The Strategic Energy Efficiency and Renewables Reserve in the CLEAN Energy Act of 2007 (H.R. 6)

The Strategic Energy Efficiency and

Renewables Reserve in the CLEAN Energy

Act of 2007 (H.R. 6)

(name redacted)

Specialist in Energy Policy

April 4, 2007

Congressional Research Service

7-....

www.crs.gov

RS22571

CRS Report for Congress

Prepared for Members and Committees of Congress

The Strategic Energy Efficiency and Renewables Reserve in the CLEAN Energy Act of 2007

Summary

H.R. 6 would use revenue from certain oil and natural gas policy revisions to create an Energy

Efficiency and Renewables Reserve. The actual uses of the Reserve would be determined by

ensuing legislation. A variety of tax, spending, or regulatory bills could draw funding from the

Reserve to support liquid fuels or electricity policies. The House budget resolution (H.Con.Res.

99) would create a deficit-neutral reserve fund nearly identical to that proposed in H.R. 6. The

Senate budget resolution (S.Con.Res. 21) would create three reserve funds with purposes related

to those in H.R. 6. However, the Senate version has more specifics about efficiency and

renewables measures, and it would allow reserve fund use for “responsible development” of oil

and natural gas.

Congressional Research Service

The Strategic Energy Efficiency and Renewables Reserve in the CLEAN Energy Act of 2007

Contents

Background ................................................................................................................................1

Strategic Energy Efficiency and Renewables Reserve..................................................................1

Bill Purpose and Permitted Reserve Uses ..............................................................................1

Budget Adjustment Procedure for Uses of the Reserve ..........................................................1

Initial Revenue Estimates for the Reserve..............................................................................2

H.R. 6 Action..............................................................................................................................2

Related Action on the Budget Resolution ....................................................................................2

House Version of the Budget Resolution (H.Con.Res. 99)......................................................2

Senate Version of the Budget Resolution (S.Con.Res. 21)......................................................3

Contacts

Author Contact Information ........................................................................................................3

Congressional Research Service

The Strategic Energy Efficiency and Renewables Reserve in the CLEAN Energy Act of 2007

Background

H.R. 6 was introduced by the House Democratic Leadership to revise certain tax and royalty

policies for oil and natural gas and use the resulting revenue to support a reserve for energy

efficiency and renewable energy. The bill is one of several introduced on behalf of the

Democratic Leadership in the House as part of its “100 hours” package of legislative initiatives

conducted early in the 110th Congress.

Title I proposes to reduce certain oil and natural gas tax subsidies to create a revenue stream to

support energy efficiency and renewable energy. 1 Title II would modify certain aspects of royalty

relief for offshore oil and natural gas development to create a second stream of revenue to support

energy efficiency and renewable energy. 2

Strategic Energy Efficiency and Renewables Reserve

Title III of H.R. 6 creates a budget procedure for the creation and use of a Strategic Energy

Efficiency and Renewable Energy Reserve, under which additional spending for energy

efficiency and renewable energy programs can be accommodated without violating enforcement

procedures in the Congressional Budget Act of 1974, as amended.

Bill Purpose and Permitted Reserve Uses

The stated purpose of the bill is to “reduce our nation’s dependency on foreign oil” by investing

in renewable energy and energy efficiency. Specifically, Section 301 (a) of the bill would make

the revenue in the Reserve available to “offset the cost of subsequent legislation” that may be

introduced “(1) to accelerate the use of domestic renewable energy resources and alternative

fuels, (2) to promote the utilization of energy-efficient products and practices and conservation,

and (3) to increase research, development, and deployment of clean renewable energy and

efficiency technologies.”

Budget Adjustment Procedure for Uses of the Reserve

The budget adjustment procedure for use of the Reserve is set out in Section 301 (b). The

procedure is similar to reserve fund procedures included in annual budget resolutions.3 It would

require the chairman of the House or Senate Budget Committee, as appropriate, to adjust certain

spending levels in the budget resolution, and the committee spending allocations made

thereunder, to accommodate a spending increase (beyond FY2007 levels) in a reported bill, an

amendment thereto, or a conference report thereon that would address the three allowed uses of

the Reserve noted above. The adjustments for increased spending for a fiscal year could not

1

A detailed description of existing oil and natural gas tax provisions is available in CRS Report RL33763, Oil and Gas

Tax Subsidies: Current Status and Analysis, by (name redacted).

