Statement of Administration Policy: H.R. 776 - Comprehensive National Energy Policy Act

(House Floor)
(Sharp (D) Indiana and 5 others)

The Administration strongly supports the enactment of comprehensive national energy legislation that will implement the Administration's National Energy Strategy of February 20, 1991, and provide for economic growth, increased energy security, and environmental protection. Such legislation should encourage increased energy efficiency; reform unnecessary regulation of electricity generation, natural gas and nuclear power; increase the use of alternative fuels; provide for environmentally responsible development of additional domestic energy sources; and allow sustained economic growth. The Administration has proposed, and the Senate has adopted, legislation that would achieve this critical balance.

In his letter of April 20, 1992, the President encouraged the House of Representatives to follow the Senate's lead and pass balanced energy legislation. The letter also identified certain provisions which would not be acceptable: the imposition of new taxes; the imposition of inflexible and burdensome regulatory review procedures; provisions that would effectively prevent the construction and relicensing of nuclear power plants; restrictions on oil and gas development on the Outer Continental Shelf; mandating market shares for certain fuels; and limiting economic growth by mandating targets and timetables for greenhouse gas emission levels. If these provisions were adopted, the President's senior advisers would recommend a veto.

H.R. 776, as reported by the House Energy and Commerce Committee and amended by the Committee on Ways and Means, provides a good bipartisan basis for the development of an acceptable bill in conference. In particular, the Administration strongly supports the Ways and Means Committee amendments to provide relief from the alternative minimum tax for independent oil and gas producers and to strike the proposed in-kind tax on petroleum for the strategic petroleum reserve.

The Administration strongly supports the Barton-Clement nuclear licensing amendment. This amendment would allow safe, completed nuclear plants to operate without undue delay, while ensuring fair and direct access by the public in the licensing process. The Administration strongly opposes the Jontz amendment that would establish a new regulatory program that would mandate the composition of octane enhancers in gasoline. This provision would create a major new Federal regulatory program that will increase the cost of motor fuels, with no commensurable improvement in energy security or air quality. The Administration also strongly supports the Dingell amendment relating to site characterization at Yucca Mountain. The amendment would ensure the Department of Energy's ability to expeditiously carry out its statutory mandate to determine the suitability of Yucca Mountain for the disposal of high level radioactive waste and spent nuclear fuel. The Administration may have additional views after the second rule becomes available.

The Administration strongly opposes several provisions of H.R. 776, as well as other provisions which have been reported by other Committees; some of which would meet the criteria set by the President as being unacceptable. If these provisions are not dropped from the legislation or substantially modified, the President's senior advisers would recommend a veto. Examples of such provisions, listed by Committee, include:

Interior Committee

• Nuclear Power: Increases regulatory and judicial burdens and delays without providing for any additional safety or increasing effective public participation in the regulatory process. These provisions, in effect, would preclude new nuclear powerplants and would hinder efforts to renew the licenses of the safe plants that currently produce about twenty percent of our Nation's electricity. Instead, the Administration strongly supports the Barton-Clement amendment to streamline the nuclear licensing process, consistent with the objective of ensuring adequate safety.
  
  
• Radiation Standards: Authorizes States to supersede Nuclear Regulatory Commission (NRC) regulations. These previsions are unnecessary and could result in burdensome State regulation of civilian nuclear activities, including medical, scientific, and energy activities, without apparent benefit.
  
  
• Administrative Review of Regulations: Requires, among other things, the Office of Management and Budget, the Council on Competitiveness or other bodies given authority to review regulations under E.O. 12291 related authorities granted by H.R. 776 to: (1) maintain a public file of all written material concerning a regulation issued or revised and (2) a descriptive summary of all meetings and all other communications including oral communications with persons who are not employees of the Federal Government. This provision would encroach upon the President's constitutional authority to protect the confidentiality of deliberations within the Executive branch.
  
