Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Subtitle F — Access to Federal Lands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Subtitle G — Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Subtitle H — Refinery Revitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Title IV — Coal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Subtitle A — Clean Coal Power Initiative . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Subtitle B — Clean Power Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Subtitle C — Coal and Related Programs . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Subtitle D — Federal Coal Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Title V — Indian Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Title VI — Nuclear Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Subtitle A — Price-Anderson Act Amendments . . . . . . . . . . . . . . . . . . . . . 38

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Subtitle B — General Nuclear Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Background and Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Subtitle C — Next Generation Nuclear Plant Project . . . . . . . . . . . . . . . . . 44

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Subtitle D — Nuclear Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Background and Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Title VII — Vehicles and Fuels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Subtitle A — Existing Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Subtitle B — Hybrid Vehicles, Advanced Vehicles, and Fuel Cell Buses . 51

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Subtitle C — Clean School Buses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Subtitle D — Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Subtitle E — Automobile Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Subtitle F — Federal and State Procurement . . . . . . . . . . . . . . . . . . . . . . . . 54

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Subtitle G — Diesel Emissions Reduction . . . . . . . . . . . . . . . . . . . . . . . . . 55

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Title VIII — Hydrogen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Title IX — Research and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Subtitle A — Energy Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Subtitle B — Distributed Energy and Electric Energy Systems . . . . . . . . . 59

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

Subtitle C — Renewable Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Subtitle D — Agricultural Biomass Research and

Development Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Subtitle E — Nuclear Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Subtitle F — Fossil Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Subtitle G — Science . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

Subtitle H — International Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Subtitle I — Research Administration and Operations . . . . . . . . . . . . . . . . 69

Subtitle J — Ultra-Deepwater and Unconventional Natural

Gas and Other Petroleum Resources . . . . . . . . . . . . . . . . . . . . . . . . . . 71

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

Title X — Department of Energy Management . . . . . . . . . . . . . . . . . . . . . . . . . . 72

Title XI — Personnel and Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

Title XII — Electricity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Short Title (Sec. 1201) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Subtitle A — Reliability Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Subtitle B — Transmission Infrastructure Modernization . . . . . . . . . . . . . . 76

Siting of Interstate Electric Transmission Facilities (Sec. 1221) . . . . . 76

Third-Party Finance (Sec. 1222) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

Advanced Transmission Technologies (Sec. 1223) . . . . . . . . . . . . . . . 77

Advanced Power System Technology Incentive

Program (Sec. 1224) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

Subtitle C — Transmission Operation Improvements . . . . . . . . . . . . . . . . . 77

Open Nondiscriminatory Access (Sec. 1231) . . . . . . . . . . . . . . . . . . . 77

Federal Utility Participation in Regional Transmission

Organizations (Sec. 1232) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

Native Load Service Obligation (Sec. 1233) . . . . . . . . . . . . . . . . . . . . 78

Study on the Benefits of Economic Dispatch (Sec. 1234) . . . . . . . . . . 78

Protection of Transmission Contracts in the Pacific

Northwest (Sec. 1235) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

Sense of Congress Regarding Locational Installed

Capacity Mechanism (Sec. 1236) . . . . . . . . . . . . . . . . . . . . . . . . 78

Subtitle D — Transmission Rate Reform . . . . . . . . . . . . . . . . . . . . . . . . . . 79

Transmission Infrastructure Investment (Sec. 1241) . . . . . . . . . . . . . . 79

Funding New Interconnection and Transmission Upgrades

(Sec. 1242) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

Subtitle E — Amendments to PURPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

Net Metering and Additional Standards (Sec. 1251) . . . . . . . . . . . . . . 79

Smart Metering (Sec. 1252) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

Cogeneration and Small Power Production Purchase

and Sale Requirements (Sec. 1253) . . . . . . . . . . . . . . . . . . . . . . . 80

Interconnection (Sec. 1254) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

Subtitle F — Repeal of PUHCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

Short Title (Sec. 1261) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

Definitions (Sec. 1262) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

Repeal of the Public Utility Holding Company Act of

1935 (Sec. 1263) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

Federal Access to Books and Records (Sec. 1264) . . . . . . . . . . . . . . . 84

State Access to Books and Records (Sec. 1265) . . . . . . . . . . . . . . . . . 84

Exemption Authority (Sec. 1266) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

Affiliate Transactions (Sec. 1267) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Applicability (Sec. 1268) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Effect on Other Regulations (Sec. 1269) . . . . . . . . . . . . . . . . . . . . . . . 85

Enforcement (Sec. 1270) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Savings Provisions (Sec. 1271) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Implementation (Sec. 1272) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Transfer of Resources (Sec. 1273) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Effective Date (Sec. 1274) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Service Allocation (Sec. 1275) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

Authorization of Appropriations (Sec. 1276) . . . . . . . . . . . . . . . . . . . 86

Conforming Amendments to the Federal Power Act (Sec. 1277) . . . . 86

Subtitle G — Market Transparency, Enforcement, and

Consumer Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

Electricity Market Transparency (Sec. 1281) . . . . . . . . . . . . . . . . . . . 86

False Statements (Sec. 1282) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

Market Manipulation (Sec. 1283) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Enforcement (Sec. 1284) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Refund Effective Date (Sec. 1285) . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Refund Authority (Sec. 1286) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Consumer Privacy and Unfair Trade Practices (Sec. 1287) . . . . . . . . . 88

Authority of Court to Prohibit Individuals from

Serving As Officers, Directors, and Energy

Traders (Sec. 1288) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

Merger Review Reform (Sec. 1289) . . . . . . . . . . . . . . . . . . . . . . . . . . 88

Relief for Extraordinary Violations (Sec. 1290) . . . . . . . . . . . . . . . . . 88

Subtitle H — Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

Definitions (Sec. 1291) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

Subtitle I — Technical and Conforming Amendments . . . . . . . . . . . . . . . . 89

Conforming Amendments (Sec. 1295) . . . . . . . . . . . . . . . . . . . . . . . . 89

Subtitle J — Economic Dispatch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

Economic Dispatch (Sec. 1298) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

Title XIII — Energy Policy Tax Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

Subtitle A — Electricity Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

Background and Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

Subtitle B — Domestic Fossil Fuel Security . . . . . . . . . . . . . . . . . . . . . . . 94

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

Background and Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

Subtitle C — Conservation and Energy Efficiency Provisions . . . . . . . . . . 97

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

Subtitle D — Alternative Motor Vehicles and Fuel Incentives . . . . . . . . . 100

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

Background and Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

Subtitle E — Additional Energy Tax Incentives . . . . . . . . . . . . . . . . . . . . 106

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

Subtitle F — Revenue Raising Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 107

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

Title XIV — Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

Subtitle A — In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

Subtitle B — Set America Free . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

Title XV — Ethanol and Motor Fuels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

Subtitle A — General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

Subtitle B — Underground Storage Tank Compliance . . . . . . . . . . . . . . . 115

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115

Subtitle C — Boutique Fuels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

Title XVI — Climate Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

Subtitle A — National Climate Change Technology Deployment . . . . . . 116

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

Subtitle B — Climate Change Technology Deployment

in Developing Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119

Title XVII — Incentives for Innovative Technologies . . . . . . . . . . . . . . . . . . . 120

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120

Background and Policy Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120

Title XVIII — Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

Summary of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126

List of Tables

Table 1. Fuel Economy Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

Table 2. Conservation Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

Table 3. Authorizations in the Energy Policy Act of 2005,

as Enacted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

Energy Policy Act of 2005: Summary and

Analysis of Enacted Provisions

Introduction

The Energy Policy Act of 2005 (P.L. 109-58), signed by President Bush August

8, 2005, was the first omnibus energy legislation enacted in more than a decade.

Major provisions include tax incentives for domestic energy production and energy

efficiency, a mandate to double the nation’s use of biofuels, repeal of restrictions on

interstate utility holding companies, faster procedures for energy production on

federal lands, and authorization of numerous federal energy research and

development programs.

Spurred by rising energy prices and growing dependence on foreign oil, the new

energy law was shaped by competing concerns about energy security, environmental

quality, and economic growth. For example, efforts to enhance energy security by

allowing oil and gas production in the Arctic National Wildlife Refuge (ANWR)

were blocked by environmental concerns. Conversely, efforts to address

environmental quality by restricting carbon dioxide and other greenhouse gases were

stymied largely because of their potential effect on the U.S. economy, as were

proposals to increase automobile fuel economy standards.

Soon after the Energy Policy Act was enacted, disruption from Hurricanes

Katrina and Rita contributed to a surge in U.S. gasoline prices, prompting widespread

criticism that the new law did not adequately address the nation’s gasoline supply.1

As with most energy legislation since the 1970s, the new energy law has few

provisions aimed at near-term problems in the energy market, being focused

primarily on the mid- to long term.

Major Provisions

Electricity Regulation. Title XII authorizes the Federal Energy Regulatory

Commission (FERC) to certify a national electric reliability organization (ERO) to

enforce mandatory reliability standards for the bulk-power system. All ERO

standards must be approved by FERC. The ERO can impose penalties on a user,

owner, or operator of the bulk-power system for violations of any FERC-approved

reliability standard.

The Secretary of Energy is required to conduct a study of electric transmission

congestion every three years and may designate a geographic area as being congested.

1

The House subsequently passed legislation to encourage the expansion of U.S. oil refinery

capacity (H.R. 3893, passed October 7, 2005).

CRS-2

Under certain conditions, FERC is authorized to issue construction permits in

congested areas. Permit holders may petition in U.S. District Court to acquire rightsof-way through eminent domain. An applicant for federal authorization to site

transmission facilities on federal lands could request that the Department of Energy

be the lead agency to coordinate environmental review and other federal

authorization. If a federal agency has denied an authorization required by a

transmission or distribution facility, the denial could be appealed by the applicant or

relevant state to the President.

Section 210 of the Public Utility Regulatory Policies Act (PURPA, P.L. 95-617)

had required utilities to purchase power from all qualifying facilities and small power

producers at a rate based on the utilities’ avoided cost. The Energy Policy Act

repeals the PURPA mandatory purchase requirement for new contracts if FERC finds

that a competitive electricity market exists and a qualifying facility has adequate

access to wholesale markets.

Also repealed is the Public Utility Holding Company Act of 1935 (PUHCA, 15

U.S.C. 79 et seq.), which restricted the structure of holding companies of investorowned utilities, and provided for Securities and Exchange Commission (SEC)

regulation of mergers and diversification proposals. FERC and state regulatory

bodies must be given access to utility books and records.

FERC is directed to facilitate price transparency in wholesale electric markets,

relying on existing price publishers and providers of trade processing services to the

maximum extent possible. However, FERC may establish an electronic information

system if it determines that existing price information is not adequate. FERC is

given approval authority over the acquisition of securities and the merger, sale, lease,

or disposition of facilities under FERC’s jurisdiction with a value in excess of $10

million.

(For additional discussion on these issues, see CRS Report RL32728, Electric

Utility Regulatory Reform: Issues for the 109th Congress, by (name redacted) ; and CRS

Report RL32133, Federal Merger Review Authority, by (name redacted), (name red

acted), and (name redacted).)

Renewable Fuel Standard and MTBE. Title XV contains several

provisions addressing the gasoline additives methyl tertiary butyl ether (MTBE) and

ethanol.

Under the Clean Air Act Amendments of 1990, reformulated gasoline (RFG)

sold in many areas of the country with poor air quality was required to contain an

oxygenate (MTBE, ethanol, or other substances containing oxygen) to improve

combustion and reduce emissions of ozone-forming compounds and carbon

monoxide. Title XV repeals the Clean Air Act requirement to use oxygenates in

RFG, eliminating a key incentive for refiners to use MTBE. In place of the oxygen

requirement, the energy law establishes a new requirement that gasoline contain an

increasing amount of renewable fuel such as ethanol or biodiesel. The law requires

that motor fuels contain at least 4.0 billion gallons of renewables in 2006, and

requires an increase of 700 million gallons each year through 2011, before reaching

a level of 7.5 billion gallons in 2012. (In 2004, about 3.4 billion gallons of ethanol

CRS-3

were used in motor fuels.) The law also authorizes funds to clean up MTBE

contamination in groundwater.

The enacted law also contains “anti-backsliding” provisions, to preserve the

reductions in emissions of toxic substances achieved by the RFG program. The

baseline emissions are set as the quantity emitted in 2001 and 2002.

The most controversial of the MTBE provisions was dropped in conference: a

“safe harbor” that the House version would have provided for fuels containing

renewable fuel or MTBE. The safe harbor from liability would have meant that such

fuels could not be deemed defective in design or manufacture by virtue of the fact

that they contained MTBE or renewable fuel. The effect of this provision would have

been to protect anyone in the product chain, from manufacturers to retailers, from

liability for cleanup of contamination or for personal injury or property damage based

on the nature of the product.

(For additional information, see CRS Report RL32865, Renewable Fuels and

MTBE: A Comparison of Selected Legislative Initiatives, by (name redacted),

(name redacted), (name redacted), a nd (name redacted); CRS Report RL30369,

Fuel Ethanol: Background and Public Policy Issues, by (name redacted) and

(name redacted); and CRS Report RL32787, MTBE in Gasoline: Clean Air and

Drinking Water Issues, by (name redacted) and (name redacted).)

Energy Taxes. Title XIII provides about $14.5 billion in tax reductions over

11 years to encourage domestic energy production and energy efficiency. Tax

incentives of about $1.3 billion are provided for energy efficiency and conservation,

including a deduction for energy-efficient commercial property, fuel cells, and

micro-turbines. About $4.5 billion is provided in renewable energy incentives,

including a two-year extension of the §45 renewable electricity tax credit, renewable

energy bonds, and business credits for solar. A $2.6 billion package of oil and gas

incentives includes seven-year depreciation for natural gas gathering lines, a refinery

expensing (one-year writeoff) provision, and a small refiner provision.

A nearly $3.0 billion coal package would provide 84-month amortization for

pollution control facilities and treatment of the §29 production tax credit as a general

business credit. More than $3.0 billion in electricity incentives include provisions

providing 15-year depreciation for transmission property, nuclear decommissioning

provisions, and a nuclear electricity production tax credit. It also provides for the

five-year carry-back of net operating losses of certain electric utility companies.

(For more background, see CRS Issue Brief IB10054, Energy Tax Policy, by

(name redacted).)

