Energy Policy Act of 2005

ENERGY POLICY ACT OF 2005

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Ms. CANTWELL. Mr. President, I rise today to discuss the Senate energy bill that this body has passed today, on a resounding bipartisan vote of 85 to 12. For those of us on the Senate Energy and Natural Resources Committee, this day has been long in coming. Today is another milestone in the effort to craft a new energy plan for America; legislation that has been swirling around Capitol Hill in one form or another for at least the last 4 years.

I thank the chairman and ranking member of the Energy Committee for the skill and consideration they have shown in navigating a path forward for this legislation. It has taken a lot of work. But today's vote represents a concerted, bipartisan effort to find the compromises that can help move our nation forward on an energy strategy to meet the needs of a 21st century economy. The result has been a cleaner, more transparent process, and a cleaner energy plan for America.

I will not stand before this body today and suggest that this legislation is the solution to all of the challenges we are facing--and will continue to face for decades to come--when it comes to our national energy security. There are provisions contained in this lengthy and complicated bill that I do not agree with; and there are areas where this legislation does not go nearly far enough, particularly when it comes to curbing our dangerous overdependence on foreign oil imports, and tackling the emerging threat of global climate change. However, I am supporting this legislation because it represents a modest improvement on the status quo; and because I believe that this legislation is the beginning--rather than the end--of the Senate's consideration of these issues.

I have participated in this debate in the Energy Committee and on the Senate floor for the past 4 years, and I have listened intently to many of my colleagues and what they have had to say. I can tell you this: it seems to me that there is more agreement in this body today than at any other point in my memory as to the nature of the energy challenges we are facing as a nation, and the critical importance of addressing these problems if we want to ensure American competitiveness and economic security in the coming decades.

Four years ago, I do not believe many of us were discussing the impact of foreign, state-owned oil companies on our energy security. Few of us had recognized the emergence of China and India and what those countries' growing thirst for petroleum could mean to the dynamics of world energy markets and the American economy. Many Senators were skeptical about the potential market transformation that could occur with new hybrid vehicle technologies. Four years ago, there was far less consensus about the promise of new biofuel technologies using an array of different crops and materials. These technologies are capable of transforming the U.S. renewable fuels business from a boutique industry dominated by corn-growers to a real, national industry capable of displacing significant amounts of imported petroleum.

This Senate has come along way in four years--in thought, if not yet in deed. The fact the majority of Senators now recognize the need to address in a meaningful and binding way the threat of global climate change; and the fact that the majority of my colleagues now seem to recognize the perfect storm of economic and national security issues posed by our dependence on foreign oil are significant milestones. But I am disappointed that we do not yet have the same degree of unanimity on what to do about it.

That is why this legislation--and the debate about this legislation's successes and failings--is just the beginning. Our national energy security is an issue with which this country and its leaders absolutely must continue to grapple. When it comes to our Nation's oil dependence, America can and must make more progress. We must acknowledge the realities of geology and the international marketplace. Given that the U.S. sits on just 3 percent of the world's known oil reserves, we cannot drill our way to energy independence. And when any policymaker looks at the distribution of where the rest of those oil reserves lie--two-thirds of them in the Middle East--it becomes painfully obvious that the U.S. must step up and tackle this challenge head-on. Anything less jeopardizes our economic future and our national security.

I fundamentally believe that securing our Nation's energy future is among the biggest challenge faced by our generation. It is a challenge by which future generations of Americans will measure us. We did not get the job done with this particular Energy bill when it comes to America's energy security and dependence on foreign oil. Nor did we finish the job when it comes to the issue of global climate change. So this year, next year and for the foreseeable future, this Senator will stand up and ask her colleagues to pay more than lip service to these issues. The spirited and thoughtful debate that has characterized our consideration of this bill must guide us as we move forward to tackle these challenges. I believe it can be done. It must be done. And this Senator stands ready to work with her colleagues on both sides of the aisle to reach meaningful solutions to what are some of the most difficult economic security issues of our time.

But as I said at the outset, I do believe that this legislation will move our Nation forward in a number of other important ways. A comprehensive Energy bill touches every sector of our economy. The nature of our existing energy infrastructure is complex and interdependent, yet regionally diverse. Moreover, a maze of interlocking Federal and State regulatory authorities guide the production and sale of energy supplies in this country. For all of these reasons, the task of crafting a ``comprehensive'' energy policy is a massive undertaking. But even as this legislation has failed to address certain issues to this Senator's satisfaction, we have taken a number of important steps forward.