  
• Outer Continental Shelf (OCS): Imposes oil and gas leasing moratoria on over 500 million acres of the OCS until after January 1, 2002. The President's 1990 OCS plan has already identified and precluded leasing on environmentally sensitive coastal waters. These expanded congressional moratoria would more than double the President's proposal and could further retard U.S. oil and gas production and reduce jobs in the vital oil and gas sector. Moreover, the Committee provision requires the cancellation and buyback of 23 existing leases in the North Aleutian Basin (Alaska). This buyback is not based on any legal or environmental evaluation and will cost approximately $200 million in FY 1996. (Similar, seriously objectionable previsions (1) establishing Congressional leasing moratoria, and (2) authorizing OCS buybacks covering Alaska, North Carolina, and Florida are contained in the Merchant Marine and Fisheries reported bill. These buyback provisions have estimated maximum costs exceeding $2 billion.)
  
  
• Abandoned Mine Reclamation Fund: Redirects fee revenues paid into a fund to reclaim abandoned mine lands to bailout a private, insolvent retiree benefit fund. This provision sets an unacceptably bad precedent because it attempts to divert existing coal industry fees from their intended purpose to finance privately negotiated benefits.

Energy and Commerce Committee

• SPR Oil Tax: Requires importers and first purchase refiners of domestic crude and natural gas liquids to provide in-kind or cash payments to achieve a one billion barrel SPR. This "tax" will burden domestic producers of oil and natural gas liquids, raise prices to consumers, and require a new large, costly bureaucracy to administer.
  
  
• Refined Product Reserve: Requires a 50 million barrel reserve of refined petroleum products in the Northeast which is unnecessary because SPR oil is easily accessible to Northeast markets. A regional reserve would be costly and displace stock now held by the private sector.
  
  
• Expanded SPR Drawdown Authority: Expands SPR drawdown authority to include mitigation of petroleum price increases. This provision could short circuit market signals and aggravate petroleum market disruptions, lead to burdensome and counterproductive government intervention in oil markets, and leave insufficient supplies of oil to address a truly substantial oil market disruption. Adequate authority now exists to draw down the SPR if a supply shortfall is imminent.

Constitutional Concerns

In addition to the objections noted above, the Department of Justice advises that H.R. 776, and the proposed amendments contain a number of provisions which raise constitutional concerns. The Administration will work to resolve these issues in conference.

Scoring for Purposes of Pay-As-You-Go

Several provisions of H.R. 776 would increase direct spending or reduce receipts; therefore it is subject to the pay-as-you-go requirement of the Omnibus Budget Reconciliation Act (OBRA) of 1990.    A budget point of order applies in both the House and the Senate against any bill that is not fully offset under CBO scoring. If, contrary to the Administration's recommendation, the House waives any such point of order that applies against H.R. 776, the effects of enactment of this legislation would be included in a look back pay-as-you-go sequester report at the end of the congressional session.

OMB's preliminary scoring estimates for a position of this bill are presented in the table below. Final scoring of this legislation may deviate from these estimates. If H.R. 776 were enacted, final OMB scoring estimates would be published within five days of enactment, as required by OBRA. The cumulative effects of all enacted legislation on direct spending will be issued in monthly reports transmitted to Congress. The scoring is not complete because estimates of the Ways and Means provisions are not yet available.

The Administration strongly opposes several other previsions as they appear either in the Energy and Commerce Committee version of H.R. 776 or in amendments adopted by other Committees. If a sufficient number of these item are not addressed, the President's senior advisers may recommend a veto. These items are discussed in the attachment.

Estimates for Pay-As-You-Go
(dollars in millions)

Ways and Means Cte.

The provisions in Title XIV regarding Strategic Petroleum Reserve oil acquisition are ambiguous and could be interpreted in several ways, including as a legislative taking or as a new tax. Under the Budget Enforcement Act, a legislative taking would be scored as an increase in direct spending, requiring PAYGO offsets, while a new tax and spend requirement would be scored on the basis of its effect on net outlays. In addition, the bill also contains language that could be interpreted in a manner that would result in scoring this provision as discretionary spending. However, the language in title XIV is extremely ambiguous, and the Office of Management and Budget has not reached a final conclusion on scoring.