Nuclear Energy. Strong incentives for building new commercial nuclear

power plants are included in Title VI, including tax credits, loan guarantees, and

regulatory delay compensation. The law also reauthorizes the Price-Anderson Act

nuclear liability system for 20 years and authorizes the Department of Energy (DOE)

to build an advanced reactor in Idaho.

CRS-4

The strongest nuclear incentive is a 1.8-cents/kilowatt-hour tax credit for

electricity produced by nuclear reactors. The credit is available for up to 6,000

megawatts of new capacity — the equivalent of about five or six new reactors — for

the first eight years of operation. The nuclear production tax credit also had been

included in the energy bill conference report in the 108th Congress, and the Energy

Information Administration concluded then that the credit would provide sufficient

incentives for new commercial reactors to be built.2

The Secretary of Energy is authorized to help pay the cost of regulatory delays

at up to six new commercial nuclear reactors. Up to $500 million is authorized for

each of the first two reactors that begin construction, plus up to $250 million for each

of the next four. Delays caused by the failure of a reactor owner to comply with laws

or regulations would not be covered.

Reauthorization of the Price-Anderson Act was generally considered to be a

prerequisite for new reactors. Under Price-Anderson, commercial reactor accident

damages are paid through a combination of private-sector insurance and a nuclear

industry self-insurance system. Liability is capped at the maximum coverage

available under the system, currently about $10.7 billion. Title VI provides a 20-year

extension of Price-Anderson, to the end of 2025.

The law also addresses concerns about nuclear power plant security. The

Nuclear Regulatory Commission (NRC) within 18 months is required to revise the

“design basis threat” (DBT) that nuclear plant security forces must be able to

overcome, each nuclear plant must undergo a force-on-force security evaluation at

least every three years, and each NRC region must have a federal security

coordinator.

(For more information, see CRS Issue Brief IB88090, Nuclear Energy Policy,

by (name redacted).)

Energy Efficiency and Renewable Energy. Improved national energy

efficiency is encouraged through new statutory standards, requirements for federal

action, and incentives for voluntary improvements. The law’s energy conservation

provisions (Title I) deal almost entirely with energy consumption by buildings,

industrial processes, appliances and commercial equipment, and other stationary

activities. Highly controversial efficiency standards for motor vehicles are excluded

from the act.

New efficiency standards for appliances and commercial equipment may have

the most certain impact, with the effectiveness of many of the title’s other provisions

depending largely on appropriations and implementation. The law addresses energy

efficiency standards, water-use standards, and labeling rules for a variety of products.

Some efficiency standards are explicitly set in the law, while others are to be

determined by DOE. Measures aimed at the federal government’s own energy

efficiency and water consumption range from the treatment of energy costs in the

2

U.S. Department of Energy. Energy Information Administration. Analysis of Five Selected

Tax Provision of the Conference Energy Bill of 2003. SR/OIAF/2004-01. February 2004.

CRS-5

federal budget and procurement processes to specific requirements for upgrading

equipment in congressional office buildings.

Renewable energy provisions in Title II are intended to increase production and

use, advance technology development, and promote commercial development.

Potentially the largest impact could come from a broadening of the renewable energy

production incentive (REPI) payment for electricity generated by renewable energy

facilities, although funding is subject to appropriations. Other provisions establish

resource assessments, federal purchases of equipment and electricity, federal land

leasing, and grants, all of which are also subject to appropriations.

(For additional information, see CRS Issue Brief IB10020, Energy Efficiency:

Budget, Oil Conservation and Electricity Conservation Issues, by (name redacted), and

CRS Issue Brief IB10041, Renewable Energy: Tax Credit, Budget, and Electricity

Production Issues, by (name redacted).)

Domestic Energy Production. The Department of the Interior (DOI) has

estimated that roughly a quarter of oil resources and less than one-fifth of gas

resources on Indian lands have been developed. The Energy Policy Act encourages

production on federal lands through royalty reductions for marginal oil and gas wells

on public lands and the outer continental shelf. Provisions are also included to

increase access to federal lands by energy projects — such as drilling activities,

electric transmission lines, and gas pipelines. In addition, the law prevents the

Environmental Protection Agency (EPA) from regulating hydraulic fracturing to

protect drinking water sources.

(For additional information, see CRS Report RL32873, Key Environmental

Issues in the Energy Policy Act of 2005, coordinated by (name redacted), and

CRS Report RL32262, Selected Legal and Policy Issues Related to Coalbed Methane

Development, by (name redacted).)

Hydrogen and Fuel Cells. Title VIII establishes a hydrogen and fuel cell

program with a goal of producing commercial fuel cell vehicles and developing

hydrogen infrastructure by 2020. Critics of the Administration suggest that the

hydrogen program is intended to forestall any attempts to significantly raise vehicle

Corporate Average Fuel Economy (CAFE) standards, and that it relieves the

automotive industry of assuming more initiative in pursuing technological

innovations. On the other hand, some contend that it is appropriate for government

to become involved in the development of technologies that could address national

environmental and energy goals but are too risky to draw private-sector investment.

(For additional information, see CRS Report RS21442, Hydrogen and Fuel Cell

R&D: FreedomCAR and the President’s Hydrogen Fuel Initiative, by (name re

dacted), and CRS Report RL32196,

A Hydrogen Economy and Fuel Cells: An

Overview, by (name redacted) and Aimee E. Curtright.)

Organization of Report

The remainder of this report provides a section-by-section summary of the

provisions of the Energy Policy Act of 2005. Discussions of legislative background

CRS-6

and policy implications are provided for bill titles and subtitles that address unified

programs or policy areas. Some of the most controversial sections are discussed in

greater detail. Funding authorizations are shown in Table 3 at the end of the report.

Title I — Energy Efficiency

Improved national energy efficiency is encouraged through new statutory

standards, requirements for federal action, and incentives for voluntary

improvements. This title deals almost entirely with energy used by buildings,

industrial processes, appliances and commercial equipment, and other stationary

activities. Highly controversial efficiency standards for motor vehicles are excluded

from the act. New efficiency standards for appliances and commercial equipment in

Subtitle C may have the most certain impact, with the effectiveness of many of the

title’s other provisions depending largely on appropriations and implementation.

Subtitle A — Federal Programs

Summary of Provisions. Measures aimed at the federal government’s own

energy efficiency and water consumption range from the treatment of energy costs

in the federal budget and procurement processes to specific requirements for

upgrading equipment in congressional office buildings.

Energy and Water Saving Measures in Congressional Buildings

(Sec. 101). The Architect of the Capitol is required to plan and implement an

energy and water conservation strategy for congressional buildings that is consistent

with that required of other federal buildings. An annual report is required.

Energy Management Requirements (Sec. 102). The baseline for federal

energy savings is updated from FY1985 to FY2003, and a new 20% reduction goal

is set for FY2015. By the end of 2014, DOE is to assess progress and set a new goal

for FY2016 through FY2025. Standards for exclusion are set, which empower DOE

to exempt, under certain conditions, buildings that serve a national security function

or for which achieving the target would be impracticable. Further, agencies are

allowed to retain appropriations for energy expenses that are saved by the energy

efficiency measures. A report to Congress is required.

Energy Use Measurement and Accountability (Sec. 103). Federal

buildings are required to be metered or sub-metered by October 1, 2012, to help

reduce energy costs and promote energy savings. Further, the Secretary of Energy

is required to prepare guidelines for agency energy managers to facilitate

implementation of metering. After guidelines are established, each agency is

required to submit an implementation plan to DOE.

Procurement of Energy Efficient Products (Sec. 104). Federal

agencies are required to purchase products certified as energy-efficient under the

Energy Star program or energy-efficient products designated by the Federal Energy

Management Program (FEMP), provided that the products are found to be

“cost-effective” and “reasonably available.”

CRS-7

Energy Savings Performance Contracts (Sec. 105). The authority to

enter into energy savings performance contracts — in which private-sector

contractors install energy conservation measures in federal buildings in exchange for

a specified share of any resulting energy cost savings — is extended from 2006 to

2016. Any energy savings performance contract entered into after October 1, 2003,

and before the date of enactment of this act, is considered as extended by this section.

Voluntary Commitments to Reduce Industrial Energy Intensity (Sec.

106). DOE is authorized to form voluntary agreements with industry sectors or

companies to reduce energy use per unit of production by 2.5% annually from 2007

through 2016. Participants are eligible for technical assistance and grants. A report

to Congress with an evaluation of energy-savings impacts is required by June 30,

2012, and by June 30, 2017.

Advanced Building Efficiency Testbed (Sec. 107). DOE is required to

create a program to develop, test, and demonstrate advanced federal and private

building efficiency technologies. Appropriations of $6.0 million per year for FY2006

through FY2008 are authorized.

Increased Use of Recovered Mineral Component in Federally

Funded Projects Involving Procurement of Cement or Concrete (Sec.

108). DOT and other agencies that regularly procure or provide federal funds to

procure material for cement or concrete projects are directed to fully implement all

procurement requirements and incentives that provide for incorporating recovered

mineral components, such as blast furnace slag and coal combustion fly ash. A

report to Congress on the energy savings and environmental benefits is required 30

months after enactment.

Federal Building Performance Standards (Sec. 109). DOE is directed

to set revised energy efficiency standards for new federal buildings at a level 30%

stricter than industry or international standards — provided the standards would be

“life-cycle cost-effective.” Each agency’s annual budget request is required to list

all new federal buildings and whether each one meets these standards.

Daylight Savings (Sec. 110). Starting in 2007, daylight saving time will

begin three or four weeks earlier (the second Sunday in March) and end one week

later (the first Sunday in November). This is expected to reduce energy used for

night-time electric lighting. A report to Congress on energy savings is required nine

months after implementation begins.

Enhancing Energy Efficiency in Management of Federal Lands

(Sec. 111). National parks, forests, and wildlife refuges are required to employ

energy efficiency measures in buildings and energy-efficient vehicles (including

biodiesel and hybrid engines) “to the extent practicable.”

Background. These provisions were motivated by a desire to save energy

costs and to set a good example, given the requirements imposed on the private

sector. The provisions of this subtitle are intended to overcome institutional barriers.

Some measures will not require large financial commitments up front, but the success

of others will depend on the amount appropriated for energy-saving equipment in

CRS-8

future budget cycles. Some measures may have an impact outside the government,

such as through the influence of federal procurement on manufacturers, and in setting

an example for the private sector to reduce energy consumption.

Policy Context. The provision for extending daylight saving time and the

extension of goals for energy savings in federal executive branch agencies are

noteworthy provisions in this subtitle. Also, the requirement for energy efficiency

measures in congressional facilities is a significant expansion of the requirements for

the federal government in its effort to “lead by example.”

Subtitle B — Energy Assistance and State Programs

Summary of Provisions. Several existing programs to help state and local

governments improve energy efficiency are strengthened, and additional funding is

authorized. Energy savings may be modest, however.

Low Income Home Energy Assistance Program (Sec. 121). Funding

at $5.1 billion per year is authorized for the LIHEAP grant program for FY2005

through FY2007. (Department of Health and Human Services funding for LIHEAP

had been authorized through FY2003.) Also, states and their designees are allowed

to use renewable fuels (including biomass) to carry out the purposes of this section.

DOE is required to report to Congress on the use of renewable fuels under LIHEAP.

Weatherization Assistance (Sec. 122). Funding is authorized for the

DOE weatherization grant program in the amounts of $500 million for FY2006, $600

million for FY2007, and $700 million for FY2008. Also, eligibility for assistance is

raised from 125% to 150% of the poverty level.

State Energy Programs (Sec. 123). New requirements are set for state

energy conservation goals and plans, including a 25% energy efficiency improvement

in 2012 over 1990. Also, funding for the DOE state energy grant program is

authorized at $100 million for FY2006, $100 million for FY2007, and $125 million

for FY2008.

Energy Efficient Appliance Rebate Program (Sec. 124). DOE is

authorized to fund rebate programs in eligible states to support residential end-user

purchases of Energy Star products. Funding of $50 million per year is authorized for

FY2006 through FY2010.

Energy Efficient Public Buildings (Sec. 125). A grant program is created

for energy-efficient renovation and construction of local government buildings.

Grants may be used for construction of new buildings that use 30% less energy than

comparable public buildings that meet existing conservation standards and for

renovations that reduce energy consumption by 30% over the pre-renovation

baseline. DOE funding of $30 million per year is authorized for FY2006 through

FY2010.

Low Income Community Energy Efficiency Pilot Program (Sec.

126). A pilot energy efficiency and renewable energy grant program is created for

local governments, private companies, community development corporations, and

CRS-9

Native American economic development entities. Funding at $20 million per year

is authorized for FY2006 through FY2008.

State Technologies Advancement Collaborative (Sec. 127). A

cooperative program is created that links DOE with the states. It is focused on

research, development, demonstration, and deployment of technologies in which

there is a common federal and state energy efficiency, renewable energy, and fossil

energy interest. Such sums as necessary are authorized for FY2006 through FY2010.

State Building Energy Efficiency Codes Incentives (Sec. 128). A

grant program is created for states that DOE determines have achieved a least a 90%

rate of compliance with the most recent model building energy codes. Funds may be

used to implement building energy codes and practices that exceed efficiency

requirements of the most recent model building codes. Funding at $25 million per

year is authorized for FY2006 through FY2010 and such sums as necessary for

FY2011 and each fiscal year thereafter.

Background.

The weatherization portion of LIHEAP, the DOE

weatherization program, and DOE state energy programs are the major programs in

this subtitle and have been in place for nearly 30 years. Modest energy savings are

expected from these measures, depending largely on available funding. The other

grant programs are new, relatively limited in scope, and will depend on funding to

have any significant effect.

Policy Context. The weatherization grant programs (under both LIHEAP and

DOE) are the primary energy conservation programs for low-income households.

Funding for them has been relatively steady, and is not usually the subject of major

debate. The state energy program grants are key to the operation of state energy

offices, especially in smaller states.

Subtitle C — Energy Efficient Products

Summary of Provisions. This subtitle deals with energy efficiency

standards, water-use standards, and labeling rules for a variety of products. Some

efficiency standards in sections 135 and 136 are explicitly set in the law, while others

are to be determined by DOE.

Energy Star Program (Sec. 131). DOE and EPA are given statutory

authority to carry out the Energy Star program, which identifies and promotes energy

efficient products and buildings. Also, DOE is directed to establish new qualifying

energy efficiency levels for clothes washers and dishwashers.

