Omnibus Energy Legislation, 108th Congress: Comparison of Non-Tax Provisions in the H.R. 6 Conference Report and S. 2095
Released: 2004-02-23T00:00:00

Introduction

Continuing a legislative effort that began in the 107th Congress, House and Senate confereeson November 17, 2003, reached agreement on an omnibus energy bill ( H.R. 6 , H.Rept.108-375 ), which would be the first comprehensive energy legislation in more than 10 years. OnNovember 18, the House approved the conference report by a vote of 246-180, but on November 21,a cloture motion to limit debate in the Senate failed, 57-40. On February 12, 2004, SenatorDomenici introduced a revised version of the bill ( S. 2095 ) with a lower estimated costand without a controversial provision on the fuel additive MTBE. Including tax provisions, S. 2095 is estimated by its supporters to cost less than $14 billion, in contrast to the $31billion estimated for the H.R. 6 conference report.

The two bills contain identical provisions to change the regulatory requirements for thewholesale electric market, including repeal of the Public Utility Holding Company Act (PUHCA). They would also mandate increasing levels of ethanol production through 2012 but allow regionsto opt out under certain conditions. Use of methyl tertiary butyl ether (MTBE) as a domesticgasoline additive would be banned by the end of 2014, but the President could void the ban and astate could authorize continued use. Under the H.R. 6 conference report, producers ofMTBE and renewable fuels would be granted protection (a "safe harbor") from product liabilitylawsuits, but that provision was dropped in S. 2095 .

Both bills would provide $18 billion in loan guarantees for construction of a natural gaspipeline from Alaska to Alberta, where it would connect to the existing Midwestern pipeline system. Royalty reductions would be provided for marginal oil and gas wells on federal lands and the outercontinental shelf. Provisions are also included to increase access by energy projects to federal lands.

Several new statutory efficiency standards would be established for consumer andcommercial products and appliances, and other standards could be set by the Department of Energy(DOE). For motor vehicles, funding would be authorized for the National Highway Traffic SafetyAdministration (NHTSA) to set Corporate Average Fuel Economy (CAFE) levels as provided incurrent law.

The House version of H.R. 6 , which passed April 11, 2003, included a keycomponent of the Bush Administration's energy strategy: opening the Arctic National WildlifeRefuge (ANWR) to oil and gas exploration and development. But the Senate version, passed July31, 2003, did not include the ANWR language, and the conference report and S. 2095 would leave ANWR off-limits to drilling.

This report summarizes the major non-tax provisions of the H.R. 6 conferenceagreement and notes the changes included in S. 2095 . Table 1 lists annual fundingauthorizations in the bills, which total about $71 billion over 10 years. (The likely cost of thefunding authorizations has not yet been estimated by the Congressional Budget Office.) For adiscussion of the tax provisions in the bills, see CRS Issue Brief IB10054, Energy Tax Policy .

For a comparison of the House and Senate versions of H.R. 6 , see CRS Report RL32033, Omnibus Energy Legislation (H.R. 6): Side-by-side Comparison of Non-taxProvisions . Many provisions in the H.R. 6 conference report are similar to those of anomnibus energy bill that the Senate debated but did not pass, S. 14 . For a comparisonof major provisions of S. 14 and the House and Senate versions of H.R. 6, seeCRS Report RL32078, Omnibus Energy Legislation: Comparison of Major Provisions in House-and Senate-Passed Versions of H.R. 6, Plus S. 14.

Major Non-Tax Provisions

Electricity Regulation. Historically, electric utilities have been regarded as naturalmonopolies requiring regulation at the state and federal levels. The Energy Policy Act of 1992(EPACT, P.L. 102-486 ) removed a number of regulatory barriers to electricity generation in an effortto increase supply and introduce competition, but further legislation has been introduced and debatedto resolve remaining issues affecting transmission, reliability, and other restructuring concerns.

In part, the electricity section of the conference report and S. 2095 would repealthe Public Utility Holding Company Act (PUHCA) and establish mandatory reliability standards.Standard market design (SMD), a proposed system to provide uniform market procedures forwholesale electric power transactions, would be remanded to the Federal Energy RegulatoryCommission (FERC); no rule would be allowed before the end of FY2006. The Department ofEnergy (DOE) would identify "transmission corridors" that require new construction or upgrading.The bills would grant eminent domain authority to the federal government for construction ofinterstate power lines on these transmission corridors if the states did not act in time.

(For a discussion of the policy context and current law, see CRS Report RL32178 , Summaryof Electricity Provision in the Conference Report on H.R. 6. For additional discussionon these issues, see CRS Report RL32728 , Electric Utility Regulatory Reform: Issues for the 109thCongress ; and CRS Report RL32133 , Federal Merger Review Authority .)

Renewable Fuel Standard and MTBE. The H.R. 6 conference report and S. 2095 would amend the Clean Air Act to eliminate the requirement that reformulatedgasoline (RFG) contain 2% oxygen to reduce automotive emissions, a requirement which promptedthe widespread use of MTBE (methyl tertiary butyl ether) and, to a lesser degree, ethanol. Instead,the bills would establish a new requirement that an increasing amount of gasoline contain renewablefuels such as ethanol. The bills would require that 3.1 billion gallons of renewable fuel be used in2005, increasing to 5.0 billion gallons by 2012 (as compared to 2.1 billion gallons used in 2002). However, concerns have been raised that this requirement could significantly raise the pump pricefor gasoline in some areas.