ATTACHMENT

The following are further examples of objectionable provisions offered by various Committees in the context of H.R. 776. If a sufficient number of these provisions are not addressed, the President's senior advisers may recommend a veto of the bill.

Interior Committee

• Prince William Sound/Gulf of Alaska Restoration: Overturns last year's carefully crafted court agreement on the Exxon Valdez settlement. Prior to completion of joint Federal/State restoration planning required by the court agreement, the provision would earmark funding for potentially unneeded acquisition of lands into the Federal inventory. The State of Alaska is adamantly opposed to this provision.
  
  
• Hydroelectric Power: Severely limits development and retention of electricity generation from a domestic renewable resource.
  
  
• Plutonium Transport: Prohibits vessels transporting plutonium from entry into U.S. ports or navigable waters, unless the NRC certifies the plutonium containers. This provision violates the right of innocent passage under the U.S.-Japan Agreement for Peaceful Nuclear Cooperation and imposes safety criteria more stringent than existing international and domestic standards.

Energy and Commerce Committee

• Uranium Enrichment D&D Fee: This provision is premature, and could be inequitable to both utility ratepayers and the general taxpayers. The ultimate responsibility for D&D costs should be determined by the Secretary of Energy following the completion of further study of the cost allocation issue.
  
  
• Mandatory Utility Planning: Sets new federal utility rate standards with respect to "least cost planning" and inclusion of "externalities" in the calculation of rates under these plans. There are significant measurement problems and no generally accepted methods of quantifying "externalities" or for "internalizing" them in utility rates. Creating a federal standard before credible methods are available to identify and to assess the costs and benefits associated with the use of particular energy technologies will only distort the energy market.
  
  
• Self-Dealing: Prohibits the sale of power by an independent power producer to a parent or affiliate which will limit competition and thereby increase energy costs to consumers.
  
  
• Electricity Transmission: Limits FERC's ability to initiate more efficient regulation of electric transmission by (1) requiring that a utility file an open-access transmission tariff before it can receive market-based pricing for electric power or FERC approval for a merger or consolidation (thereby incorrectly assuming that transmission ownership always confers market power); (2) requiring FERC to set rates for transmission access that do not necessarily allow for the recovery of all appropriate costs; and (3) requiring FERC to order open access transmission when only one of five criteria are met, even if there exists a more effective or less burdensome alternative.
  
  
• Alternative Fuels: Requires that 50% of alternative fuels for the federal fleet be derived from domestic feedstocks and specifies that reformulated gasoline is not to be considered an alternative fuel. These previsions would create a far less cost-effective alternative fuels program than that proposed by the Administration, with no additional environmental benefits.

Merchant Marine Committee

• Global Climate Change Fund: Redirects OCS oil and gas leasing revenues away from existing statutory U.S. resource conservation and preservation purposes to unspecified global climate change programs to be established by international treaties.

Ways and Means Committee

• Uranium Enrichment Fee: This is a premature allocation of a multi-billion dollar liability between taxpayers and commercial generators of nuclear power. DOE is currently reviewing estimates of D&D costs of up to $20 billion, and the cost allocation between the government and private industry has not yet been set.

Government Operations Committee

• Energy Conservation Revolving Fund: Establishes a central Federal revolving fund to which most agencies would be required to transfer funds for energy efficiency investments. This provision would discourage Federal agencies from making their own investments and could actually slow down agency conservation activities. In addition, the requirement that agencies transfer an amount equal to at least ten percent of their facilities' energy costs implies Federal expenditures of more than $400 million per year. Such an amount is likely to exceed the investment requirements or capabilities of Federal agencies in the coming years.

Science. Space and Technology Committee

• Energy Technology Research and Development (R&D): Authorizes some $19 billion over five years (FYs 1993-1997) for expanded energy technology R&D programs. While many of these technology R&D needs were identified in the National Energy Strategy, the provisions of this title are not fiscally responsible, are overly prescriptive, and do not allow adequate flexibility to prioritize R&D activities within overall Federal budget constraints.