HVAC Maintenance Consumer Education Program (Sec. 132). DOE

is required to implement a public education program for homeowners and small

businesses that explains the energy-saving benefits of improved maintenance of

heating, ventilating, and air conditioning equipment. Also, the Small Business

Administration is directed to assist small businesses in becoming more

energy-efficient. Such sums as necessary are authorized.

CRS-10

Public Energy Education Program (Sec. 133). DOE is required to

convene a conference with representatives from industry, education, professional

societies, trade associations, and government agencies to design and establish an

ongoing national public education program focused on energy efficiency and other

topics. DOE is directed to provide guidance and technical assistance. Such sums as

necessary are authorized.

Energy Efficiency Public Information Initiative (Sec. 134). DOE is

required to conduct an advertising and public outreach program about the need to

reduce energy use, the consumer benefits of reduced use, the relationship to jobs and

economic growth, and cost-effective consumer measures to reduce energy use.

Funding at $90 million per year is authorized for FY2006 through FY2010.

Energy Conservation Standards for Additional Products (Sec. 135).

Energy efficiency standards, test procedures, and labeling requirements are set by

statute for exit signs, traffic signals, pedestrian crossing signals, compact fluorescent

lamps (CFLs), torchieres (floor lamps), fluorescent lamp ballasts, mercury vapor

lamp ballasts, residential ceiling fans, residential dehumidifiers, building

transformers (electric utility equipment), commercial unit heaters (fan-type heaters,

usually portable), and commercial pre-rinse spray valves (used in restaurants).

Further, DOE is directed to issue a rule that prescribes efficiency standards and

labeling requirements for external power supplies, battery chargers, and refrigerated

vending machines.

Energy Conservation Standards for Commercial Equipment (Sec.

136). Energy efficiency standards, test procedures, and labeling requirements are set

by statute for commercial refrigerators, freezers, and refrigerator-freezers; large

commercial air conditioners and heaters; commercial (automated) ice-makers; and

commercial clothes washers.

Energy Labeling (Sec. 137). The Federal Trade Commission (FTC) is

required to consider improvements in the effectiveness of energy labels for consumer

products. Also, DOE or FTC is directed to consider prescribing labeling

requirements for many of the products listed in section 135. However, certain types

of dehumidifiers are exempted from labeling requirements.

Intermittent Escalator Study (Sec. 138). The Administrator of the

General Services Administration (GSA) is required to conduct a study on the

advantages and disadvantages, including energy cost savings, of using intermittent

(on-demand) escalators in the United States. A report to Congress is required within

one year of enactment.

Energy Efficient Electric and Natural Gas Utilities Studies (Sec.

139). DOE is required to conduct a study of state and regional policies that promote

cost-effective programs to reduce energy use (including energy efficiency programs)

that are operated by utilities subject to state regulation and by non-regulated utilities.

A report to Congress is required within one year of enactment.

Energy Efficiency Pilot Program (Sec. 140). DOE is required to

establish a pilot program that provides financial assistance to at least three, but not

CRS-11

more than seven, states to encourage energy efficiency and energy use reductions.

Funding at $5 million per year is authorized for FY2006 through FY2010.

Report on Failure to Comply with Deadlines for New or Revised

Energy Conservation Standards (Sec. 141). DOE is required to report

regularly (within six months of enactment and every six months thereafter) to

Congress when efficiency standard rulemakings (including those following from

Sections 135 and 136) are behind schedule, including steps being taken to get back

on schedule.

Background. Under previous authority, DOE established minimum energy

efficiency standards for several consumer and commercial products, including

household appliances such as clothes washers and refrigerators. Sections 135 and

136 of the new energy law set a variety of energy efficiency standards for consumer

appliances and commercial equipment. Most of the standards are statutory, but some

are at the discretion of a DOE rulemaking. The American Council for an EnergyEfficient Economy (ACEEE) estimates that these new standards will save more

energy than any other efficiency provisions in the bill. Further, §141 requires that

DOE report regularly to Congress when efficiency standard rulemakings are behind

schedule, including steps being taken to get back on schedule. Other provisions for

Energy Star, public education and outreach, and labeling are designed to help support

consumer use of more efficient equipment.

Policy Context. DOE is several years behind previous target dates to

implement higher energy efficiency standards for certain consumer products and

equipment. In 2001, the incoming Bush Administration sought to roll back

efficiency standards for central air conditioners and heat pumps (from SEER 13 to

SEER 12) that DOE had issued late in the Clinton Administration. In response to

litigation by several states (including California and New York) and environmental

groups, the U.S. Second Circuit Court of Appeals upheld the higher standards.3

Standards set in the past for several other types of equipment, such as refrigerators,

are widely considered to have been successful at increasing average efficiency.

Subtitle D — Public Housing

Summary of Provisions. Parallel to the policies set forth above for federal

agencies, this subtitle aims to make similar improvements in energy efficiency for

federally supported public housing. The provisions cover appliances and equipment,

building codes, a financial mechanism, and a requirement to create an energy

conservation strategy.

Public Housing Capital Fund (Sec. 151). The Public Housing Capital

Fund at the Department of Housing and Urban Development (HUD) is modified to

include coverage of certain energy- and water-use efficiency improvements.

3

U.S. Court of Appeals for the Second Circuit. Natural Resources Defense Council et al

v. U.S. Department of Energy et al. (Docket Nos. 01-4102, 01-4103, 02-4160, 02-4189,

02-6139). Decided January 13, 2004. 66 p.

CRS-12

Energy-Efficient Appliances (Sec. 152). Public housing agencies are

required to purchase cost-effective Energy Star and FEMP-designated appliances and

products.

Energy Efficiency Standards (Sec. 153). The energy efficiency standards

and codes that the federal government encourages states to use are changed from the

codes set by the Council of American Building Officials (CABO) to the 2003

International Energy Conservation Code (IECC).

Energy Strategy for HUD (Sec. 154). The Secretary of Housing and Urban

Development is required to implement an energy conservation strategy to reduce

utility expenses through cost-effective energy efficient design and construction of

public and assisted housing. A report to Congress is required within one year of

enactment.

Background. The previous Energy Policy Act of 1992 (P.L. 102-486)

contained mortgage-related provisions for energy efficiency in housing. This subtitle

extends some similar energy efficiency measures to public housing.

Policy Context. Four additional provisions for public housing were proposed

in the House version of the bill, but were dropped in conference. The provisions

covered capacity building, use of Community Development Block Grants, grants for

assisted housing, and Federal Housing Authority mortgage insurance.

Title II — Renewable Energy

Subtitle A — General Provisions

Summary of Provisions. The major purposes of this title are to increase

production and use, advance technology development, and promote commercial

development of renewable energy. Potentially significant effects could come from

a broadening of the renewable energy production incentive (REPI) payment for

electricity generated by renewable energy facilities, depending on the amount of

future appropriations. Other provisions establish resource assessments, federal

purchases of equipment and electricity, federal land leasing, and grants, all of which

are also subject to appropriations.

Assessment of Renewable Energy Resources (Sec. 201). DOE is

required to report annually on the resource development potential of solar, wind,

biomass, ocean (tidal, wave, current, and thermal), geothermal, and hydroelectric

energy resources. Further, DOE is required to review available assessments and

undertake new assessments as necessary, accounting for changes in market

conditions, available technologies, and other relevant factors. Funding at $10 million

per year is authorized for FY2006 through FY2010.

Renewable Energy Production Incentive (Sec. 202). Eligibility for the

existing incentive is extended through 2026 and expanded to include electric

cooperatives and tribal governments. Qualifying resources are expanded to include

CRS-13

landfill gas, livestock methane, and ocean (tidal, wave, current, and thermal) energy.

The provision authorizes such sums as are necessary for each fiscal year from

FY2006 through FY2026.

Federal Purchase Requirement (Sec. 203). Federal agencies are

required, to the extent “economically feasible and technically practicable,” to

purchase power produced from renewable sources. The requirement for federal

renewables use, as a share of total federal electric energy use, starts at 3.0% in

FY2007, rises to 5.0% in FY2010, and then reaches 7.5% in 2013 and all subsequent

years. Renewable energy produced at a federal site, on federal lands, or on Indian

lands is eligible for double credit toward the purchase requirement. A report to

Congress is required every two years.

Use of Photovoltaic Energy in Public Buildings (Sec. 204). The

General Services Administration (GSA) is authorized to encourage the use of solar

photovoltaic energy systems in new and existing federal buildings. For FY2006

through FY2010, funding at $50 million per year is authorized for commercialization

and $10 million per year is authorized for systems evaluation.

Biobased Products (Sec. 205). This provision amends the previously

existing requirement that federal agencies give procurement preference to items

composed of the highest percentage of biobased products practicable by adding “or

such items that comply with the regulations issued under section 103 of Public Law

100-556 (42 U.S.C. 6914b — 1),” which refers to degradable plastic six-pack rings.

Renewable Energy Security (Sec. 206). For the DOE weatherization

grant program, this section increases the limit on support for renewable energy

equipment from $2,500 to $3,000 per dwelling unit. Also, it creates a consumer

rebate for renewable energy equipment installed in a dwelling or small business. The

maximum rebate is the lesser of 25% of equipment cost or $3,000. Funding is

authorized at $150 million for FY2006 and FY2007, $200 million for FY2008, and

$250 million for FY2009 and FY2010.

Installation of Photovoltaic System (Sec. 207). This provision

authorizes $20 million in FY2006 for the Administrator of GSA to proceed with the

Sun Wall Design Project, the winning entry in a national design competition

sponsored jointly by DOE and the National Renewable Energy Laboratory, to install

a photovoltaic solar electric system on the headquarters building of DOE.

Sugar Cane Ethanol Program (Sec. 208). A program is established at the

Environmental Protection Agency to study the production of ethanol from cane sugar,

sugarcane, and sugarcane byproducts. The program is restricted to projects in

Florida, Louisiana, Texas, and Hawaii. A total of $36 million is authorized.

Rural and Remote Community Electrification Grants (Sec. 209). A

grant program is established at DOE for “increasing energy efficiency, siting or

upgrading transmission and distribution lines serving rural areas; or providing or

modernizing electric generation facilities that serve rural areas.” Grant applications

for development of renewable energy sources will be extended “preference.”

Funding at $20 million annually is provided for FY2006 through FY2012.

CRS-14

Grants to Improve the Commercial Value of Forest Biomass for

Electric Energy, Useful Heat, Transportation Fuels, and Other

Commercial Purposes (Sec. 210). This provision creates a grant program at the

Department of Agriculture to subsidize biomass purchases for use in an energy

production facility. The purpose is to encourage the removal of slash, brush,

pre-commercial thinning material, and other non-merchantable forest biomass from

federal lands and Indian reservations for biomass energy production. Grants are

limited to $500,000. Funding is authorized at $50 million per year for FY2006

through FY2016. By the end of FY2010, a report to Congress is required that

describes the types of biomass, transport distances, and economic impacts.

Sense of Congress Regarding Generation Capacity of Electricity

From Renewable Energy Resources on Public Lands (Sec. 211). For the

Secretary of the Interior, this provision sets a goal of having 10,000 megawatts of

non-hydropower renewable energy generation capacity installed on public lands

within 10 years from the date of enactment.

Background. Since the early 1980s, the main policies promoting commercial

development of renewables have been the power purchase requirement in Section

210 of the Public Utility Regulatory Policies Act (PURPA, P.L. 98-617) and tax

credits. Under certain conditions, Section 1253 of the Energy Policy Act of 2005

terminates PURPA Section 210. A generous investment tax credit expired in 1985.

A few years later, a renewable energy production tax credit (PTC) was created and

renewed several times. The renewable energy industry says the PTC is an

appropriate credit, but its effectiveness has been limited by its short-term durations,

and subsequent lapses, when it sunsets before Congress has passed extensions. In the

past few years, several states (currently about 20) have enacted a Renewable Portfolio

Standard (RPS) to work with the PTC in providing a strong base of encouragement

for renewables.

Policy Context. The Senate version of H.R. 6 (the bill that became the

Energy Policy Act of 2005) included a Renewable Energy Portfolio Standard (RPS),

which would have required retail electricity suppliers to provide 10% of their

electricity (attained by direct generation, power purchases, or purchases of tradable

credits) from renewable sources by 2020. Proponents noted that there were a

growing number of states with an RPS and that Energy Information Administration

reports showed an RPS could reduce electricity bills. Opponents raised concerns

about the exclusion of existing hydropower facilities and resource limits for the

southeastern United States. There was no RPS provision in the House version of

H.R. 6. During the conference, there were discussions about compromising by

including nuclear and hydropower facilities. Nevertheless, RPS was dropped in

conference.

Subtitle B — Geothermal Energy

Summary of Provisions. Much of the nation’s geothermal energy potential

is located on federal lands. Reducing delays in the federal geothermal leasing

process and reducing royalties could increase geothermal energy production although

the environmental impact of greater geothermal development is also at issue.

CRS-15

Short Title (Sec. 221). This subtitle may be cited as the “John Rishel

Geothermal Steam Act Amendments of 2005.”

Competitive Lease Sale Requirements (Sec. 222). The amendments

to the Geothermal Steam Act change the lease procedures for competitive and noncompetitive lease sales. Competitive lease sales will be held every two years. If there

were no competitive bids, then lands would be made available for two years under

a non-competitive process.

Direct Use (Sec. 223). A fee schedule in lieu of any royalty or rental

payments shall be established for lessees of geothermal resources that are not sold or

used commercially.

Royalties and Near-term Production Incentives (Sec. 224). Royalties

on electricity produced from geothermal resources are not less than 1% and not more

than 2.5% of the gross proceeds from geothermal electricity sales in the first 10 years

of production and not less than 2% and more than 5% of the gross proceeds from

geothermal electricity sales each year after the 10-year period. A state shall receive

50% of the mineral revenue generated within its borders and the county will receive

25%. Other near-term production incentives are applicable to certain existing leases.

Coordination of Geothermal Leasing and Permitting on Federal

Lands (Sec. 225). A memorandum of understanding (MOU) between the

Secretaries of the Interior and Agriculture should include provisions that would

identify known geothermal areas on public lands within the National Forest system

and establish an administrative procedure that would include time frames for

processing lease applications. This section also establishes a five-year program for

leasing geothermal energy in the National Forest and a program for reducing the

backlog of geothermal lease applications.