Because of concerns over drinking water contamination by MTBE (a major competitor withethanol), the bills would ban the use of MTBE in motor vehicle fuel, except in states that specificallyauthorize its use, not later than December 31, 2014. The ban has two possible exceptions. First, EPAmay allow MTBE in motor fuel up to 0.5 percent by volume, in cases that the Administratordetermines to be appropriate; and second, the President may make a determination, not later thanJune 30, 2014, that the restrictions on the use of MTBE shall not take place. The bills would alsoauthorize $2.0 billion to assist the conversion of merchant MTBE production facilities to theproduction of other fuel additives. Further, the bills would preserve the reductions in emissions oftoxic substances achieved by the RFG program.

One of the most controversial provisions in the H.R. 6 conference report is theestablishment of a "safe harbor" from product liability lawsuits for producers of MTBE andrenewable fuels. The safe harbor provision -- which was excluded from S. 2095 --would protect anyone in the product chain, from manufacturers down to retailers, from liability forcleanup of MTBE and renewable fuels or for personal injury or property damage based on the natureof the product. (That legal approach has been used in California to require refiners to shoulderliability for MTBE cleanup.) The safe harbor would be retroactive to September 5, 2003. Prior to thatdate, five lawsuits had been filed. After that date, at least 150 suits were filed, on behalf of 210communities in 15 different states.

(For additional information, see CRS Report RL32865(pdf) , Renewable Fuels and MTBE: AComparison of Selected Legislative Initiatives ; CRS Report RL30369, Fuel Ethanol: Backgroundand Public Policy Issues ; and CRS Report RL32787 , MTBE in Gasoline: Clean Air and DrinkingWater Issues .)

Motor Vehicle Fuel Economy. One of the first initiatives designed to have a significanteffect on oil demand was passage of corporate average fuel economy standards (CAFE) in theEnergy Policy and Conservation Act of 1975 (EPCA, P.L. 94-163 ). In the years since, there havebeen periodic calls for toughening or broadening the CAFE standards -- especially as consumerdemand has turned more to light-duty trucks and sport utility vehicles (SUVs).

A final rule mandating higher CAFE standards for light-duty trucks was issued April 1, 2003,by the National Highway Traffic Safety Administration (NHTSA), but congressional interest in theissue continues. The bill reported from conference and S. 2095 would require a CAFEstudy, would prescribe several considerations that must be weighed in determining maximumfeasible fuel economy, would authorize $2 million annually during FY2004-FY2008 for NHTSArulemakings and CAFE analysis, and would extend the existing fuel economy credit for themanufacture of alternative-fueled vehicles.

(For additional information, see CRS Issue Brief IB90122, Automobile and Light Truck FuelEconomy: The CAFE Standards .)

Nuclear Accident Liability. Reauthorization of the Price-Anderson Act nuclear liabilitysystem is one of the top nuclear items on the energy agenda. Under Price-Anderson, commercialreactor accident damages are paid through a combination of private-sector insurance and a nuclearindustry self-insurance system. Liability is capped at the maximum coverage available under thesystem, currently about $10.9 billion. Price-Anderson also authorizes the Department of Energy toindemnify its nuclear contractors. The limit on DOE contractor liability is the same as forcommercial reactors, except when the limit for commercial reactors drops because of a decline inthe number of covered reactors.

The H.R. 6 conference agreement and S. 2095 would provide a20-year extension of Price-Anderson to the end of 2023. The nuclear industry contends that thesystem has worked well and should be continued, but opponents charge that Price-Anderson'sliability limits provide an unwarranted subsidy to nuclear power. The conference report would alsoauthorize the Nuclear Regulatory Commission (NRC) to issue new regulations on nuclear powerplant security and would require force-on-force security exercises.

Another nuclear provision in the bills is a $1.1 billion authorization for a nuclear-hydrogencogeneration project at the Idaho National Engineering and Environmental Laboratory. In the taxtitle, the conference agreement -- but not S. 2095 -- would provide a tax credit of 1.8cents per kilowatt-hour for electricity generated by new nuclear power plants, if the plants wereplaced in service by 2020 and did not exceed a total capacity of 6,000 megawatts.

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

Renewable Energy and Efficiency. The H.R. 6 conference report and S. 2095 would legislate new energy efficiency standards for several consumer andcommercial products and appliances. For certain other products and appliances, DOE would beempowered to set new standards. Also, the bills would provide increased funding authorizations forthe DOE weatherization program and establish a voluntary program to promote energy efficiencyin industry.

However, neither bill includes one of the top priorities of environmental groups: a renewableportfolio standard (RPS), which would have required retail electricity suppliers to obtain a minimumpercentage of their power from a portfolio of new renewable energy resources. The Senate versionof H.R. 6 would have established an RPS starting at 1% in 2005, rising at a rate of about1.2% every two years, and leveling off at 10% in 2019.

(For additional information, see CRS Issue Brief IB10020, Energy Efficiency: Budget, OilConservation and Electricity Conservation Issues , and CRS Issue Brief IB10041, RenewableEnergy: Tax Credit, Budget, and Electricity Production Issues .)

Arctic National Wildlife Refuge. The congressional debate over whether to open the ArcticNational Wildlife Refuge (ANWR) to oil and gas leasing has continued for more than 30 years. H.R. 6 as passed by the House would have authorized oil and gas exploration,development, and production in ANWR, with a 2,000-acre limit on production and support facilities.The Senate-passed bill did not include ANWR provisions. The Administration strongly urged thatthe House ANWR language be included in the conference bill. However, once it became apparentthat there were insufficient votes in the Senate to pass an energy bill with ANWR provisions, themanagers decided to leave ANWR out of the final conference bill and S. 2095 .