2

A detailed description of existing and proposed oil and natural gas royalty provisions is available in CRS Report

RS22567, Royalty Relief for U.S. Deepwater Oil and Gas Leases, by (name redacted).

3

For more details on how reserve funds are used to make adjustments to a budget resolution, see CRS Report

RL33122, Congressional Budget Resolutions: Revisions and Adjustments, by (name redacted), p.12-13.

Congressional Research Service

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The Strategic Energy Efficiency and Renewables Reserve in the CLEAN Energy Act of 2007

exceed the amount of increased receipts for that fiscal year, as estimated by the Congressional

Budget Office, attributable to H.R. 6.

Initial Revenue Estimates for the Reserve

According to the Congressional Budget Office (CBO), the proposed repeal of selected tax

incentives for oil and natural gas would make about $7.7 billion available over 10 years, 2008

through 2017. The proposed changes to the royalty system for oil and natural gas are estimated to

generate an additional $6.3 billion. This would yield a combined total of $14 billion for the

Reserve over a 10-year period. 4 The CBO estimates show that the total annual revenue flow

would vary annually over the 10-year period, ranging from a low of about $900 million to a high

of about $1.8 billion per year.

H.R. 6 Action

H.R. 6 came to the House floor for debate on January 18, 2007. In the floor debate, opponents

argued that the reduction in oil and natural gas incentives would dampen production, cause job

losses, and lead to higher prices for gasoline and other fuels. Opponents also complained that the

proposal for the Reserve does not identify specific policies and programs that would receive

funding. Proponents of the bill countered that record profits show that the oil and natural gas

incentives were not needed. They also contended that the language that would create the Reserve

would allow it to be used to support a variety of R&D, deployment, tax incentives, and other

measures for renewables and energy efficiency, and that the specifics would evolve as legislative

proposals come forth for to draw resources from the Reserve. The bill passed the House on

January 18 by a vote of 264-163.

Related Action on the Budget Resolution

In general, the budget resolution would revise the congressional budget for FY2007. It would also

establish the budget for FY2008 and set budgetary levels for FY2009 through FY2012. In

particular, the House resolution (H.Con.Res. 99) would create a single deficit-neutral reserve fund

for energy efficiency and renewable energy that is virtually identical to the reserve described in

H.R. 6. In contrast, the Senate resolution (S.Con.Res. 21) would create three reserve funds, which

identify more specific efficiency and renewables measures and would allow support for

“responsible development” of oil and natural gas.

House Version of the Budget Resolution (H.Con.Res. 99)

On March 28, the House passed H.Con.Res. 99 by a vote of 216-210. For FY2007, it would allow

for additional funding for energy (Function 270) above the President’s request that “could be used

for research, development, and deployment of renewable and alternative energy.” Section 207

would create a deficit-neutral reserve fund that fulfills the purposes of H.R. 6 to “facilitate the

4

U.S. Congress. Congressional Budget Office. H.R. 6, CLEAN Energy Act of 2007. (Letter to Chairman Nick Rahall,

Committee on Natural Resources.) January 12, 2007. 4 p.http://www.cbo.gov/ftpdocs/77xx/doc7728/hr6prelim.pdf

Congressional Research Service

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The Strategic Energy Efficiency and Renewables Reserve in the CLEAN Energy Act of 2007

development of conservation and energy efficiency technologies, clean domestic renewable

energy resources, and alternative fuels that will reduce our reliance on foreign oil.”

Senate Version of the Budget Resolution (S.Con.Res. 21)

On March 23, the Senate passed S.Con.Res. 21, its version of the budget resolution. In parallel to

the House resolution, Section 307 of S.Con.Res. 21 would create a deficit-neutral reserve fund

that could be used for renewable energy, energy efficiency, and “responsible development” of oil

and natural gas. In addition, Section 332 would create a deficit-neutral reserve fund for extension

through 2015 of certain energy tax incentives, including the renewable energy electricity

production tax credit (PTC), Clean Renewable Energy Bonds, and provisions for energy efficient

buildings, products, and power plants. Further, Section 338 would create a deficit-neutral reserve

fund for manufacturing initiatives that could include tax and research and development (R&D)

measures that support alternative fuels, automotive and energy technologies, and the

infrastructure to support those technologies.

Author Contact Information

(name redacted)

Specialist in Energy Policy

/redacted/@crs.loc.gov, 7-....

Congressional Research Service

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