Assessment of Geothermal Energy Potential (Sec. 226). The U.S.

Geological Survey (USGS) shall provide Congress with an assessment of current

geothermal resources within three years of enactment of the Energy Policy Act of

2005.

Cooperative or Unit Plans (Sec. 227). Cooperative or unit plans for

geothermal development shall be promoted.

Royalty on Byproducts (Sec. 228). Leasable minerals produced as a

byproduct of a geothermal lease are subject to royalties under the Mineral Leasing

Act (30 U.S.C. 181).

Authorities of Secretary to Readjust Terms, Conditions, Rentals,

and Royalties (Sec. 229). Sections 8(a) and (b) of the Geothermal Steam Act are

repealed, eliminating the Secretary’s authority to readjust geothermal rental and

royalty rates at “not less than 20 year intervals beginning 35 years after the date

geothermal steam is produced.”

Crediting of Rental Towards Royalty (Sec. 230). Annual rentals are

credited towards the royalty of the same lease.

CRS-16

Lease Duration and Work Commitment Requirements (Sec. 231).

The primary lease term is 10 years and can be extended for two additional five-year

terms if work commitments are met.

Advanced Royalties Required for Cessation of Production (Sec.

232). If production from a geothermal lease were suspended during a period in

which a royalty was required, royalties would be paid in advance until production

resumed.

Annual Rental (Sec. 233). The act establishes rental rates for competitive

and non-competitive lease sales.

Deposit and Use of Geothermal Lease Revenues for 5 Fiscal Years

(Sec. 234). For the first five years after the enactment of this act, a separate account

shall be established for revenue receipts from leases under the Geothermal Steam Act

of 1970, excluding money necessary for payments to states and county governments.

Funds may be transferred to the Forest Service.

Acreage Limitations (Sec. 235). Section 7 of the Geothermal Steam Act

on acreage limitations is repealed (30 U.S.C. 1006).

Technical Amendments (Sec. 236).

amendments are included.

About two dozen technical

Intermountain West Geothermal Consortium (Sec. 237). The

Intermountain West Geothermal Consortium shall be established to focus on

expanded use of geothermal energy. The consortium would involve the participation

of the Secretary of Energy, universities in the region, and state agencies.

Background. Competitive geothermal lease sales are based on whether lands

are within a known geothermal resource area (Geothermal Steam Act of 1970, 30

U.S.C. 1003). Geothermal production on federal lands is charged a royalty of 10%15% under section 5 of the Geothermal Steam Act. The royalty is imposed on the

amount or value of steam or other form of heat derived from production under a

geothermal lease.

The Secretary of the Interior can withdraw public lands from leasing or other

public use and modify, extend, or revoke withdrawals under provisions in the Federal

Land Policy and Management Act of 1976 (FLPMA, 43 U.S.C. 1714). At certain

intervals the Secretary may readjust terms and conditions of a geothermal lease,

including rental and royalty rates. Annual rental fees of not less than $1 per acre on

geothermal leases are paid in advance. The primary lease term is 10 years and shall

continue as long as geothermal steam is produced or used in commercial quantities.

Rents are $1 per acre or fraction thereof for each year of a geothermal lease.

Policy Context. Much of the nation’s geothermal energy potential is located

on federal lands. Reducing delays in the federal geothermal leasing process and

reducing royalties could increase geothermal energy production, although the

environmental impact of greater geothermal production is an issue. This section also

prohibits the Secretary from making future adjustments to the initial lease.

CRS-17

Subtitle C — Hydroelectric

Summary of Provisions. This subtitle encourages hydroelectric production

at non-federal dams. It makes it more difficult for a federal agency to establish a

fisheries requirement as part of the hydropower licensing process, if it would

decrease hydroelectric production. Furthermore, the subtitle establishes a process

through which the State of Alaska may decline to adopt federal agencies’ fish and

wildlife recommendations for the dams it regulates. The subtitle also authorizes $20

million to increase energy efficiency and expand hydroelectric production at existing

non-federal dams.

Alternative Conditions and Fishways (Sec. 241). This provision gives

applicants for hydroelectric licenses increased flexibility in complying with

conditions imposed by federal agencies. Currently, the Federal Power Act (16 U.S.C.

791 et al.) gives certain federal agencies (conditioning agencies) the authority to

attach conditions to Federal Energy Regulatory Commission (FERC) licenses. For

example, federal agencies may require applicants to build passageways through

which fish can travel around a dam, schedule periodic water releases for recreation,

release minimum flows of water for fish migration, control water release rates to

reduce erosion, or limit reservoir fluctuations to protect a reservoir’s shoreline

habitat. Once an agency issues such conditions, FERC must include them in its

license. While these conditions often generate environmental or recreational benefits,

they may also require construction expenditures and may increase power generation

costs by reducing operational flexibility.

This provision allows entities to propose alternative license conditions and

requires federal agencies to consider the alternatives proposed by license applicants

and other parties to the license proceeding. An agency shall accept a proposed

alternative, if it finds that the alternative (1) provides for the adequate protection and

utilization of the federal reservation, or is no less protective of the fish resource than

the fishway initially prescribed, and (2) costs significantly less to implement than the

original condition, and/or will improve operation of the project for electricity

production. Agencies that are issuing conditions must provide FERC with a written

statement demonstrating that the relevant Secretary gave “equal consideration” to the

effects of the conditions on factors such as energy supply, flood control, navigation,

water supply, and air quality. It remains to be seen how this equal consideration

clause will affect agencies’ resources and whether it will alter their responsibilities

to fish and wildlife.

Hydroelectric Production Incentives (Sec. 242). The Secretary of

Energy shall make incentive payments to non-federal owners or operators of

hydroelectric facilities for power that is first produced within 10 years of the date of

enactment by generating equipment added to existing facilities. Payments of 1.8

cents per kilowatt-hour (kWh), up to a total of $750,000/year, may be made for up

to 10 years from the first year after the facility begins operating. Authorizes $10

million per year from FY2006 through FY2015.

Hydroelectric Efficiency Improvement (Sec. 243). The Secretary of

Energy shall make incentive payments to the owners or operators of hydroelectric

facilities who make capital improvements on existing facilities that improve

CRS-18

efficiency by at least 3%. Payments are not to exceed 10% of the improvement cost

and may not exceed $750,000 at any single facility. Appropriations of $10 million

per year for FY2006 through FY2015 are authorized.

Alaska State Jurisdiction Over Small Hydroelectric Projects (Sec.

244). This provision amends the requirement under which the State of Alaska may

regulate its small hydroelectric dams. Under this provision, the State of Alaska may

decide against issuing a recommended condition on a hydroelectric project if it finds

that the recommendation is inconsistent with protection of the public interest as

described in a November 2000 amendment to the Federal Power Act (16 U.S.C.

823c).

Flint Creek Hydroelectric Project (Sec. 245). This provision allows the

Federal Energy Regulatory Commission to extend, by three years, a preliminary

licensing permit for the Flint Creek Hydroelectric Project in Montana.

Small Hydroelectric Projects (Sec. 246). This provision amends the

Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 2708), to change the date

on or before which a dam must be constructed to qualify as an existing dam, from

April 20, 1977, to July 22, 2005.

Subtitle D — Insular Energy

Summary of Provisions. This subtitle seeks to improve the reliability of

insular area energy systems and to update plans put forth in the 1982 Territorial

Energy Assessment. Also, grants are provided to help with feasibility studies for

demonstration projects. In general, the aims are to improve energy efficiency and to

increase use of indigenous energy resources.

Insular Areas Energy Security (Sec. 251). This section includes

congressional findings that electric power transmission and distribution lines in

insular areas are not adequate to withstand hurricane and typhoon damage, and that

an assessment is needed of energy production, consumption, infrastructure, reliance

on imported energy, and indigenous sources of energy in insular areas. Further, it

requires the Secretary of the Interior, in consultation with the Secretary of Energy and

the head of government of each insular area, to update insular area energy plans

within one year of enactment to reflect these findings, with the goals of reducing

energy imports by 2012, increasing energy conservation and energy efficiency, and

maximizing the use of indigenous resources. Funding at $6 million per year is

authorized that would, in part, be used for matching grants (federal share maximum

is 75%) for projects designed to protect electric power transmission distribution lines

in one or more of the territories of the United States from damage caused by

hurricanes and typhoons.

Projects Enhancing Insular Energy Independence (Sec. 252). The

Secretary of Energy, in consultation with the Secretary of the Interior, is required to

assess and report to Congress on projects with the greatest potential for reducing

dependence on fossil fuels used to generate electricity, and to promote distributed

energy, in the insular areas. DOE would be authorized to provide technical and

financial assistance, on a matching basis with local utilities, for feasibility studies and

CRS-19

for implementation of projects the Secretary of Energy determines are feasible and

appropriate. Funding is authorized at $500,000 per year for feasibility studies and

$44 million per year for project implementation. No local match is required for

assistance.

Background. In general, insular areas face much higher energy costs than the

continental United States, because most fuels must be imported. This is especially

true for oil, which often costs twice as much as it does on the mainland. Also, such

areas rely mainly on diesel generators for power production and relatively often

experience brown-outs and black-outs. The 1982 Territorial Energy Assessment

sought to lay out a strategy that emphasized greater energy efficiency and increased

reliance on indigenous energy sources, particularly solar, wind, and biomass.

Policy Context. The insular areas provide strategic locations for U.S. military

installations in the Pacific Ocean and Caribbean Sea.

Title III — Oil and Gas

Subtitle A — Petroleum Reserve and Home Heating Oil

Summary of Provisions. This subtitle permanently authorizes the Strategic

Petroleum Reserve (SPR) and Northeast Heating Oil Reserve (NHOR), thereby

avoiding awkward periods such as occurred in 2000 when there was a period of

several months when the authorities were not in force. Storage sites are to be

identified for expansion of the SPR to one billion barrels, and conditions are set out

for adding oil to the SPR during periods when oil supply is tight and prices elevated,

or when acquiring oil will spur or exacerbate those conditions. Other provisions are

intended to provide guidelines for acquiring oil for the SPR in the future in a manner

that minimizes any consequences on oil prices and markets.

Permanent Authority to Operate the Strategic Petroleum Reserve

and Other Energy Programs (Sec. 301). Authority for the SPR program is

made permanent, as are authorities that permit U.S. oil companies to participate,

without risk of anti-trust violations, in the International Energy Agency (IEA) oilsharing agreement.

National Oilheat Research Alliance (Sec. 302). The law extends the

authorization for NORA until nine years (2010) after the date on which the Alliance

was established.

Site Selection (Sec. 303). The Secretary of Energy is required, within one

year of enactment, to select sites — giving preference to sites that have been

previously studied — for expansion of the SPR to its fully authorized volume of one

billion barrels.

Background. Congress authorized the Strategic Petroleum Reserve (SPR) in

the Energy Policy and Conservation Act (EPCA, P.L. 94-163) to help prevent a

repetition of the economic dislocation caused by the 1973-74 Arab oil embargo.

CRS-20

Physically, the SPR comprises five underground storage facilities, hollowed out from

naturally occurring salt domes, located in Texas and Louisiana. In 2000, Congress

also authorized establishment of a Northeast Heating Oil Reserve (NHOR) where

two million barrels of home heating oil is kept in leased, above-ground storage, to be

released if the price of heating oil exceeds a calculated historic average. The

authorities governing the SPR and NHOR are included in the Energy Policy and

Conservation Act (EPCA, P.L. 94-163) and are currently authorized through FY2008

by the Consolidated Appropriations Resolution for FY2003 (P.L. 108-7). These

authorities also provide for U.S. participation in emergency activities of the

International Energy Agency (IEA) without risking violation of antitrust law and

regulation.

The National Oilheat Research Alliance (NORA) was established by the Energy

Policy Act of 2000 (P.L. 106-460), and assesses a fee of $.002 per gallon on home

heating oil sold by retail distributors. The proceeds, among other purposes, are

dedicated to research on improving the efficiency of furnaces and boilers, and

providing education and training resources to professionals in the industry.

Producers of offshore leases in the Gulf of Mexico pay a royalty to the U.S.

Treasury based upon production at their sites. Since 1999 and until August 2005,

most new fill of the SPR was achieved by the acceptance of royalty-in-kind (RIK) oil

from these producers in lieu of cash paid to the Treasury. Some have objected to RIK

deliveries, arguing that diverting any oil from the markets was contributing to rising

crude prices. The Administration argued that the volumes involved, never more than

200,000 b/d and often less, was not large enough to have the effect on prices that

some alleged.

Policy Context. There have been occasions in the past when the authorities

expired for the SPR program and antitrust protection for U.S. participation in the

international oil-sharing agreement of the International Energy Agency (IEA). The

Energy Policy Act of 2005 eliminates the possibility of this occurring in the future.

The provisions in the energy act will probably preclude any new acquisitions for the

SPR until petroleum product stocks recover from the effects of Hurricanes Rita and

Katrina, and oil and energy markets calm considerably.

Subtitle B — Natural Gas

Summary of Provisions. Streamlined permitting processes and NEPA

reviews4 are provided for the siting of liquefied natural gas (LNG) facilities and

conventional natural gas storage facilities. Expedited judicial review is also provided

by designating exclusive jurisdiction for civil action to the U.S. Court of Appeals for

the circuit in which the facility would be located. Other provisions relate to

improvements in the performance of natural gas markets, prohibiting of market

manipulation, and ensuring that prices are determined in a clear-cut way with full

disclosure of all relevant information.

4

Environmental impact reviews required by the National Environmental Policy Act (NEPA,

P.L. 91-190).

CRS-21

Exportation or Importation of Natural Gas (Sec. 311). The Natural Gas

Act (NGA, 15 U.S.C. 717) is amended to unequivocally establish exclusive FERC

jurisdiction over siting LNG terminals for exportation and importation of natural gas.

The language specifies that the rights of states are not changed under the Coastal

Zone Management Act (CZMA, 16 U.S.C. 1451 et seq.), the Clean Air Act (42

U.S.C. 7401 et seq.), and the Federal Water Pollution Control Act (33 U.S.C. 1251

et seq.). Before January 1, 2015, FERC shall not deny approval solely for the reason

that the applicant would use the gas himself, wholly or in part. Approval shall not be

conditioned on a requirement to offer service to others, a directive to file rates or

tariffs with FERC, or any other regulation of rates and service. These provisions shall

cease to exist after January 1, 2030.