Proponents of exploring ANWR point to advances in exploration and drilling technology andmethods that have significantly reduced the extent of surface disturbance caused by oil and gasactivities. While opponents concede this may be so, they argue that the bill does not imposeadequate requirements in this regard, that surface disturbance represents only one of manyenvironmental impacts, and that considerable risk to the environment remains during all phases ofdevelopment. Some opponents, citing ANWR's pristine character, argue that its ecology and habitatshould not be disturbed under any circumstances.

(For additional information, see CRS Issue Brief IB10136, Arctic National Wildlife Refuge(ANWR) , and CRS Report RL31115 , Legal Issues Related to Proposed Drilling for Oil and Gas inthe Arctic National Wildlife Refuge .)

Domestic Energy Production. The Department of the Interior (DOI) has estimated thatroughly a quarter of oil resources and less than one-fifth of gas resources on Indian lands have beendeveloped. The H.R. 6 conference report and S. 2095 would allow Indiantribes to enter into business agreements with energy developers without obtaining prior approvalfrom the Department of the Interior, but only if DOI has already approved the tribe's regulationsgoverning such energy agreements.

To encourage production on federal lands, royalty reductions would be provided for marginaloil and gas wells on public lands and the outer continental shelf. Provisions are also included toincrease access to federal lands by energy projects -- such as drilling activities, electric transmissionlines, and gas pipelines.

Alaska Gas Pipeline. Alaska's North Slope currently holds 30 trillion cubic feet ofundeveloped proven natural gas reserves, about 18% of total U.S. reserves. The Alaska gas reserveshave not been developed due to the high cost of building and operating the transportationinfrastructure to reach distant markets. The H.R. 6 conference bill and S. 2095 would provide $18 billion in loan guarantees for constructing an Alaska gas pipeline. The taxsection of S. 2095 would also provide a tax credit for Alaska gas producers if prices fellbelow a certain level.

Hydrogen Fuel Initiative. The H.R. 6 conference bill and S. 2095 would authorize $2.1 billion for FY2004-2008 for President Bush's hydrogen initiative and establisha goal of producing hydrogen vehicles by 2020. Critics of the Administration suggest that thehydrogen program is intended to forestall any attempts to significantly raise vehicle CAFE standards,and that it relieves the automotive industry of assuming more initiative in pursuing technologicalinnovations. On the other hand, some contend that it is appropriate for government to becomeinvolved in the development of technologies that could address national environmental and energygoals 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 ; and CRS Report RL32196, A HydrogenEconomy and Fuel Cells: An Overview .)

Selected New Provisions in H.R. 6 Conference Bill

Several significant non-tax provisions in the H.R. 6 conference report are notfound in the House and Senate versions of the bill. The following is a partial list and briefdescription of such new provisions.

Hydropower. Section 246: Corps of Engineers Hydropower Operation and MaintenanceFunding. The administrators of power marketing administrations could transfer receipts to the ArmyCorps of Engineers for operations and maintenance activities at facilities assigned to them. Thisprovision was not included in S. 2095 .

Energy on Federal Lands. Section 316: Alaska Offshore Royalty Suspension. TheSecretary of the Interior could reduce or eliminate oil and gas royalty or net profit shares in planningareas of offshore Alaska.

Section 317: Oil and Gas Leasing in the National Petroleum Reserve in Alaska. Thecompetitive leasing system for oil and gas in the National Petroleum Reserve in Alaska would bemodified, allowing the Secretary of the Interior to grant royalty reductions if they were found to bein the public interest.

Section 329: Outer Continental Shelf Provisions. For applications to build deepwater ports,the Secretary of Transportation could use environmental impact statements or other studies preparedby other federal agencies instead of conducting separate studies.

Section 352: Renewable Energy on Federal Lands. A five-year plan would be prepared toencourage renewable energy development.

Section 356: Finger Lakes National Forest Withdrawal. All federal land within the boundaryof Finger Lakes National Forest in the state of New York would be withdrawn from entry,appropriation, or disposal under public land laws and disposition under all laws relating to oil andgas leasing.

Section 358: Federal Coalbed Methane Regulation. States would be encouraged to reduceimpediments to coalbed methane development.

Nuclear Energy. Section 634: Fernald Byproduct Material. DOE-managed material in theconcrete silos at the Fernald uranium processing facility would be considered byproduct material,which DOE would dispose of in an NRC- or state-regulated facility.

Section 635: Safe Disposal of Greater-than-Class-C Radioactive Waste. DOE woulddesignate an office with the responsibility for developing a comprehensive plan for permanentdisposal of the most concentrated category of low-level radioactive waste.

Section 637: Uranium Enrichment Facilities. The Nuclear Regulatory Commission (NRC)would be required to issue a final decision on a license to build and operate a uranium enrichmentfacility within two years after an application is submitted, and procedures for handling the facility'swaste would be established.

Section 638: National Uranium Stockpile. The Secretary of Energy would be authorized tocreate a national low-enriched uranium stockpile.

Section 662: Fingerprinting for Criminal Background Checks. The existing requirement thatindividuals be fingerprinted for criminal background checks before receiving unescorted access tonuclear power plants would be extended to individuals with unescorted access to any radioactivematerial or property that could pose a health or security threat.

Section 668: NRC Homeland Security Costs. Except for the costs of background checks andsecurity inspections, NRC homeland security costs would not be recovered through fees on nuclearpower plants and other licensees.