While we have not done nearly enough to address our economy's petroleum dependence--and hence, our dependence on foreign petroleum--this bill does put in place the basics for creation of a robust, American biofuels industry that can someday displace significant portions of our energy imports. While agricultural producers across the U.S. have long touted the energy and economic security benefits of fostering a domestic biofuels production industry, this country has nevertheless lagged behind in developing the technologies that would make a national biofuels strategy a reality. For example, 90 percent of the ethanol production in the U.S. is derived from corn and is produced in just five Midwestern States. Meanwhile, other nations such as Brazil have taken the lead on producing biofuels from other crops, and in the process have diversified their economies and energy supplies, begun to minimize their dependence on foreign petroleum, and lowered prices for consumers.

The key to growing this industry for the U.S. is investing in the demonstration and commercialization of new technologies that will make it possible to produce biofuels from a more diverse array of crops, including wheat straw and other biomass readily available in places like Washington State.

The Senate Energy bill contains a number of provisions key to moving forward on a national biofuels strategy. Specifically, I was pleased to add a number of measures that will help spur biofuels production in the Pacific Northwest. Making ethanol and biodiesel from more diverse feedstocks--in more regions of the country--is essential to making biofuels a sustainable and cost-effective solution to our Nation's emerging energy needs.

The Senate Energy bill contains a provision I authored to establish an ``Advanced Biofuel Technologies Program.'' The new program provides $550 million over 5 years to demonstrate technologies for production of ethanol and biodiesel. The measure directs the Secretary of Energy to work toward developing and demonstrating no fewer than four different conversion technologies for producing cellulosic-based ethanol; and five technologies for coproducing biodiesel and value-added bioproducts. In other words, it would provide Federal support for universities, private sector researchers and entrepreneurs who are striving to invent the next generation of biofuels technology, and help demonstrate them in real-world applications. The program also directs the Secretary to prioritize the demonstration of proj-Ðects that will enhance the geographical diversity of alternative fuels production, and focus on developing technology related to feedstocks that represent 10 percent or less of our Nation's existing ethanol and biodiesel production--agricultural products like wheat straw, canola and mustard that are readily available in Washington State and throughout the Pacific Northwest.

But in addition to pioneering the next generation of technologies, the Senate Energy bill would provide important market-based incentives for the very first producers of new sources of biofuel. The Senate bill is more ambitious that previous energy bills, as well as this year's House-passed version, in setting a target to produce 8 billion gallons of renewable fuel by 2012. But in addition, it contains my provision to more than double the incentives for refiners to use ethanol made from cellulosic sources such as wheat straw, and to ensure that by 2013 the U.S. is producing at least 250,000 gallons of ethanol from these new sources. These provisions are designed to help build a market for the very first producers of ethanol from nontraditional, noncorn sources--an important way to help move the technology toward broader commercialization.

The Senate Energy bill also recognizes that a national biofuels strategy is in the long-term energy security interests of the U.S., and provides Federal support for this emerging industry. First, the legislation authorizes Federal loan guarantees for the first cellulosic ethanol facilities that produce 15 million gallons of ethanol or more. Multiple sites in the Pacific Northwest are vying to be among the first in the U.S. to produce cellulosic ethanol. In addition, the bill would extend the biodiesel excise tax credit through 2010. Otherwise slated to expire in 2006, the tax credit is important to the very first refiners and distributors of biodiesel in Washington State, who are using this tax credit to lower costs to consumers at the pump. I believe all of these are valuable provisions that will contribute to our national energy security and put farmers across the country in the biofuels business.

In addition to the renewable fuels standard, this legislation will diversify our Nation's energy supplies with the inclusion of a renewable portfolio standard that would require 10 percent of our electricity to come from sources such as wind, solar and geothermal. This legislation also extends the renewable production tax credit and the renewable energy production incentive program to support the drive to diversify our sources of electricity.

I should also note that this legislation contains consensus reliability standards, to ensure mandatory rules are in place to govern operation of our electricity grid--an important provision that I have championed since I arrived in the Senate, and an effort that was initially begun by my predecessor, Senator Slade Gorton.

I was also pleased to have a role in crafting provisions to promote cutting-edge research and development in the area of ``smart grid'' technologies, which will build intelligence into our existing energy infrastructure in a way that improves both efficiency and reliability. This legislation also includes incentives for the adoption of existing technologies that can aid reliability such as ``smart meters,'' which give utilities and their customers real-time information about energy usage.