FERC shall obtain the concurrence of the Secretary of Defense before

authorizing an LNG facility impacting a military installation. The governor of a state

with a proposed LNG site will designate the appropriate state agency to consult with

FERC on safety issues, including the nature of the facility, population characteristics,

and physical characteristics. The state agency shall issue an advisory report to FERC

on safety issues. Any authorization of an LNG facility shall require the operator, in

consultation with the designated state agency and the U.S. Coast Guard, to develop

an Emergency Preparedness Plan to be approved by FERC.

New Natural Gas Storage Facilities (Sec. 312). Section 4 of the NGA

is amended to allow FERC to permit new natural gas storage facilities to charge

market based prices, if it determines that they are in the public interest and reasonable

consumer protections exist. FERC shall review these rates periodically.

Process Coordination; Hearings; Rules of Procedure (Sec. 313).

This section defines a “federal authorization” as the complete package of permits and

regulatory rulings needed to obtain an authorization or a certificate of convenience

and necessity. FERC is designated the lead agency in the federal authorization

process, setting the schedule for other state and federal agencies to ensure expeditious

completion of necessary proceedings and comply with applicable schedules

established by federal law. FERC is tasked with keeping the consolidated record of

all decisions made and actions taken by all parties, which shall also be the record for

CZMA and judicial review.

Judicial review of an order from any federal (other than FERC) or state agency

shall be in the U.S. Court of Appeals for the circuit in which the project would be

constructed. The U.S. Court of Appeals for the District of Columbia is to hear cases

involving failure to act by an agency or denial of permit under federal law. These

cases shall be heard on an expedited schedule.

Penalties (Sec. 314). This section raises the penalties for violating FERC

orders. It raises the maximum prison term from two to five years and the maximum

fine from $500 per violation to $50,000 for each day the violation took place.

Violations of emergency orders are subject to fines of up to $1 million per day. Civil

penalties are also raised to a maximum of $1 million per day.

Market Manipulation (Sec. 315). This section prohibits anyone from using

any manipulative or deceptive contrivance (as defined by the Securities and

CRS-22

Exchange Commission) in connection with the purchase or sale of natural gas or

related transport services, in contravention of FERC rules. Essentially, it bars false

reporting of terms and condition of natural gas trades.

Natural Gas Market Transparency Rules (Sec. 316). This creates a new

section in the NGA (Sec. 23), calling on FERC to prescribe such rules as necessary

to provide for the timely dissemination of information about price and supply of gas

sold at wholesale. FERC may obtain this information from any market participant,

or rely on private parties to make this information available. FERC shall seek to

assure that consumers are protected from the adverse effects of anti-competitive

behavior on the part of market participants. Within 180 days of enactment, FERC

shall conclude a memorandum of understanding with the Commodity Futures

Trading Commission regarding data sharing, ensuring that duplicative information

requests are minimized. Market participants having de minimus transactions are

exempted from any reporting requirements that might originate under this act.

Federal-State Liquified Natural Gas Forums (Sec. 317). Within one

year of enactment, the Secretary of Energy is directed to convene at least three

forums on LNG in areas where facilities are under consideration. These are to be

undertaken with the participation of the Secretaries of Transportation, Homeland

Security, and coastal state governors. Their goal would be to create dialogue among

stakeholders regarding such issues as safety and environmental risks, and siting and

permitting, and general education. Their purpose would be to identify and develop

best practices for dealing with LNG issues. Funds are authorized to be appropriated

as needed.

Prohibition of Trading and Serving By Certain Individuals (Sec.

318). This amends §20 of NGA to allow a court to prohibit a person convicted of

violating FERC rules from acting as an officer of a natural gas company or from

trading natural gas or transportation services.

Subtitle C — Production

Summary of Provisions. This subtitle facilitates the storage of imported

liquefied natural gas at offshore terminals and excludes injection of hydraulic

fracturing fluids, except diesel fuel, from regulation under the Safe Drinking Water

Act (42 U.S.C. 300f et seq.). The legislation also gives a permanent exemption from

Clean Water Act stormwater runoff rules for the construction of exploration and

production facilities by oil and gas companies and the roads that service those sites.

Outer Continental Shelf Provisions (Sec. 321). This section allows

subsurface storage on the outer continental shelf of oil and natural gas (including

natural gas liquids, liquefied petroleum gas, and natural gas condensate) from any

source. A key effect of this provision would be to facilitate the storage and

processing of imported liquefied natural gas at offshore terminals.

Hydraulic Fracturing (Sec. 322). This section amends the Safe Drinking

Water Act (SDWA), Section 1421(d), to specify that the definition of “underground

injection” excludes the injection of fluids or propping agents (other than diesel fuel)

used in hydraulic fracturing operations related to oil, gas, or geothermal production

CRS-23

activities. This provision removes EPA’s current authority to regulate the

underground injection of fluids (other than diesel fuel) used in hydraulic fracturing,

as needed to protect drinking water.

Before 1997, EPA had not considered regulating hydraulic fracturing for oil and

gas development, because it did not view this well-production process as an activity

subject to regulation under SDWA’s underground injection control (UIC) program.

In 1997, the 11th Circuit Court of Appeals ruled that the injection of fluids for the

purpose of hydraulic fracturing constituted underground injection, that all

underground injection must be regulated, and that hydraulic fracturing of coalbed

methane (CBM) wells in Alabama must be regulated under the state’s UIC program

(LEAF v. EPA, 118 F. 3d 1467).

Hydraulic fracturing involves the high-pressure injection of fluids into coal beds

to enhance the recovery of oil and natural gas from underground formations. Waterbased fluids are typically used as fracturing fluids; however, diesel fuel often is used

instead of water, and various chemicals are added to fracturing fluids.5 While

hydraulic fracturing has been used in the recovery of conventional oil and gas since

the 1950s, this practice has been used for CBM recovery mainly since the 1990s.

A growing concern is that, in many CBM-producing regions, the target coal

beds occur within underground sources of drinking water, and the fracturing process

injects fluids directly into the drinking water sources; EPA has determined that the

use of diesel fuel as a fracturing fluid introduces benzene and other toxic substances

directly into underground sources of drinking water.6 Also, because the process

fractures rock, fracturing can create new pathways for natural gas (primarily

methane) to enter drinking water aquifers. As the number of coalbed methane (CBM)

wells and the use of hydraulic fracturing have increased rapidly in recent years, so has

concern over the potential impact on water resources, particularly in the water-scarce

West. Very few studies have been done to evaluate these impacts.

A study by the National Academy of Sciences is required under §1811 on the

effect of coalbed natural gas production on surface and ground water resources,

including drinking water, in Montana, Wyoming, Colorado, New Mexico, North

Dakota, and Utah.

Oil and Gas Exploration and Production Defined (Sec. 323). The

definitions provision of the Clean Water Act (CWA, §502) is amended to give a

permanent exemption from CWA stormwater runoff rules for the construction of

5

Environmental Protection Agency, Evaluation of Impacts to Underground Sources of

Drinking Water by Hydraulic Fracturing of Coalbed Methane Reservoirs, Washington,

D.C., June 2004, pp. 4-3 - 4-4.

6

Ibid., pp. 1-6. According to EPA, hydraulic fracturing of oil and gas found in conventional

geologic traps is well established; however, hydraulic fracturing of coal beds is relatively

new. Conventional sites are usually very deep and involve saline groundwater that is

unsuitable for drinking water. In contrast, formations that contain coal bed methane can be

near the surface where groundwater may be used as a source of drinking water supplies. pp.

4-9 - 4-10.

CRS-24

exploration and production facilities by oil and gas companies and the roads that

service those sites.

Background. Previously under the CWA (33 U.S.C. 1251 et seq.), the

operation of facilities involved in oil and gas exploration, production, processing,

transmission, or treatment generally was exempt from stormwater runoff regulations

(so long as the runoff was uncontaminated by pollutants), but the construction of

these facilities and associated roads was not. Section 323 modifies CWA to

specifically include construction activities in the types of oil and gas facilities that are

covered by the act’s statutory exemption from stormwater rules.

The issue arises from CWA stormwater permitting rules for small construction

sites and municipal separate storm sewer systems that were issued by the

Environmental Protection Agency (EPA) in 1999 and became effective March 10,

2003. Those rules, known as Phase II of the CWA stormwater program, require most

small construction sites disturbing one to five acres and municipal separate storm

sewer systems serving populations of up to 100,000 people to have a CWA discharge

permit. The permits require pollution-prevention plans describing practices for

curbing sediment and other pollutants from being washed by stormwater runoff into

local water bodies. Phase I of the stormwater program required construction sites

larger than five acres (including oil and gas facilities) and larger municipal separate

storm sewer systems to obtain discharge permits beginning in 1991.

EPA had initially assumed that most oil and gas facilities would be smaller than

one acre in size and thus excluded from the Phase II rules, but newer data indicate

that up to 30,000 new sites per year would be of sizes subject to the rule. As the

March 2003 compliance deadline approached, EPA authorized a two-year extension

of the Phase II rules for small oil and gas construction sites to allow the agency to

assess the economic impact of the rule on that industry. In March 2005, EPA

extended the exemption until June 2006 and said it would propose a specific rule for

small oil and gas construction sites by September 12, 2005, and issue a final rule in

June 2006.

Policy Context. Section 323 makes EPA’s regulatory delay permanent and

makes it applicable to construction activities at all oil and gas development and

production sites, regardless of size, including those previously covered by Phase I

rules. Industry had argued that the stormwater rule creates time-consuming

permitting requirements, even though the short construction period for drilling sites

carries little potential for stormwater runoff pollution. Supporters said the

amendment was intended to clarify existing CWA language. Opponents argued that

there is no evidence that construction at oil and gas sites causes less pollution than

other construction activities, which are regulated under EPA’s stormwater program.

As a result of the amendment, which is intended to exempt from the CWA all

uncontaminated stormwater discharges that occur while setting up drilling operations,

EPA proposed in December 2005 a new rule for discharges of stormwater from oil

and gas operations, making construction activities at all oil and gas sites eligible for

the exemption. EPA still intends to issue a final rule by June 2006.

CRS-25

Subtitle D — Naval Petroleum Reserves

Summary of Provisions. This subtitle continues a process of divesting or

transferring responsibility for management of Naval Petroleum Reserve oil fields

outside of the Department of Energy.

Transfer of Administrative Jurisdiction and Environmental

Remediation (Sec. 331-334). Administration of public domain lands within the

Naval Petroleum Reserve No. 2 (NPR-2), located in Kern County, CA, will be

transferred to the Secretary of the Interior. The Secretary is instructed to manage oil

production from these tracts in a manner consistent with maximizing production over

the lifetime of the field. Surface rights, title and interest in a roughly 220 acre parcel

of Naval Petroleum Reserve No. 2 is transferred to the city of Taft, CA. The federal

government will retain rights to all fossil fuel and mineral resources for itself or its

lessees, but yields all surface rights and responsibilities for care of the surface. The

Executive Order of December 13, 1912, establishing NPR-2 is revoked.

Background. The National Defense Authorization Act for FY1996 (P.L. 104106) authorized sale of the federal interest in the oil field at Elk Hills, CA (Naval

Petroleum Reserve-1 (NPR-1)). Transfers of other NPR sites have followed in

subsequent years. This has left in the Naval Petroleum Reserves program two small

oil fields in California and Wyoming, which will generate estimated revenue to the

government of roughly $7.2 million during FY2005. The Kern County site (NPR-2)

comprises a “checkerboard” pattern of governmentally and privately owned tracts

adjacent to the Elk Hills field. Of the 50 tracts owned by the government, nearly 90%

are leased by private oil companies with royalty payments deposited in the U.S.

Treasury.

Subtitle E — Production Incentives

Summary of Provisions. Royalty relief provisions are provided to

encourage further offshore oil and gas development. An inventory of offshore

resources is included. The royalty in-kind program is codified, along with a program

for royalty relief for marginal oil and gas properties and a program to remediate

orphaned and abandoned wells.

Definition of Secretary (Sec. 341). In this subtitle, “Secretary” means

Secretary of the Interior.

Program on Oil and Gas Royalties In-Kind (Sec. 342). The federal

government is authorized to continue to receive physical quantities of oil and gas as

royalty-in-kind payments if it can receive market value for the product and revenues

greater than or equal to the revenues it would have received under a comparable cashpayment royalty. The royalty product would have to be placed in marketable

condition (as defined in the law) at no cost to the United States. Small refineries

would receive preferential treatment if supplies on the market were insufficient. A

report to Congress in each year from FY2006-FY2015 must explain, among other

things, how the Secretary determined whether the amount received was at least the

CRS-26

amount that would have been taken in cash and how a lease was evaluated as to

whether royalty in kind were taken.

Marginal property production incentives (Sec. 343). The Secretary of

the Interior has the authority to reduce or terminate royalties for independent

producers under certain conditions. The Secretary is authorized to prescribe different

standards for marginal properties in lieu of those in this section.

Incentives for Natural Gas Production from Deep Wells in the

Shallow Waters of the Gulf of Mexico (Sec. 344). Royalty reductions are

provided for shallow water production at certain depths not later than180 days after

enactment. An “ultra-deep” well and “sidetrack” well are defined in this section.

Royalty Relief for Deep Water Production (Sec. 345). Royalty

reductions are provided for deepwater areas at fixed production levels at certain

depths.

Alaska Offshore Royalty Suspension (Sec. 346). Planning areas in

offshore Alaska are included under section 8(a)(3)(B) of the Outer Continental Shelf

Lands Act (OCSLA, 43 U.S.C. 1337(a)(3)(B)). At the Secretary’s discretion, leases

in this area are eligible for royalty relief in an effort to promote development and

encourage production.

Oil and Gas Leasing in the National Petroleum Reserve in Alaska

(Sec. 347). These provisions direct the Department of the Interior (DOI) to begin

“an expeditious program” for competitive leasing in the National Petroleum ReserveAlaska (NPR-A). Leases will be initially for 10 years; leases will be lost if, after 30

years, there has been no oil or gas production on the lease site.

North Slope Science Initiative (Sec. 348). The Secretary of the Interior

shall establish a long-term initiative to coordinate collection of ecosystem data on

Alaska’s North Slope. A technical advisory panel shall the established, and the

Secretary shall publish annual reports on the initiative beginning three years after

enactment.

Orphaned, Abandoned, or Idled Wells on Federal Land (Sec. 349).