Section 928: Security of Reactor Designs. DOE's Office of Nuclear Energy, Science, andTechnology would be required to carry out a research and development (R&D) program ontechnology for increasing the safety and security of reactor designs.

Section 929: Alternatives to Industrial Radioactive Sources. After studying the currentmanagement of industrial radioactive sources and developing a program plan, DOE would berequired to establish an R&D program on alternatives to large industrial radioactive sources.

Energy Efficiency and Renewables. Section 703: Credits for Medium and Heavy-DutyDedicated Vehicles. Vehicle fleets operated by states and alternative fuel providers could claim extracredits for purchasing medium- and heavy-duty vehicles dedicated to running on alternative fuels.

Section 915: Distributed Energy Technology Demonstration Program. DOE would beauthorized to provide financial assistance to consortia for demonstrations to accelerate the use ofdistributed energy technologies in highly energy-intensive commercial applications.

Section 916: Reciprocating Power. DOE would be required to create a program for fuelsystem optimization and emissions reduction after-treatment technologies for industrial reciprocatingengines, including retrofits for natural gas or diesel engines.

Section 920: Concentrating Solar Power Research and Development Program. DOE wouldbe required to conduct an R&D program on using concentrating solar power to produce hydrogen.

Section 965: Western Hemisphere Energy Cooperation. DOE would be directed to conducta cooperative effort with other nations of the Western Hemisphere to assist in formulating economicand other policies that increase energy supply and energy efficiency.

Electricity. Section 1222: Third-Party Finance. The Western Area Power Administration(WAPA) and the Southwestern Power Administration (SWPA) would be able to either continue todesign, develop, construct, operate, maintain, or own transmission facilities within their region orparticipate with other entities for the same purposes if specified criteria were met.

Section 1227: Office of Electric Transmission and Distribution. Statutory authority wouldbe provided for the DOE Office of Electric Transmission and Distribution.

Section 1275: Service Allocation. FERC would be required to review and authorize costallocations for non-power goods or administrative or management services provided by an associatecompany that was organized specifically for the purpose of providing such goods or services.

Offshore Energy Revenue Sharing. Section 1412: Domestic Offshore EnergyReinvestment. A portion of the federal revenues from offshore energy activities would be given toaffected coastal states to fund specified activities.

Tennessee Valley Authority. Sections 1431-1434: Changes to Board of Directors and StaffAppointments. The presidentially appointed TVA Board of Directors would be expanded from threeto nine, and the Board would hire a chief operating officer to take over day-to-day management.

Environmental Regulation. Section 1443: Attainment Dates for Downwind OzoneNonattainment Areas. Clean Air Act deadlines would be extended for areas that have not attainedozone air quality standards if upwind areas "significantly contribute" to their nonattainment.

Section 1445: Use of Granular Mine Tailings. The EPA Administrator would be directed toestablish criteria for the safe and environmentally protective use of lead and zinc mine tailings innortheastern Oklahoma for cement or concrete projects, and for federally funded highwayconstruction projects.

Alternative and Reformulated Fuels. Section 1513: Cellulosic Biomass andWaste-Derived Ethanol Conversion Assistance. The conference report would allow the Secretaryof Energy to provide grants for the construction of ethanol plants. To qualify, the ethanol must beproduced from cellulosic biomass, municipal solid waste, agricultural waste, or agriculturalbyproducts. A total of $750 million would be authorized for FY2004 through FY2006. Neither theHouse nor the Senate version contained any similar provision.

Section 1514: Blending of Compliant Reformulated Gasolines. This provision would allowreformulated gasoline (RFG) retailers to blend batches with and without ethanol as long as bothbatches were compliant with the Clean Air Act. In a given year, retailers would be permitted toblend batches over any two 10-day periods in the summer months. Currently, retailers must draintheir tanks before switching from ethanol-blended RFG to non-ethanol RFG (or vice versa). TheHouse and Senate versions contained no similar provision.

Organization of Report

The remainder of this report provides a section-by-section summary of the non-tax provisionsof the conference version of H.R. 6 . Sections that were excluded from S. 2095 are shown in italics, and new language is shown in boldface.

The sections are listed in numerical order, with section numbers that have been changed in S. 2095 shown in parentheses. Some of the most controversial sections are discussedin greater detail, while multiple sections that deal with a single program have been combined. Funding authorizations, including changes made by S. 2095 , are shown in Table 1 atthe end of the report.

The following analysts in the CRS Resources, Science, and Industry Division contributed tothis report:

[author name scrubbed], electric utilities;

[author name scrubbed], DOE management;

[author name scrubbed], energy security;

Carl Behrens, hydropower;

[author name scrubbed], Federal Water Pollution Control Act;

Lynne Corn, ANWR;

[author name scrubbed], Native American energy, generalauthorizations;

[author name scrubbed], nuclear energy;

[author name scrubbed], federal energy leasing, coal;

Larry Kumins, oil and gas;

Erika Lunder, state energy incentive authority;

Jim McCarthy, Clean Air Act, MTBE;

Dan Morgan, science programs;

[author name scrubbed], Clean Air Act;

[author name scrubbed], hydropower;

[author name scrubbed], ozone, mine tailings;

[author name scrubbed], conservation and renewable energy;

[author name scrubbed], underground storage tanks, drinkingwater;

Brent Yacobucci, motor fuels;

Jeff Zinn, Coastal Zone Management Act.