This legislation also takes an important step to ensure that we are meeting the workforce needs of the electric utility sector. The National Science Foundation and energy industry interests have noted that as the baby boom sector of our workforce retires, a lack of training capacity will lead to a growing shortage of qualified engineers and innovators. Language that I worked to add to the bill in committee will ensure that the Energy and Labor Secretaries are closely monitoring our energy workforce, including the availability of power and transmission engineers, and will authorize the Federal Government to provide grants for appropriate workforce training investments. All of these reliability-related provisions will help ensure the stability of the electricity grid, which powers every sector of the American economy.

While I am on the topic of electricity, I must mention some of what I believe are among the most notable achievements of this legislation. There are provisions of this bill that I have championed related to Enron and the market manipulation that occurred during the Western energy crisis, which I believe represent the first meaningful Congressional response to the massive public mugging that took place. Certainly, Congress enacted aggressive new accounting reforms in the wake of Enron's collapse. But we have not yet done the same when it comes to our Federal energy laws.

I spoke at the outset about how the Senate has at least turned the corner in recognizing the problems posed by climate change and foreign oil dependence. Similarly, some of my colleagues may recall that, 4 years ago, many at first didn't believe that any market manipulation had taken place in the West. But with the release of Enron's smoking gun memos outlining the manipulation schemes, additional audiotape evidence that has surfaced since then, the guilty pleas of energy traders who executed these schemes four years later, this Senate has reevaluated its position, based on facts that are now a matter of public record.

I am optimistic about the notion that this Senate, in the foreseeable future, will get serious about addressing climate change and oil dependence because I have seen a sea change occur in the Senate on an energy issue before--in particular, on the issue of market manipulation and the need to protect our Nation's consumers against later-day Enrons. The Energy bill we passed today contained a number of important provisions to incorporate the lessons we learned from the Western energy crisis.

First, it puts in place a broad statutory ban on all forms of market manipulation in our Nation's electricity and natural gas markets. Second, it gives Federal authorities the ability to ban traders and executives implicated in energy market manipulation schemes from participating in the utility industry.

The Securities Exchange Commission has had this authority for decades and used it in some high-profile instances of individuals engaged in securities fraud. However, this authority does not currently exist in Federal energy law. Added unanimously as amendments during the Senate Energy Committee's markup of the bill, these provisions were inspired by recent court cases in which it is alleged that some of the same energy traders overheard on the now-infamous Enron audiotapes have been implicated in subsequent market manipulation schemes in other regions of the country.

Lastly, this legislation contains a provision of particular importance to my Washington State constituents. Section 1270 of this bill would prohibit a Federal bankruptcy court from forcing Washington State's Snohomish Public Utility District--PUD--and its customers to fork over another $122 million to Enron. Specifically, the provision prohibits the bankruptcy court from enforcing payments on power contracts that are unjust, unreasonable or contrary to the public interest. The provision was written to target manipulated power contracts between Enron and utilities in the West. The contracts were cancelled when the energy giant began its scandalous slide into bankruptcy. But once they were cancelled, Enron turned around and sued utilities for ``termination payments,'' seeking to collect profits on power that was never even delivered.

While the Federal Energy Regulatory Commission--FERC--has been conducting its proceedings to provide remedies for the consumers harmed by market manipulation, Enron has nevertheless continued pursuing collection of these ``termination payments'' in bankruptcy court. In fact, the court has already ruled that other Enron victims--Nevada Power Company and Sierra Pacific Power Company--should have to pay these fees, which come to more than $330 million for the two Nevada utilities. The court went so far as to enjoin FERC from proceeding with its own specific inquiry into whether Enron is owed the termination payments in those cases.

The provision included in this bill says very clearly to FERC, ``Do your job to protect consumers, and when you make a decision, that decision will stand.'' Interpreting our Nation's energy consumer protection laws is not the job of a bankruptcy judge. This responsibility lies with the Federal Energy Regulatory Commission.

I am aware that these provisions are in stark contrast to those included in the legislation passed by the House of Representatives. The House bill would ban only one type of manipulation scheme made infamous by Enron--roundtrip trading. It would do nothing to ban proven market manipulators from future employment in the energy business. And most inexplicably, it would actually give later-day Enrons a license to steal. It would lock in profits for would-be market manipulators under the guise of ``contract sanctity.'' I recognize that reconciling these issues with the House may be difficult. But when it comes to the deeds of Enron--and putting in place tough new laws to make sure such a wide-ranging fraud is never again perpetrated against our Nation's consumers--I believe the Senate will have the American people firmly on our side.