Within a year after enactment, the Secretary shall establish a technical assistance

program to help states remediate and close abandoned or idled wells. Technical and

financial assistance will be made available over a 10-year period to quantify and

mitigate environmental dangers. A program will be established for reimbursing the

private sector with credits against federal royalties for reclaiming, remediating, and

closing orphaned wells.

Combined Hydrocarbon Leasing (Sec. 350). The Mineral Leasing Act

(30 U.S.C. 181 et seq.) is amended to allow separate leases for tar sands and for oil

and gas in the same area. Tar sands will be leased under the same system as for oil

and gas and require a minimum acceptable bid of $2 per acre.

Preservation of Geological and Geophysical Data (Sec. 351). The

Secretary of the Interior shall establish a program to preserve and archive geologic,

CRS-27

geophysical, and engineering data, including maps, well logs, and samples. Financial

assistance is authorized for up to 50% of the costs incurred by state agencies that

provide archiving facilities and conduct studies under this program.

Oil and Gas Lease Acreage Limitations (Sec. 352). Lease acreage

limits are altered so that additional federal lands would not fall under the Mineral

Leasing Act’s single-state ownership limitations.

Gas Hydrate Production Incentive (Sec. 353). Royalties are suspended

for the first 30 billion cubic feet of natural gas produced from gas hydrate resources

per lease, in addition to any other applicable royalty relief.

Enhanced Oil and Natural Gas Production Through Carbon Dioxide

Injection (Sec. 354). Royalty relief will be available for the purposes of enhancing

oil and natural gas recovery from specified leases. DOE shall establish a carbon

dioxide sequestration demonstration program that injects carbon dioxide to enhance

recovery of oil and gas.

Assessment of Dependence of State of Hawaii on Oil (Sec. 355).

The Secretary of Energy shall study the economic implications of Hawaii’s

dependence on oil and submit a report to Congress within 300 days of enactment.

The study must evaluate the vulnerability of Hawaii to oil disruptions, and assess,

island-by-island, the technical and economic feasibility of displacing oil consumption

with other sources of energy, including renewables, liquefied natural gas, and

hydrogen.

Denali Commission (Sec. 356). Funding is authorized for the Denali

Commission to carry out energy programs in Alaska, including development of

alternative energy, construction of electricity transmission infrastructure, replacement

and cleanup of fuel tanks, and coal gasification.

Comprehensive Inventory of OCS Oil and Natural Gas Resources

(Sec. 357). The Secretary shall conduct an inventory and analysis including 3-D

seismic technology but not drilling of oil and natural gas beneath all water of the

United States outer continental shelf (OCS). Also, the Secretary must issue a report

to Congress within six months of enactment that includes a discussion of restrictions,

impediments, and recommendations.

Background. OCSLA currently provides a mechanism for the Secretary of

the Interior to reduce or eliminate royalty or net profit share established in leases for

oil and gas production in Gulf of Mexico planning areas. According to the Minerals

Management Service (MMS), the Deep Water Royalty Relief Act of 1995 has led to

a significant increase of leases in the deepwater Gulf of Mexico.

Policy Context. There is strong interest among the major oil firms in this

region because of the resource potential and the improvement of deepwater

technology. U.S. offshore oil and gas production has become a larger component of

U.S. domestic supply as production from onshore federal leases has declined 19%

over the past 10 years. Opponents of continued royalty relief contend that deepwater

technology has advanced enough to ensure the economic viability of deepwater

CRS-28

reserves, thus there is no need for further royalty relief. Continued royalty relief has

also faced criticism during a period of record high oil prices and oil industry profits.

The comprehensive inventory of the OCS is designed to provide an updated and

accurate assessment of oil and gas resources, with particular interest in highlighting

resources in areas now off-limits to exploration and development. Some opponents

have argued that the inventory is a first step in a larger effort to open more of the

OCS for exploration and development.

Subtitle F — Access to Federal Lands

Summary of Provisions. These provisions address concerns over delays in

the permitting process for oil and gas development on federal lands after leases are

granted. Some lease stipulations are considered by the Administration to be

impediments to domestic oil and gas development. However, concerns have also

been raised that faster permitting could bypass important environmental protections.

Federal Onshore Oil and Gas Leasing and Permitting Practices

(Sec. 361). The Department of the Interior along with the Forest Service shall

review current onshore oil and gas leasing and permitting practices and report on

actions taken to improve the program.

Management of Federal Oil and Gas Leasing Programs (Sec. 362).

The Secretaries of Agriculture and of the Interior are required to ensure expeditious

compliance with applicable environmental and cultural resource laws. “Best

management practices” to ensure timely action on oil and gas leases and drilling

permits must be implemented. Funds would be authorized for FY2006-FY2010.

Consultation Regarding Oil and Gas Leasing on Public Land (Sec.

363). The Secretary of the Interior and the Secretary of Agriculture will enter into

a memorandum of understanding to ensure timely processing of oil and gas lease

applications, elimination of duplication of effort, and establishment of joint data

retrieval and mapping systems.

Estimates of Oil and Gas Resources Underlying Onshore Federal

Land (Sec. 364). The U.S. Geological Survey is required to estimate onshore oil

and gas resources and identify impediments and restrictions that might delay permits.

The Department of Energy is required to make regular assessments of economic

reserves.

Pilot Project to Improve Federal Permit Coordination (Sec. 365). A

federal permit streamlining pilot project will be established to demonstrate energy

development on federal land in accordance with the multiple-use mandate; Wyoming,

Montana, Colorado, Utah, and New Mexico may be asked to participate. A Bureau

of Land Management Permit Processing Improvement Fund is established. Half of

rental revenue will be deposited into the Fund and made available to the pilot project

for FY2006-FY2015 without further appropriation.

Deadline for Consideration for Applications for Permits (Sec. 366).

The Secretary of the Interior will have 10 days after receiving an application for a

CRS-29

permit to drill (APD) to notify the applicant whether the APD was complete. The

Secretary will have 30 days after a complete APD was submitted to issue or defer a

permit with correcting measures. If deferred, the applicant would have a two-year

window to complete the application, as specified by the Secretary. If the applicant

met the requirements within that period, then the Secretary must issue a permit within

10 days. The Secretary shall deny the permit if the criteria were not met within the

two-year period.

Fair Market Value Determinations for Linear Rights-of-way Across

Public Lands and National Forests (Sec. 367). The Secretaries of the Interior

and Agriculture will annually revise and update rental fees for land encumbered by

linear rights-of-way to reflect fair market value.

Energy Right-of-Way Corridors on Federal Land (Sec. 368). Not later

than two years after enactment, the Secretaries of the Interior and Agriculture, in

consultation with the Secretaries of Defense, Commerce, and Energy and FERC, will

submit to Congress a report addressing the location of existing rights-of-way on

federal land for oil and gas pipelines and electric transmission and distribution

facilities.

Oil Shale, Tar Sands, and Other Strategic Unconventional Fuels

(Sec. 369). The Secretary of the Interior will develop an oil shale and tar sands

leasing program as soon as practicable and publish a final regulation to implement

the program by December 31, 2006. A task force is set up to coordinate and

accelerate commercial development of strategic unconventional fuels. An Office of

Petroleum Reserves will be established to coordinate federal development of strategic

fuels. The Secretary shall carry out an assessment of U.S. oil shale and oil sands. The

Department of Defense is authorized to procure unconventional fuels to meet its fuel

needs. The leasing program will be for conducting research and development

activities related to the production of oil shale and oil sands. A programmatic

environmental impact statement will be prepared.

Finger Lakes Withdrawal (Sec. 370). All federal land within the boundary

of Finger Lakes National Forest, New York, is withdrawn from potential energy

development under the public land laws.

Reinstatement of Leases (Sec. 371). This section establishes conditions

for reinstating an oil and gas lease if it was terminated for nonpayment of rental fees

between September 1, 2001, and June 30, 2004.

Consultation Regarding Energy Rights-of-Way on Public Land (Sec.

372). Within six months after enactment, the Secretaries of the Interior and of

Agriculture will be required to enter into an MOU to coordinate environmental

compliance and processing of rights-of-way applications.

Sense of Congress Regarding Development of Minerals Under

Padre Island National Seashore (Sec. 373). In recognition of the split estate

on Padre Island National Seashore, it is the sense of Congress that the federal

government owns the surface rights while the mineral rights are held privately and

also by the state of Texas.

CRS-30

Livingston Parish Mineral Rights Transfer (Sec. 374). Section 102 of

P.L. 102-562 is amended by striking the “Conveyance of Lands” provision, which

maintains the reservation of mineral rights held by the United States in specific areas

of Livingston Parish, Louisiana.

Background. The federal oil and gas leasing program is governed by the

Mineral Leasing Act of 1920, as amended (30 U.S.C. 181 et. Seq.). Bureau of Land

Management (BLM) procedures for an application for a permit to drill (APD) are

contained in 43 CFR 3162.3-1. The Bush Administration has taken some action to

reduce the time needed to consider APDs, including processing and conducting

environmental analyses on multiple permit applications with similar characteristics,

implementing geographic area development planning for oil and gas fields or areas

within a field, and allowing for block surveys of cultural resources.

Subtitle G — Miscellaneous

Deadline for Decision on Appeals of Consistency Determination

Under the Coastal Zone Management Act of 1972 (Sec. 381). These

provisions establish three deadlines for the appeals process by amending section 319

of the Coastal Zone Management Act (CZMA). They will limit the overall length of

this appeals process to a total of 270 days from the date when an appeal is filed (with

options that can extend the process for up to an additional 75 days). The first

deadline is for the Secretary of Commerce to publish an initial notice of an appeal in

the Federal Register within 30 days of when it is filed. The second deadline is that

the administrative record is closed after 160 days from the date of that publication.

During that time period, the Secretary can receive filings related to the appeal. The

Secretary has the discretion to extend this period for up to 60 days under certain

circumstances. The final deadline gives the Secretary up to 60 days to issue a

decision after the administrative record had been closed, and gives the Secretary the

option of extending that time span for up to 15 additional days. There are no

grandfather provisions for determinations that are currently in the appeals process.

Background. The consistency provisions in Section 307 of the CZMA allow

a state to object to any proposed federal activity that it determines to be incompatible

with its federally approved and state-administered coastal zone management plan.

Since the first state plan was approved in the mid-1970s, there has been considerable

friction between states and federal agencies over the reach of the consistency

provisions. States have sought broader application to have a stronger role in

decisions about the largest possible array of proposed federal activities, while the

federal government has sought narrower interpretations, especially relating to

offshore energy development. Determining an exact boundary separating actions on

which the state is to have a primary role from actions on which the state does not

have such powers has been a subject of federal litigation, including decisions by the

U.S. Supreme Court (notably Secretary of the Interior v. California, 464 U.S. 312

(1984)), in which the court determined that the sale of oil and gas leases on the outer

continental shelf (OCS) was not an act affecting the coastal zone.

When a state and a federal agency cannot reach an agreement on a consistency

determination, the law and regulations lay out an elaborate process for resolving that

disagreement. Most disagreements are resolved through this process, but if no

CRS-31

agreement can be reached, the final step is an appeal to the Secretary of Commerce

to make a decision. Appeals to the Secretary have not been common. According to

citations of appeals posted on the website of the Office of Ocean and Coastal

Resource Management in the National Oceanic and Atmospheric Administration

(NOAA) (viewed May 12, 2005), 38 consistency determinations were appealed to the

Secretary between 1984 and 1999, and 19 of them involved proposed activities by oil

companies. The appeals process, like all other aspects of consistency, is currently

covered under a final rule issued by NOAA in the December 8, 2000, Federal

Register. While a proposal to modify the appeals time line with deadlines very

similar to this legislation was included in a proposed rule on federal consistency

published in the June 11, 2003, Federal Register, no final rule was issued.

Section 319 in previous law had less detail than the newly amended version. It

stated that the Secretary would either issue a final decision on the appeal or publish

a notice in the Federal Register stating why a decision could not be reached within

90 days after the record had closed. If the Secretary published a notice that a decision

had not been made, that decision had to be issued within 45 days of the date of

publication of that notice.

Policy Context. Consistency appeals have been contentious and, in some

instances, the appeals process has dragged on for long time periods. The 1996

amendments in Section 319 were meant to address those delays by establishing some

time limits. This proved unsatisfactory to some, who sought additional statutory

language to remove decisions about deadlines from the unpredictable rulemaking

process by defining the length of component steps in law, and therefore the overall

process, after an appeal to the Secretary has been filed.

The consistency provision creates an unusual relationship where states have

been granted the authority to halt most federal actions that are incompatible with state

interests. When enacted, the consistency requirement was viewed as a main incentive

for states to develop and implement coastal plans since the other incentive to

participate, federal financial grants, always has been modest. This view appears to

have some validity, as 34 of the 35 eligible states and territories are now

administering federally approved coastal management programs.

Appeals Relating to Offshore Mineral Development (Sec. 382).

Appeals of decisions under section 319 of the Coastal Zone Management Act (16

U.S.C. 1465) on natural gas pipelines and offshore energy projects will be based

exclusively on the record compiled by FERC or the relevant permitting agency.

Royalty Payments under Leases under the Outer Continental Shelf

Lands Act (Sec. 383). The lessee of a “covered lease tract” off the coast of

Louisiana will be allowed to withhold royalties due to the United States if it pays the

state of Louisiana 44 cents for every dollar of the federal royalty withheld. This

royalty relief will end when certain drainage claims are satisfied.

Coastal Impact Assistance Program (Sec. 384). This section amends

Section 31 of the OCSLA (43 U.S.C. 1356a). The Secretary shall disburse to

producing states and political subdivisions $250 million annually during FY2007-

CRS-32

FY2010. Allocations for each producing state and political subdivision as well as

authorized uses will be established.

Background. This is the most recent of repeated efforts to allocate a portion

of federal offshore oil and gas revenues to coastal states to assist them in addressing

the impacts of these activities. Recent Congresses, starting with the 105th, considered

numerous similar legislative proposals. These proposals came to be known as

CARA, or the Conservation and Reinvestment Act. In the 106th Congress, the House

passed a version of CARA on May 11, 2000 (H.R. 701). Some of these proposals

were also reflected in the Clinton Administration’s Lands Legacy Initiative proposal

in 2000, and also in a one-time $150 million appropriation provided in the FY2001

Commerce appropriations legislation (P.L. 106-553) for coastal impact assistance.