Title I -- Energy Efficiency

Subtitle A -- Federal Programs

Section 101: Energy and Water Saving Measures in Congressional Buildings. TheArchitect of the Capitol would be required to plan and implement an energy and water conservationstrategy for congressional buildings that would be consistent with that required of other federalbuildings. An annual report would be required. Up to $2 million would be authorized. Section 310of the Legislative Branch Appropriations Act of 1999 called for the Architect of the Capitol (AOC)to develop an energy efficiency plan for congressional buildings.

Section 102: Energy Management Requirements. The baseline for federal energy savingswould be updated from FY1985 to FY2001 and a new goal of 20% reduction would be set forFY2013. At that time, DOE would be directed to assess progress and set a new goal for FY2023. Section 202 of Executive Order 13123 uses FY1985 as the baseline for measuring federal buildingenergy efficiency improvements and calls for a 35% reduction in energy use per gross square footby FY2010.

Section 103: Energy Use Measurement and Accountability. Federal buildings would berequired to be metered or sub-metered by late 2010, to help reduce energy costs and promote energysavings.

Section 104: Procurement of Energy-Efficient Products. Statutory authority would becreated to require federal agencies to purchase products certified as energy-efficient under the EnergyStar program or energy-efficient products designated by the Federal Energy Management Program(FEMP). Currently, Section 403 of Executive Order 13123 directs federal agencies to purchaselife-cycle cost-effective Energy Star products.

Section 105: Energy Saving Performance Contracts . Federal agencies would beempowered to continue using energy savings performance contracts (ESPCs) indefinitely. Section801(c) of the National Energy Conservation Policy Act (NECPA, P.L. 95-619 ) provides for federaluse of ESPCs through the end of FY2002.

Section 106: Energy Savings Performance Contracts Pilot Program for Non-BuildingApplications . The Department of Defense and other federal agencies would be authorized to enterinto up to 10 energy savings performance contracts for non-building applications. The paymentsto be made by the federal government could not exceed $200 million for all such contractscombined.

Section 105 (107) : Voluntary Commitments to Reduce Industrial Energy Intensity. DOE would be authorized to form voluntary agreements with industry sectors or companies toreduce energy use per unit of production by 2.5% per year. While there is no current statutoryauthority, industry energy efficiency programs have been in place, such as the former Climate Wiseprogram at the Environmental Protection Agency (EPA).

Section 106 (108) : Advanced Building Efficiency Testbed. DOE would be required tocreate a program to develop, test, and demonstrate advanced federal and private building efficiencytechnologies.

Section 107 (109) : Federal Building Performance Standards. DOE would be directed toset revised energy efficiency standards for new federal buildings at a level 30% stricter than industryor international standards. Mandatory energy efficiency performance standards for federal buildingsare currently set in Section 305(a) of P.L. 94-385 and implemented through 10 CFR Part 435.

Section 108 (110) : Increased Use of Recovered Mineral Component in Federally FundedProjects. Federally funded construction projects would be required to increase the procurement ofcement and concrete that used recovered material.

Subtitle B -- Energy Assistance and State Programs

Section 121: Low Income Home Energy Assistance Program (LIHEAP). Increasedfunding would be authorized for the LIHEAP grant program for FY2004 through FY2006. Department of Health and Human Services funding for LIHEAP is currently authorized throughFY2003 in the Human Services Authorization Act of 1998.

Section 122: Weatherization Assistance. Increased funding would be authorized for theDOE weatherization grant program for FY2004 through FY2006.

Funding for the program is currently authorized through FY2003 under 42 U.S.C. 6872.

Section 123: State Energy Programs. New requirements would be set for state energyconservation goals and plans. Also, increased funding would be authorized for FY2004 throughFY2006 for DOE state energy grant programs.

Section 124: Energy-Efficient Appliance Rebate Programs. DOE would be authorizedto fund rebate programs in eligible states to support residential end-user purchases of Energy Starproducts.

Section 125: Energy-Efficient Public Buildings. A grant program would be created forenergy-efficient renovation and construction of local government buildings.

Section 126: Low Income Community Energy Efficiency Pilot Program. A pilotenergy-efficiency grant program would be created for local governments, private companies,community development corporations, and Native American economic development entities.

Subtitle C -- Energy-Efficient Products

Section 131: Energy Star Program. DOE and EPA would be given statutory authority tocarry out the Energy Star program, which identifies and promotes energy-efficient products andbuildings.

Section 132: HVAC Maintenance Consumer Education Program. DOE would berequired to implement a public education program for homeowners and small businesses thatexplained the energy-saving benefits of improved maintenance of heating, ventilating, and airconditioning equipment. Also, the Small Business Administration would be directed to assist smallbusinesses in becoming more energy-efficient.

Section 133: Energy Conservation Standards for Additional Products. DOE would bedirected to issue a rule that determined whether efficiency standards should be set for standby modein battery chargers and external power supplies. Also, energy efficiency standards would be set bystatute for exit signs, traffic signals, torchieres (floor lamps), and distribution transformers (electricutility equipment). Further, DOE would be directed to issue a rule that prescribed efficiencystandards for ceiling fans, vending machines, commercial refrigerators and freezers, unit heaters(fan-type heaters, usually portable), and compact fluorescent lamps.

Section 134: Energy Labeling. The Federal Trade Commission (FTC) would be requiredto consider improvements in the effectiveness of energy labels for consumer products. Also, DOEor FTC would be directed to prescribe labeling requirements for products added by this section ofthe bill. The FTC is currently required by Section 324(a) of the Energy Policy and Conservation Act( P.L. 94-163 ) to issue rules for energy efficiency labels on consumer products (42 U.S.C. 6294).

