Tuesday, July 26, 2005

US Energy Bill backs Ethanol, not Oil Savings Plan

US energy bill backs ethanol, not oil savings plan

By Tom Doggett and Chris Baltimore
WASHINGTON, July 25 (Reuters) - To stretch America's
gasoline supplies, a joint Senate-House conference committee
racing to finish a U.S. energy bill voted late on Monday to
almost double production of the motor fuel additive ethanol to
7.5 billion gallons a year by 2012.
However, the full panel rejected a proposal to reduce U.S.
oil consumption by 1 million barrels per day and also turned
down a plan to require utilities to generate more of their
electricity from renewable energy sources like wind and solar
The ethanol compromise is larger than the 5 billion gallons
approved by the U.S. House of Representatives, but smaller than
the 8 billion gallons called for by the Senate.
Ethanol, derived mostly from corn, is a popular political
cause in farm country, where it is regarded as a homegrown
answer to oil imports and a boon to farm income.
It is usually blended directly into gasoline in a mix of 10
percent ethanol and 90 percent gasoline, which makes motor fuel
burn more cleanly to meet federal air pollution requirements.
Ethanol is more difficult for oil companies to transport
because it evaporates more quickly than conventional gasoline,
requiring refiners to remove more smog-forming emissions.
House negotiators voted against a Senate plan requiring the
president to come up with ways to cut America's oil demand by
1 million barrels a day by 2015.
"We have a relentless addiction to oil. We need to address
it," said Democratic Sen. Byron Dorgan of North Dakota and
sponsor of the oil savings amendment. The United States has to
import 60 percent of its oil to meet its 21 million barrel
daily demand.
House opponents said the proposal would force Americans
into carpools and automakers to boost vehicle fuel standards.
A separate Senate proposal that also failed would have
required 10 percent of U.S. electricity to be generated by
renewable sources by 2020.

Republican Pete Domenici of New Mexico, the chief Senate
energy bill negotiator, said the electricity plan would have
helped reduce U.S. demand for natural gas, which has increased
sharply in price due in part to new power plants fueled by
Yet to be finalized is a multibillion-dollar package of
energy tax breaks and subsidies. The House package totals $8
billion while the Senate's is $14 billion. Both are higher than
the $6.7 billion sought by the Bush administration. Negotiators
are working on a compromise tax package of about $10 billion.
Chances for the bill's passage have improved, after
negotiators on Sunday dropped a proposal for legal protection
for oil refiners that make a rival fuel additive to ethanol --
methyl tertiary butyl ether, or MTBE.
MTBE is added to make fuel burn cleaner, but has polluted
groundwater in many states. It makes water taste and smell like
turpentine and is a possible carcinogen.
Rep. Joe Barton, Texas Republican and chairman of the
energy bill conference committee, proposed creating an $11.4
billion fund to clean up MTBE contamination in return for
shielding refiners such as Exxon Mobil Corp. (XOM.N: Quote, Profile, Research) from
lawsuits. But the plan was roundly criticized by the oil
industry, municipal water officials and key U.S. senators.
While Barton did not win liability protection for the oil
companies, he was able to include language in the bill to
require new MTBE liability lawsuits to be reviewed by federal
courts, setting a higher bar for such lawsuits to proceed.
White House spokesman Scott McClellan reiterated on Monday
that the administration "doesn't think we need to be providing
tax credits to oil companies when the price of oil is above $50
a barrel."
Bush spoke with leaders of the conference committee on
Sunday and urged them to approve a final energy package this
week so the full Senate and House can clear it and then send it
to him to sign into law by Aug. 1.
Other provisions in the bill would:
* Move the start of daylight-saving time in 2007 from the
first Sunday in April to the second Sunday in March, and extend
it by one week to the first Sunday in November.
* Impose a 141-day delay in a U.S. government review of the
Chinese-government owned CNOOC Ltd (0883.HK: Quote, Profile, Research) oil company's
$18.5 billion bid for American-oil giant Unocal (UCL.N: Quote, Profile, Research).
*Repeal a Depression-era law, the Public Utility Holding
Company Act, which prevents certain utility mergers.

* Require the federal government to provide $2 billion in
insurance to cover delays in the building of 6 new nuclear
power reactors.
* Impose reliability operating standards on utilities to
protect the U.S. electric grid from blackouts.


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