Support for the CARA proposals, which would also have funded many related

federal natural resource protection programs, grew as the deficit of the early and mid1990s was replaced by forecasts of a surplus, as protecting natural resources came to

be viewed as part of the effort to address sprawl, and as efforts and support to secure

federal funding for coastal resource protection and restoration efforts grew. With the

replacement of the surplus forecast with deficit forecasts and changing national

priorities since the 9/11 terrorist attacks, broad support for wide-ranging legislation

like CARA has declined, but interest has remained in returning a portion of the

money currently paid to the federal government by private companies leasing

offshore areas to those locations most affected by the offshore activity.

Policy Context. Proponents of these proposals look to the rates at which funds

are given to jurisdictions where energy development occurs within those jurisdictions

on federal lands, and seek revenues that will help coastal states respond to adverse

onshore effects of offshore energy development. Coastal destruction has received

particular attention in Louisiana, where many square miles of wetlands are being lost

to the ocean each year.

Study of Availability of Skilled Workers (Sec. 385). The National

Academy of Sciences (NAS) shall study the availability of skilled workers to meet

U.S. energy and mineral security requirements.

Great Lakes Oil and Gas Drilling Ban (Sec. 386). No federal or state

permit or lease shall be issued for new oil and gas slant, directional, or offshore

drilling in or under one or more of the Great Lakes.

Federal Coalbed Methane Regulation (Sec. 387). States on the list of

“affected states” under section 1339(b) of the Energy Policy Act of 1992 (42 U.S.C.

13368(b)) will be removed if they took specified actions within three years after

enactment of the Energy Policy Act of 2005 or had previously taken such action. The

“affected states” are West Virginia, Pennsylvania, Kentucky, Ohio, Tennessee,

Indiana, and Illinois. These states are on the list as a result of coalbed methane

(CBM) ownership disputes, impediments to development, lack of a regulatory

framework to encourage CBM development in the state, and lack of extensive

development of CBM. A state may be removed from the list through a petitioning

process initiated by the governor of that state.

CRS-33

Alternate Energy-Related Uses of the Outer Continental Shelf (Sec.

388). The Secretary of the Interior is authorized to grant rights-of-way or easements

on the OCS for energy-related activity on a competitive or noncompetitive basis and

to charge fees for such access. A surety bond or other financial guarantee is required.

Further, this provision amends the Outer Continental Shelf Lands Act to provide

authority to the Secretary of the Interior to grant leases, easements, or rights-of-way

for energy and related purposes on the OCS. This provision does not allow the grant

of easements or rights-of-way for activities that support the exploration,

development, or production of oil and natural gas in areas where oil and gas

preleasing, leasing, and related activities are prohibited by a congressional

moratorium or a withdrawal pursuant to section 12 of the Outer Continental Shelf

Lands Act. The authority does not apply to any area within the exterior boundaries

of any unit of the National Park System, National Wildlife Refuge System, National

Marine Sanctuary System, or any National Monument. The provision requires the

Secretary to undertake a coordinated OCS mapping initiative to assist in

decisionmaking relating to the siting of facilities under this provision.

Oil Spill Recovery Institute (Sec. 389). The authorization for the Oil Spill

Recovery Institute is extended from 2012 to one year after oil exploration and

production ceases in Alaska.

NEPA Review (Sec. 390). Drilling on a previously used well site and certain

other activities are not subject to National Environmental Policy Act (NEPA) review

if the activities are conducted for oil and gas exploration or development under the

Mineral Leasing Act.

Subtitle H — Refinery Revitalization

Summary of Provisions. Congress finds that U.S. capacity to refine

gasoline and other fuels falls short of the nation’s demand for petroleum products,

and that the shortfall of refining capability is growing, leading to greater dependence

on supplies from foreign refineries. As a remedy to potential obstacles to expanding

refinery capacity, federal-state regulatory coordination is required, and EPA is to

provide states with technical and financial assistance on issuing permits under the

Clean Air Act.

Findings and Definitions (Sec. 391). It is found that, in addition to a

current shortfall in the capacity of domestic refineries to meet the demand for fuels

and petrochemical feedstocks, new demands will be placed on these facilities to

produce cleaner fuels. The current need for expanded capacity at existing refineries,

as well as future needs for more capacity and additional, new facilities, would be

facilitated by better coordination of state and federal environmental reviews.

Federal-State Regulatory Coordination and Assistance (Sec. 392).

At the request of the governor of any state, EPA may enter into a cooperative refinery

permitting agreement, identifying the steps needed for expeditiously obtaining

required federal and state environmental permits. In doing so, EPA is authorized to

accept consolidated applications for all EPA permits. EPA is further authorized to

enter into a memorandum of agreement with other federal and state agencies to

CRS-34

coordinate the application process, such that the various components are considered

concurrently.

In addition, EPA is authorized to provide financial assistance to state

governments for the hiring of technical staff having the expertise needed to deal with

processing the permits. EPA is authorized to use its own staff to provide technical

assistance in dealing with refinery permit applications.

Title IV — Coal

Subtitle A — Clean Coal Power Initiative

Summary of Provisions. The Clean Coal Power Initiative (CCPI) is in its

fourth year of funding under a 10-year, $2 billion program outlined by the Bush

Administration. The program supports cost-shared projects with the private sector

to demonstrate new technologies that could boost the efficiency and reduce emissions

from coal-fired power plants.

Authorizations of Appropriations (Sec. 401). Funding for CCPI is

authorized for $200 million for each year from FY2006-FY2014.

Project Criteria (Sec. 402). Technical criteria are established for coal-based

gasification and other projects. 70% of all funding shall be for coal-based gasification

technologies. The federal share of financing for each clean coal project will not

exceed 50%.

Report (Sec. 403). A report on the projects’ status and technical milestones

will be submitted after the first year and every two years, through 2014, by the

Secretary of Energy to various congressional committees.

Clean Coal Centers of Excellence (Sec. 404). The program includes

grants to universities to establish Centers of Excellence for energy systems of the

future.

Background. CCPI does not currently have a specific authorization, although

it has been funded through the annual Interior and Related Agencies Appropriations

bill and, since FY2006, the Energy and Water Development Appropriations bill. The

program supersedes the Clean Coal Technology Program, which has completed most

of its projects and has been subject to rescissions and deferrals since the mid-1990s.

Policy Context. A key ingredient of President Bush’s May 2001 National

Energy Policy is to bolster U.S. energy supply. One of its goals is to use coal more

efficiently, as coal is an abundant national resource. The Administration contends

that new technologies could cost-effectively reduce emissions from coal-fired power

plants and overcome barriers to expanded coal use.

CRS-35

Subtitle B — Clean Power Projects

Integrated Coal/Renewable Energy System (Sec. 411). The Secretary

of Energy shall provide loan guarantees for an integrated gasification combined cycle

(IGCC) facility located in the Upper Great Plains, of at least 200 MW, that would be

combined with renewable energy sources, sequester carbon dioxide emissions, and

be a source of hydrogen for near-site fuel cell demonstrations. The federal share will

not exceed 50%.

Loan to Place Alaska Clean Coal Technology Facility in Service

(Sec. 412). The Secretary of Energy is authorized to provide a loan not greater than

$80 million to an experimental clean coal power plant in Healy, Alaska.

Western Integrated Coal Gasification Demonstration Project (Sec.

413). The Secretary of Energy shall demonstrate the use of western coal to fuel an

IGCC plant located in a western state at an altitude of more than 4,000 feet above sea

level.

Coal Gasification (Sec. 414). Loan guarantees are authorized for an IGCC

power plant of at least 400MW in a deregulated market and receiving no ratepayer

subsidy.

Petroleum Coke Gasification (Sec. 415). Loan guarantees will be

available for at least five petro-coke gasification polygeneration projects, involving

co-production of electricity and fuels.

Electron Scrubbing Demonstration (Sec. 416). The Secretary of Energy

is directed to use $5 million of appropriated funds to begin a project managed by the

DOE Chicago Operations Office to demonstrate high-energy electron scrubbing

technology for high-sulfur coal emissions.

Department of Energy Transportation Fuels from Illinois Basin Coal

(Sec. 417). A program shall be established to evaluate the commercial and

technical viability of producing Fischer-Tropsch transportation fuels from Illinois

basin coal. A gasification test center shall be constructed, and $85 million is

authorized for years FY2006-FY2010.

Subtitle C — Coal and Related Programs

Amendment of the Energy Policy Act of 1992 (Sec. 421). The

Secretary of Energy shall carry out a Clean Air Coal Program to provide financial

assistance to coal-based power plants that would be less polluting or more efficient

than existing plants.

Subtitle D — Federal Coal Leases

Summary of Provisions. This subtitle modifies federal coal leasing

procedures to encourage greater coal production on federal lands. Issues raised by

CRS-36

these provisions include their impact on regional competition and returns to the U.S.

Treasury.

Short Title (Sec. 431). This subtitle may be cited as the “Coal Leasing

Amendments Act of 2005.”

Repeal of the 160 Acre Limitation for Coal Leases (Sec. 432). This

section repeals the 160 acre limitation on coal lease modifications. The total area

added to an existing coal lease through a modification shall not exceed 960 acres or

add acreage larger than the original lease.

Approval of Logical Mining Units (Sec. 433). Criteria are established for

extending the mine-out period of a coal lease beyond 40 years.

Payment of Advanced Royalties under Coal Leases (Sec. 434). The

Secretary of the Interior may, upon payment of an advance royalty, suspend a coal

lessee’s requirement for continuous operation. Advance royalties will be based on the

average price of coal sold on the spot market from the same region, and the aggregate

number of years advance royalties can be accepted in lieu of production will not

exceed 20.

Elimination of Deadline for Submission of Coal Lease Operation

and Reclamation Plan (Sec. 435). The previous three-year deadline for

submission of a coal lease operation and reclamation plan is eliminated.

Amendment Relating to Financial Assurances with Respect to

Bonus Bids (Sec. 436). Financial surety bonds or other financial guarantees for

bonus bids will no longer be required.

Inventory Requirement (Sec. 437). The Secretary of the Interior, in

consultation with the Secretaries of Agriculture and Energy, will be required to assess

coal on public lands, including low-sulfur coal and various impediments to

developing such resources.

Application of Amendments (Sec. 438). Amendments made under this

provision will apply to any coal lease issued before, on, or after the date of

enactment.

Policy Context. Companies could stop producing coal for 20 years instead

of 10 under the previous law, possibly reducing revenues for the federal treasury.

According to some who opposed this provision, it could lead to greater speculation

among firms that can hold properties for longer periods of time without development.

The National Mining Association and the industry contended that coal production on

federal lands is structured in an inefficient way and the section will allow production

to become more efficient. This may occur by allowing coal producers to put together

more contiguous tracts.

CRS-37

Title V — Indian Energy

Short Title (Sec. 501). “Indian Tribal Energy Development and SelfDetermination Act of 2005.”

Office of Indian Energy Policy and Programs (Sec. 502). This amends

Title II of the Department of Energy Organization Act (42 U.S.C. 7131 et seq.) to

create the Office of Indian Energy Policy and Programs at the Department of Energy.

Indian Energy (Sec. 503). Title 26 the Energy Policy Act of 1992 (25

U.S.C. 3501) is replaced by the following new sections, which outline procedures

whereby Indian tribes would be able to develop and manage the energy resources

located on, and rights-of-way through, tribal land.

Sec. 2602. Assistance for tribal energy resource development is to be provided

through the Department of the Interior by grants and low-interest loans (such sums

as necessary authorized for FY2006-FY2016), and through DOE by grants ($20

million authorized for each of FY2006-FY2016) and loan guarantees. Federal

agencies may give preference to Indian energy when purchasing energy products and

byproducts at fair market prices.

Sec. 2603. DOI grants may be provided to tribes for the regulation,

development, and management of energy resources on Indian land. Funds may be

used for the following purposes: for the inventory and development of energy

resources, development and enforcement of tribal laws and regulations, development

of a technical infrastructure to protect the environment, and employee training for the

previous activities. No funding amount is specified for this section.

Sec. 2604. Under their own tribal energy resource agreements as approved by

DOI, Indian tribes may, without prior approval of the Secretary of the Interior, enter

into leases or business agreements for energy development and grant rights-of-way

over tribal land for pipelines or electric lines. Such sums as are necessary are

authorized for FY2006-FY2016.

Sec. 2605. The Bonneville Power Administration and Western Area Power

Administration may provide technical assistance to tribes seeking to use the highvoltage transmission system for delivery of electric power. A lump sum of $750,000

is authorized for this section.

Sec. 2606. DOE, DOI, and the Army Corps of Engineers shall conduct a study

of the cost and feasibility of developing a demonstration project that uses wind

energy generated on tribal land and hydropower generated by the Corps on the

Missouri river to supply firming power to the Western Area Power Administration.

A lump sum of $1 million is authorized for this section.

Consultation with Indian Tribes (Sec. 504). The Secretaries of Energy

and of the Interior must involve and consult with Indian tribes in carrying out this

title.

CRS-38

Four Corners Transmission Line Project and Electrification (Sec.

505). The Dine Power Authority, an enterprise of the Navajo nation, shall be

eligible to receive grants and other assistance to develop a transmission line from the

Four Corners Area to southern Nevada, including related generation facilities.

Energy Efficiency in Federally Assisted Housing (Sec. 506). This

provision amends the Native American Housing and Self-Determination Act of 1996

(25 U.S.C. 4132) to include “greater energy efficiency” as a goal.

Title VI — Nuclear Matters

Subtitle A — Price-Anderson Act Amendments

Summary of Provisions. The Price-Anderson Act, which addresses liability

for damages to the general public from nuclear incidents, is extended through 2025

for new nuclear power plants and new DOE nuclear contracts.7 The extension makes

relatively few changes in the longstanding Price-Anderson system, except that the

maximum annual accident assessment on each reactor is raised from $10 million to

$15 million and subjected for the first time to an inflation adjustment. Special

treatment is also provided for modular reactors. Renewal of Price-Anderson is

widely considered to be a prerequisite for building the new nuclear power plants that

are encouraged elsewhere in the act.

Short Title (Sec. 601). This subtitle may be cited as the “Price-Anderson

Amendments Act of 2005.”

Extension of Indemnification Authority (Sec. 602). Price-Anderson

liability coverage for new commercial reactors, DOE nuclear contracts, and nonprofit educational institutions is extended through December 31, 2025.