Subtitle D -- Public Housing

Section 141: Capacity Building for Energy-Efficient, Affordable Housing. Activitieswould be required that would provide energy-efficient, affordable housing and other residentialmeasures under the HUD Demonstration Act.

Section 142: Increase of CDBG Public Services Cap for Energy Conservation andEfficiency Activities. The amount of community development block grant (CDBG) public servicesfunding that could be used for energy efficiency would be increased to 25%. The current limit is15% under Section 105(a)(8) of the Housing and Community Development Act of 1974.

Section 143: FHA Mortgage Insurance Incentives for Energy-Efficient Housing. Solarenergy equipment can be eligible for up to 30% of the total amount of property value that can becovered by Federal Housing Administration mortgage insurance. The current limit is 20% underSection 203(b)(2) of the National Housing Act.

Section 144: Public Housing Capital Fund. The Public Housing Capital Fund would bemodified to include certain energy and water use efficiency improvements. Under Section 9 of theUnited States Housing Act, the Capital Fund is available to public housing agencies to develop,finance, and modernize public housing developments and to make management improvements tothese housing facilities. There is currently no provision for energy conservation projects that involvewater-conserving plumbing fixtures and fittings.

Section 145: Grants for Energy-Conserving Improvements for Assisted Housing. HUDwould be directed to provide grants for certain energy and water efficiency improvements tomultifamily housing projects. Section 2(a)(2) of the National Housing Act, as amended by Section251(b)(1) of the National Energy Conservation Policy Act, empowers HUD to make grants forenergy conservation projects in public housing, but it has no provision for energy- andwater-conserving plumbing fixtures and fittings.

Section 146: North American Development Bank. The North American DevelopmentBank would be encouraged to finance energy efficiency projects.

Section 147: Energy-Efficient Appliances. Public housing agencies would be required topurchase cost-effective Energy Star appliances.

Section 148: Energy-Efficient Standards. The energy efficiency standards and codes thatthe federal government encourages states to use would be changed from the codes set by the Councilof American Building Officials to the 2000 International Energy Conservation Code.

Section 149: Energy Strategy for HUD. The Secretary of Housing and Urban Developmentwould be required to implement an energy conservation strategy to reduce utility expenses throughcost-effective energy-efficient design and construction of public and assisted housing.

Title II -- Renewable Energy

Subtitle A -- General Provisions

Section 201: Assessment of Renewable Energy Resources. DOE would be required toreport annually on resource potential, including solar, wind, biomass, ocean (tidal, wave, current, andthermal), geothermal, and hydroelectric energy resources. DOE would be required to reviewavailable assessments and undertake new assessments as necessary, accounting for changes in marketconditions, available technologies, and other relevant factors. The resource potential for renewableshas not been assessed as thoroughly as that for conventional energy resources and the potential maybe altered somewhat by climate change.

Section 202: Renewable Energy Production Incentive. Eligibility for the existingincentive would be extended through 2023 and expanded to include electric cooperatives and tribalgovernments. Qualifying resources would be expanded to include landfill gas. Federal law currentlyprovides a 1.5 cent/kwh incentive for power produced from wind and biomass by state and localgovernments and non-profit electrical cooperatives. (1) The incentive is funded by appropriations to DOE and was createdto encourage public agencies, which are not eligible for tax incentives, in a fashion parallel to therenewable energy production tax credit for private sector businesses (Section 1302). This incentivehas played a major role in wind energy development and is viewed by the wind industry as thesingle-most important provision in the bill. The Senate version would have added incremental hydroand ocean energy to the list of eligible resources.

Section 203: Federal Purchase Requirement. Federal agencies would be required, to theextent "economically feasible and technically practicable," to purchase power produced fromrenewables. The collective total percentage of renewables use, as a share of total federal electricenergy use, would start at 3% in FY2005, rise to 5% in FY2008, and then reach 7.5% in 2011 andall subsequent years. Renewable energy produced at a federal site, on federal lands, or on Indianlands would be eligible for double credit toward the purchase requirement. This provision aims tohelp develop the market for renewables. A report to Congress would be required every two years.

Section 204: Insular Areas Energy Security. This section includes congressional findingsthat electric power transmission and distribution lines in insular areas are not adequate to withstandhurricane 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. Federal law currently requires comprehensive energy plans for insular areas that describe thepotential for renewable energy resources. (2) This section would require the Secretary of the Interior, inconsultation with the Secretary of Energy and the head of government of each insular area, to updateinsular area plans to reflect these findings, and to seek to reduce energy imports by increasing energyconservation and energy efficiency and by attempting to maximize the use of indigenous resources.Annual appropriations would be authorized that would, in part, be used for matching grants forprojects designed to protect electric power transmission distribution lines in one or more of theterritories of the United States from damage caused by hurricanes and typhoons.

Section 205: Use of Photovoltaic Energy in Public Buildings. The General ServicesAdministration (GSA) would be authorized to encourage use of solar photovoltaic energy systemsin new and existing buildings. This provision aims to help reduce costs and, thereby, stimulate themarket for photovoltaic equipment.

Section 206: Grants to Improve the Commercial Value of Forest Biomass. TheSecretaries of Agriculture and the Interior would be authorized to make grants of up to $20 per greenton (a ton of freshly sawed or undried wood or other biomass) to individuals, businesses,communities, and Indian tribes for the commercial use of biomass for fuel, heat, or electric power. Also, the Secretaries of Agriculture and the Interior may make grants as an incentive to projects thatdevelop ways to improve the use of, or add value to, biomass. Preference is given to small towns,rural areas, and areas at risk of damage to the biomass resource. This provision attempts to addressthe increasing risk of wildfires and the growing threat to forests of insect infestation and disease.