In addition to these very important provisions, I must also make a few comments on other matters of importance in this legislation's electricity title. I regret that during the course of the debate on this bill, there was not enough time to discuss more fully its treatment of the Public Utility Holding Company Act--PUHCA. It is important that this silence not be confused with disinterest. It is because of the consumer protections provisions included in the bill-- some that I have mentioned already--that this issue has not caused an uproar, as it has in the past.

It was crucial to me that, in PUHCA's stead, this bill include the refinements and enhancements of FERC's merger review authority that were worked out by Senators Bingaman and Domenici. I must still state my profound uneasiness with the notion that we are repealing one of our Nation's fundamental consumer protection laws at a time when many of us are concerned about mergers and consolidation within the utility industry. And I remain concerned that we have not done enough to address the issue of cross-subsidization of unregulated affiliates by utilities that are owned by the same holding company.

I ask my colleagues to remember: Enron was a company willing to turn a profit by any means necessary; but it was presented with a market and regulatory environment that presented innumerable opportunities for abuse. We have given FERC the tools in this bill to prevent those abuses; let's hope they take this responsibility seriously.

The bill's repeal of PUHCA is predicted by some to usher in a new wave of utility mergers. Consolidation can be beneficial, but it can also foreclose competition, frustrate effective regulation and create inefficiencies. Let us hope that Federal and State
regulators both take their responsibilities to protect consumers seriously.

PUHCA repeal lifts diversification and investment bans that the leading financial rating agencies have determined were critical in protecting the financial health of utilities and preventing bad business investments. Let us hope that we don't regret this decision.

Again, this bill requires steps to prevent cross-subsidization when utilities merge, but is silent on the need to prevent cross-subsidization by those utilities that don't merge. Let us hope that consumers and independent competitors do not suffer from this decision.

I sincerely hope history will prove this Senator's instincts and skepticism wrong on the topic of utility cross-subsidization and PUHCA repeal--because otherwise, it is American ratepayers and investors who will be paying the price. But as I said, it is the consumer protections in this bill today that have led me to view this as a reasonable compromise. In addition to the provisions I mentioned before, this legislation also includes improved language on market transparency, accountability standards for the Nation's Regional Transmission Organizations--RTOs--and the protection of transmission rights needed to serve consumers, particularly in the Pacific Northwest.

Let me be perfectly clear: the provisions that I have mentioned, taken together, are the minimum needed in order to meet the needs of electric consumers. They were essential in earning the support of this Senator. Last Congress, one of the key factors that led to the defeat of the Energy bill was the failure of the conference report to protect electric consumers. While I believe we can and should do more, I commend both the Senators from New Mexico for their efforts. But their efforts will be wasted if the other body does not realize that these provisions are essential for final passage of an energy bill conference report.

It is also important to note that the Senate legislation we have passed today avoids the gratuitous special interest deals in the House bill--such as giving groundwater polluting MTBE manufacturers a free ride on clean up liability. It moves forward without the rollbacks of the Clean Water Act, Clean Air Act, National Environmental Policy Act, and Safe Drinking Water Act that are included in the House legislation. The Senate has spoken out against these bad environmental policies and we stuck to those principles in this bill.

We stuck to those principles and we worked across the aisle, in good faith at every turn. I hope the other body across the Capitol has paid some attention to this process. If leaders in the House are serious about delivering energy legislation to the President's desk for signature, then they will realize that a similar effort will be required during the conference on this legislation.

Make no mistake: the Senate Energy bill is far from perfect. There are missed opportunities. There are provisions that I outright oppose, such as surveying for oil and gas areas on the Outer Continental Shelf that are protected by drilling moratoria, originally established by President George H.W. Bush. But there are many, many more provisions in this legislation that I wholeheartedly support.

This bill positions the U.S. to make many of the right investments in energy research and development. It includes important measures to diversify both our domestic sources of biofuels and electricity. And it contains many important consumer protections for our Nation's energy ratepayers. In other words, the Senate Energy bill contains many of the basics necessary for our Nation to start moving in the right direction. It is a modest step. Yet I believe we should take this step, if we are committed to moving our country--even more aggressively in the coming years--toward an energy policy that will sustain American competitiveness in a rapidly-evolving global economy.

I thank my friends and colleagues who serve on the Senate Energy Committee, for the thoughtful and substantive consideration they gave a number of key aspects of this legislation. And again, my thanks to the chairman and ranking member for their leadership in navigating what were at times turbulent waters, with certain aspects of this bill. We will be counting on those navigational skills as this legislation moves toward conference with the House of Representatives.

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