Maximum Assessment (Sec. 603). The total retrospective premium for

each reactor is set at the current level of $95.8 million, and the limit on per-reactor

annual payments is raised from $10 million to $15 million. The total and annual

limits are to be adjusted for inflation every five-year period after August 20, 2003.

Department of Energy Liability Limit (Sec. 604). The liability limit for

DOE contractors is set at $10 billion per incident, to be adjusted for inflation every

five years under §607. The DOE contractor liability limit previously was linked to

the total liability limit for commercial reactor accidents.

Incidents Outside the United States (Sec. 605). The liability limit and

maximum indemnification for DOE contractors for nuclear incidents outside the

United States is raised from $100 million to $500 million.

7

The Price-Anderson Act refers primarily to §170 of the Atomic Energy Act of 1954 (42

U.S.C. 2210).

CRS-39

Reports (Sec. 606). The Nuclear Regulatory Commission (NRC) and DOE

must report to Congress by the end of 2021 on the need for further Price-Anderson

extensions and modifications.

Inflation Adjustment (Sec. 607). The liability limit for DOE nuclear

contractors must be adjusted for inflation every five years after July 1, 2003.

Treatment of Modular Reactors (Sec. 608). For the purpose of applying

the limits on retrospective premiums after a nuclear incident, a nuclear plant

consisting of multiple small reactors (100-300 megawatts per reactor, up to a total of

1,300 megawatts at the plant site) shall be considered a single reactor. Thus, a

modular plant consisting of four 300-megawatt reactors would have a total liability

limit of $95.8 million per accident rather than four times that amount ($382.3

million).

Applicability (Sec. 609). None of the increased liability limits apply to

nuclear incidents taking place before the amendments were enacted.

Civil Penalties (Sec. 610). For DOE nuclear contracts signed after

enactment, this section eliminates the civil penalty exemption for nuclear safety

violations by the seven non-profit contractors listed in previous law. DOE’s

authority to automatically remit penalties imposed on all non-profit educational

institutions serving as contractors is also repealed. However, this section limits the

civil penalties against a non-profit contractor to the amount of management fees

received under that contract within a one-year period as determined by the Secretary

of Energy.

Background. Under Price-Anderson, the owners of commercial reactors must

assume all liability for nuclear damages awarded to the public by the court system,

and they must waive most of their legal defenses following a severe radioactive

release (“extraordinary nuclear occurrence”). To pay any such damages, each

licensed reactor must carry financial protection in the amount of the maximum

liability insurance available, which was increased by the insurance industry from

$200 million to $300 million on January 1, 2003. Any damages exceeding that

amount are to be assessed equally against all covered commercial reactors, up to

$95.8 million per reactor (most recently adjusted for inflation on August 20, 2003).

Those assessments — called “retrospective premiums” — would now be paid at an

annual rate of no more than $15 million per reactor (to be adjusted for inflation every

five years), to limit the potential financial burden on reactor owners following a

major accident. According to the Nuclear Regulatory Commission (NRC), 103

commercial reactors are currently covered by the Price-Anderson retrospective

premium requirement.

Funding for public compensation following a major nuclear incident, therefore,

would include the $300 million in insurance coverage carried by the reactor that

suffered the incident, plus the $95.8 million in retrospective premiums from each of

the 103 currently covered reactors, totaling $10.2 billion. On top of those payments,

a 5% surcharge may also be imposed, raising the total per-reactor retrospective

premium to $100.6 million and the total potential compensation for each incident to

about $10.7 billion. Under Price-Anderson, the nuclear industry’s liability for an

CRS-40

incident is capped at that amount, which varies depending on the number of covered

reactors, the amount of available insurance, and an inflation adjustment that is made

every five years. Payment of any damages above that liability limit would require

congressional approval under special procedures in the act.

The Price-Anderson Act also covers contractors who operate hazardous DOE

nuclear facilities. The liability limit for DOE contractors is set by the new law at $10

billion. Price-Anderson authorizes DOE to indemnify its contractors for the entire

amount, so any damage payments for nuclear incidents at DOE facilities would

ultimately come from the U.S. Treasury. However, the law also allows DOE to fine

its contractors for safety violations, and contractor employees and directors can face

criminal penalties for “knowingly and willfully” violating nuclear safety rules.

Previously, Section 234A of the Atomic Energy Act specifically exempted seven

non-profit DOE contractors and their subcontractors and allowed DOE to

automatically remit any civil penalties imposed on non-profit educational institutions

serving as DOE contractors. The new law repeals those provisions but imposes

limits on penalties imposed on non-profit entities.

Policy Context. The Price-Anderson Act’s limits on liability were crucial in

establishing the commercial nuclear power industry in the 1950s. Supporters of the

Price-Anderson system contend that it has worked well since that time in ensuring

that nuclear accident victims would have a secure source of compensation, at little

cost to the taxpayer. However, opponents contend that Price-Anderson subsidizes

the nuclear power industry by protecting it from some or most of the financial

consequences of the worst conceivable accidents.

Although Price-Anderson coverage for new reactors lapsed at the end of 2003,

there was no immediate effect on the industry, because previously licensed reactors

continued to be covered and no new U.S. reactors are currently planned. However,

the Energy Policy Act of 2005 contains numerous incentives for construction of new

commercial nuclear power plants, and it is unlikely that any such projects would

move forward without Price-Anderson coverage. A lapse in Price-Anderson also

would have affected all subsequently signed DOE nuclear facility contracts, which

would have had to fall back on alternate indemnification authority.

Subtitle B — General Nuclear Matters

Summary of Provisions. To encourage construction of new nuclear power

plants, this subtitle authorizes payments for reactor licensing delays, clarifies when

the 40-year period for reactor operating licenses takes effect, and eliminates antitrust

reviews of reactor license applications. Exports of weapons-usable highly enriched

uranium for medical isotope production are exempted from restrictions designed to

speed conversion to low-enriched uranium. Ensuring adequate staffing at NRC is

addressed with incentives for both students and retirees to work at the agency, and

user fees that fund 90% of NRC’s costs are extended permanently.

Licenses (Sec. 621). The initial 40-year period for a commercial nuclear

reactor license would begin when NRC authorized the reactor to commence operation

after construction had been completed, rather than when the license was issued before

construction started.

CRS-41

Nuclear Regulatory Commission Scholarship and Fellowship

Program (Sec. 622). NRC may offer scholarships and fellowships to develop

critical nuclear safety regulatory skills. To receive the assistance, a student must

agree to work at NRC after graduation for a period of between one and three times

as long as the time that the scholarship or fellowship was provided.

Cost Recovery From Government Agencies (Sec. 623). NRC is

authorized to charge cost-based fees for all services rendered to other federal

agencies.

Elimination of Pension Offset for Certain Rehired Federal Retirees

(Sec. 624). When NRC has a critical need for the skills of a retired employee, NRC

may hire the retiree as a contractor and exempt him or her from the annuity

reductions that would otherwise apply.

Antitrust Review (Sec. 625). NRC no longer must submit nuclear reactor

license applications to the Attorney General for antitrust review, as previously

required by Atomic Energy Act Section 105 c.

Decommissioning (Sec. 626). NRC is explicitly authorized to issue

regulations ensuring that funds collected to decommission nuclear power plants

cannot be used for other purposes.

Limitation on Legal Fee Reimbursement (Sec. 627). Except as required

by pre-existing contracts, DOE may not reimburse its contractors for legal expenses

incurred in defending against “whistleblower” complaints that are ultimately upheld.

Decommissioning Pilot Program (Sec. 628). DOE must establish a

program to decommission and decontaminate the site of the Southwest Experimental

Fast Oxide Reactor (SEFOR) in Arkansas. Funding of $16 million is authorized.

Whistleblower Protection (Sec. 629). Previously existing whistleblower

protections for employees of nuclear power plants and other NRC licensees and

employees of DOE contractors are extended to NRC employees, employees of NRC

contractors and subcontractors, and DOE employees. An employee whose

whistleblower retaliation complaint does not receive a final decision by the Secretary

of Labor within one year can take the case to federal court.

Medical Isotope Production (Sec. 630). Highly enriched uranium (HEU)

can be exported to Canada, Belgium, France, Germany, and the Netherlands for

production of medical isotopes in nuclear reactors. Those countries are exempt from

requirements (under Section 134 of the Atomic Energy Act) that they agree to switch

to low-enriched uranium (LEU) as soon as possible and that LEU fuel for their

reactors be under active development. Instead, those countries must agree to convert

to suitable LEU fuel when it becomes available. NRC must review existing security

requirements for HEU used for medical isotope production and impose additional

requirements if necessary. The National Academy of Sciences (NAS) is to study the

potential availability and cost of medical isotopes produced without HEU. If the

Secretary of Energy certifies that U.S. medical isotope demand can be reliably and

CRS-42

economically met with production facilities that do not use HEU, NRC may no

longer grant the export exemptions.

Safe Disposal of Greater-Than-Class C Radioactive Waste (Sec.

631). DOE must designate an office with responsibility for providing a facility for

permanent disposal of all low-level radioactive waste with concentrations of

radionuclides that exceed the limits established by the NRC for Class C radioactive

waste. Within 180 days after enactment, DOE must give Congress a plan for

continued recovery and storage of Greater-Than-Class C radioactive sealed sources

that pose a security threat.

Prohibition on Nuclear Exports to Countries That Sponsor

Terrorism (Sec. 632). Exports of nuclear materials, equipment, and sensitive

technology are prohibited to any country identified by the Secretary of State as a

sponsor of terrorism. The prohibition does not apply to radiation monitoring

technologies and related surveillance equipment. The President can waive the export

restriction under certain conditions. The prohibition applies to exports already

approved if they have not yet taken place by the date of enactment.

Employee Benefits (Sec. 633). Subject to the availability of funds, workers

at DOE’s uranium enrichment plants at Portsmouth, Ohio, and Paducah, Kentucky,

who were eligible for certain pension and health care benefits on April 1, 2005, shall

continue such eligibility.

Demonstration Hydrogen Production at Existing Nuclear Power

Plants (Sec. 634). $100 million is authorized for two projects to demonstrate

hydrogen production at existing nuclear power plants. Before making awards for the

projects, the Secretary of Energy must determine whether such hydrogen production

would be cost-effective.

Prohibition of Assumption by United States Government of Liability

for Certain Foreign Incidents (Sec. 635). The U.S. Government may not

provide indemnification for contracts related to nuclear facilities or activities in

countries found to sponsor terrorism. The prohibition would not apply to missions

necessary for nuclear safety or nonproliferation.

Authorization of Appropriations (Sec. 636). Such sums as necessary to

carry out this subtitle are authorized to be appropriated.

Nuclear Regulatory Commission User Fees and Annual Charges

(Sec. 637). A statutory requirement that NRC recover 90% of its costs through

licensee fees — which was to expire September 20, 2005 — is made permanent.

NRC’s costs of licensing a national nuclear waste repository and activities

reimbursed by direct service fees continue to be excluded from the 90% fee recovery

requirement. This section also excludes NRC’s costs of regulating residual defense

radioactive waste (as required by 50 U.S.C. 2601 note) and most homeland security

costs.

Standby Support for Certain Nuclear Power Plant Delays (Sec. 638).

The Secretary of Energy is authorized to help pay the cost of regulatory delays at up

CRS-43

to six new commercial nuclear reactors, subject to funding availability. For the first

two reactors that begin construction, the DOE payments could cover all the eligible

delay-related costs, such as additional interest, up to $500 million each. For the next

four reactors, half of the eligible costs could be paid by DOE, with a payment cap of

$250 million per reactor. Delays caused by the failure of a reactor owner to comply

with laws or regulations would not be covered.

Conflicts of Interest Relating to Contracts and Other Arrangements

(Sec. 639). NRC may enter into contracts with DOE or operators of DOE facilities

despite any conflict of interest, as long as NRC determines that the conflict cannot

be mitigated and that there is adequate justification to proceed without mitigation.

Background and Policy Context. One of the Energy Policy Act’s

potentially most significant incentives for building new nuclear power plants is the

“regulatory risk insurance” in Section 638. The Administration had proposed such

risk insurance for the first four new reactors as a substitute for loan guarantees and

tax credits, contending that the risk insurance and various regulatory measures would

provide sufficient encouragement for new reactors. The enacted law includes

regulatory risk compensation for up to six new reactors, plus loan guarantees and a

production tax credit.

Concern about regulatory risk stems from the experience of some earlier nuclear

plants whose operation was held up by licensing problems after they were built. All

of today’s operating reactors were approved under a two-step licensing system in

which they were first issued a construction permit and then, after construction was

completed, an operating license was sought. Some reactors — notably the Shoreham

plant in New York and Seabrook in New Hampshire — experienced years of

litigation over their operating licenses while billions of dollars in interest costs piled

up.

The Energy Policy Act of 1992 (P.L. 102-486) created a “one step” reactor

licensing process, in which a combined construction permit and operating license

(COL) could be issued by NRC. With a COL in hand, a utility or other electric

generating company could build a reactor and then operate the completed plant

without further licensing proceedings. However, NRC would still have to ensure that

the plant was built to its specifications. The process for making that final

determination remains uncertain, since it has never been used. Nuclear power critics

want to make sure they can raise construction issues with NRC before a plant begins

operation, but the nuclear industry wants to prevent NRC’s final approval of a

completed reactor from becoming as litigious as the old, two-step licensing system.

Uncertainty about how long it would take for a completed reactor with a COL

to be approved for operation has been seen as a potential obstacle to obtaining

financing for new nuclear plants. By “insuring” the first six reactors against

regulatory delays, the provision in the new energy act is intended to provide more

confidence to potential investors. However, the stipulation that the federal payments

will not cover the failure of a reactor owner “to take any action required by law or

regulation” could undermine that confidence, since many reactor delays in the past

resulted from disagreements over whether laws and regulations had been properly

adhered to during construction.

CRS-44

Section 621 addresses another area of uncertainty about the one-step licensing

process. Under the process as established in 1992 (Atomic Energy Act Section 185

b.), a reactor’s 40-year initial license period may begin when a COL is issued before

construc

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.

A word about cookies

We need a few to keep you signed in and the library working. The rest help us see which pages people use and where they get stuck. They stay off unless you say yes.

Energy Policy Act of 2005: Summary and Analysis of Enacted Provisions · RL33302 | Frix