Section 207: Federal Procurement of Biobased Products. This provision amends theexisting requirement (3) thatfederal agencies give procurement preference to items composed of the highest percentage ofbiobased products practicable by adding a specific reference to degradable six-pack rings. (4)

Subtitle B -- Geothermal Energy

Sections 211-227: Geothermal Energy Leasing Amendments. Much of the nation'sgeothermal energy potential is located on federal lands. Reducing delays in the federal geothermalleasing process and reducing royalties could increase geothermal energy production, although theenvironmental impact of greater geothermal development is also an issue.

Current Law. Competitive geothermal lease sales are based on whether lands are within aknown geothermal resource area (Geothermal Steam Act of 1970, U.S.C. 1003). Geothermalproduction on federal lands is charged a royalty of 10%-15% under Section 5 of the GeothermalSteam Act. The royalty is imposed on the amount or value of steam or other form of heat derivedfrom production under a geothermal lease.

The Secretary of the Interior can withdraw public lands from leasing or other public use andmodify, extend, or revoke withdrawals under provisions in the Federal Land Policy and ManagementAct of 1976 (FLPMA, 43 U.S.C. 1714). At certain intervals the Secretary may readjust terms andconditions of a geothermal lease, including rental and royalty rates. Annual rental fees of not lessthan $1 per acre on geothermal leases are paid in advance. The primary lease term is 10 years andshall 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.

Conference Agreement. Amendments to the Geothermal Steam Act would change leaseprocedures for competitive and non-competitive lease sales. Competitive lease sales would be heldevery two years. If there were no competitive bid, then lands would be made available for two yearsunder a non-competitive process (Sec. 212) . A fee schedule in lieu of any royalty or rental paymentswould be established for low-temperature geothermal resources. Existing geothermal leases may beconverted to leases for direct utilization of low-temperature geothermal resources (Sec. 213) .Royalties from geothermal leases would be 3.5% of the gross proceeds from geothermal electricitysales and 0.75% of the gross proceeds from the sale of items produced from direct use of geothermalenergy. This section takes effect on October 1, 2004. (Sec. 214) . A memorandum of understandingbetween the Secretaries of the Interior and Agriculture should include provisions that would identifyknown geothermal areas on public lands within the National Forest system and establish anadministrative procedure that would include time frames for processing lease applications (Sec 215) .

The Secretary the Interior would review all areas under moratoria or withdrawals and reportto Congress on whether the reasons for withdrawal still applied (Sec. 216 ). The Secretary couldreimburse lessees for the costs of environmental analyses required by the National EnvironmentalPolicy Act of 1969 (NEPA, 30 U.S.C. 1001 et seq.) through royalty credits under certaincircumstances. This section's effective date is changed from the date of enactment to October1, 2004. (Sec. 217) . The U.S. Geological Survey (USGS) would provide Congress with anassessment of current geothermal resources (Sec. 218) . Cooperative or unit plans for geothermaldevelopment would be promoted (Sec. 219) . Leasable minerals produced as a byproduct of ageothermal lease would pay royalties under the Mineral Leasing Act (30 U.S.C. 181) (Sec. 220) .

Sections 8(a) and (b) of the Geothermal Steam Act would be repealed, which would eliminatethe Secretary's authority to readjust geothermal rental and royalty rates at "not less than 20 yearintervals beginning 35 years after the date geothermal steam is produced" (Sec. 221). Annual rentalswould be credited towards the royalty of the same lease (Sec. 222) , and the primary lease term couldbe extended for two additional five-year terms if work commitments were met (Sec. 223) . Ifproduction from a geothermal lease were suspended during a period in which a royalty was required,royalties would be paid in advance until production resumed (Sec. 224) . The conference agreementwould establish rental rates for competitive and non-competitive lease sales (Sec. 225 ). A joint reportwithin two years would be submitted to detail the differences between the military geothermalprogram and the civilian geothermal program, including recommendations for legislation oradministrative actions to improve the effectiveness of the program (Sec. 226). About two dozentechnical amendments are included in Section 227 .

Subtitle C -- Hydroelectric

Section 231: Alternative Conditions and Fishways. Under the Federal Power Act (FPA,16 U.S.C. 797 et. seq.) the Federal Energy Regulatory Commission (FERC) has primaryresponsibility for balancing multiple water uses and evaluating hydropower relicensing applications. However, the FPA also creates a role in the licensing process for federal agencies that are responsiblefor managing fisheries or federal reservations (e.g. national forests, etc.). Specifically, sections 4(e)and 18 of the FPA give certain federal agencies the authority to attach conditions to FERC licenses. For example, federal agencies may require applicants to build passageways through which fish cantravel around the dam, schedule periodic water releases for recreation, ensure minimum flows ofwater for fish migration, control water release rates to reduce erosion, or limit reservoir fluctuationsto protect the reservoir's shoreline habitat. Once an agency issues such conditions, FERC mustinclude them in its license. While these conditions often generate environmental or recreationalbenefits, they may also require construction expenditures and may increase costs by reducingoperational flexibility.

Reflecting recommendations by FERC and the hydropower industry, both the House andSenate versions of H.R. 6 included provisions to alter federal agencies'license-conditioning authority. The conference bill includes the House language. It would establishnew requirements for federal agencies that set conditions or fishway requirements for hydroelectriclicenses under sections 4(e) and 18 of the Federal Power Act. License applicants could initiate atrial-type hearing on factual issues related to an agency's conditions. Federal agencies would haveto consider alternative conditions proposed by the license applicant and accept a proposed alternativeif it would provide for the adequate protection and utilization of a federal reservation, and wouldeither cost less or improve a project's operational efficiency. An agency would have to justify itsdecision to accept or to reject the alternative after giving equal consideration to both conditions'effects on a broad range of factors. The bill would also establish a system for reviewing an agency'sdecision if it rejected the applicant's alternative.

Section 241: Hydroelectric Production Incentives. The Secretary of Energy would makeincentive payments to non-federal owners or operators of hydroelectric facilities for power that isfirst produced within 10 years of the date of enactment by generating equipment added to existingfacilities. Payments of 1.8 cents per kilowatt-hour (kWh), up to a total of $750,000/year, may bemade for up to 10 years from the first year after the facility begins operating.

Section 242: Hydroelectric Efficiency Improvement. The Secretary of Energy would makeincentive payments to the owners or operators of hydroelectric facilities who make capitalimprovements on existing facilities that improve efficiency by at least 3%. Payments would notexceed 10% of the improvement cost and would not exceed $750,000 at any single facility.

Section 243: Small Hydroelectric Power Projects. This provision would amend the PublicUtility Regulatory Policy Act of 1978 (16 U.S.C. 2078), to change the date on or before which a dammust be constructed to qualify as an existing dam, from April 20, 1977, to March 4, 2003.

Section 244: Increased Hydroelectric Generation at Existing Federal Facilities. Within18 months of enactment, the Secretaries of the Interior and Energy, in consultation with the Secretaryof the Army, would submit a study of the potential for increasing electric power productioncapability at federally owned or operated water regulation, storage, and conveyance facilities.

Section 245: Shift of Project Loads to Off-Peak Periods. The Secretary of the Interiorwould review electric power consumption by the Bureau of Reclamation facilities for waterpumping, and, with the consent of affected irrigation customers, adjust water pumping schedules toreduce power consumption during periods of peak electric power demand. This section would notaffect Interior's existing obligations to provide electric power, water, or other benefits.

Section 246: Corps of Engineers Hydropower Operation and Maintenance Funding. Thissection would authorize the administrators of federal power marketing administrations (PMAs) totransfer receipts to the Corps for operations and maintenance activities at facilities assigned tothem. This provision was not in either the House or Senate version of H.R. 6 .

Section 246 (247) : Limitation on Certain Charges Assessed to the Flint Creek Project,Montana. Charges for using federal land for the Flint Creek hydroelectric facility would be limitedto $25,000 per year. This provision was not in either the House or Senate version of H.R. 6 .

Section 247 (248) : Reinstatement and Transfer of Hydroelectric License. The licensefor FERC project 2696, the Stuyvesant Falls Hydroelectric Project, would be reinstated andtransferred to the Town of Stuyvesant, NY. This provision was not in either the House or Senateversion of H.R. 6 .

Title III -- Oil and Gas

Subtitle A -- Petroleum Reserve and Home Heating Oil

Section 301: Permanent Authority to Operate the Strategic Petroleum Reserve. Congress authorized the Strategic Petroleum Reserve (SPR) in the Energy Policy and ConservationAct (EPCA, P.L. 94-163 ) to help prevent a repetition of the economic dislocation caused by the1973-74 Arab oil embargo. Physically, the SPR comprises five underground storage facilities,hollowed out from naturally occurring salt domes, located in Texas and Louisiana. In 2000, Congressalso authorized establishment of a Northeast Heating Oil Reserve (NHOR) where two million barrelsof home heating oil is kept in leased, above-ground storage, to be released if the price of heating oilexceeds a calculated historic average. The authorities governing the SPR and NHOR are includedin the Energy Policy and Conservation Act (EPCA, P.L. 94-163 ) and are currently authorizedthrough FY2008 by P.L. 108-7 . These authorities also provide for U.S. participation in emergencyactivities of the International Energy Agency (IEA) without risking violation of antitrust law andregulation.

The conference bill would permanently reauthorize both programs, avoiding awkwardperiods such as occurred in 2000 when differences between the House and Senate over certain issuesresulted in a period of several months when the authorities were not in force.

Section 302: National Oilheat Research Alliance. 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 otherpurposes, are dedicated to research on improving the efficiency of furnaces and boilers, andproviding education and training resources to professionals in the industry. The conference billwould extend the authorization for NORA until nine years (2010) after the date on which theAlliance was established.

Subtitle B -- Production Incentives

Section 311: Definition of Secretary. In this subtitle, "Secretary" means Secretary of theInterior.

Section 312: Program on Oil and Gas Royalties-In-Kind. The federal government wouldbe allowed to continue to receive physical quantities of oil and gas as royalty-in-kind payments ifit can receive market value for the product and revenues greater than or equal to the revenues itwould have received under a comparable cash-payment royalty. The royalty product would have tobe placed in marketable condition (as defined in H.R. 6 ) at no cost to the United States. Small refineries would receive preferential treatment if supplies on the market were insufficient. Areport to Congress in each year from FY2004-FY2013 would explain among, other things, how theSecretary determined whether the amount received was at least the amount that would have beentaken in cash and how a lease was evaluated as to whether royalty in kind were taken. This sectionwould have taken effect upon enactment of the act. In S. 2095 , this section wouldtake effect on October 1, 2004.

Section 313: Marginal Property Production Incentives. The Secretary of the Interiorwould have the authority to reduce or terminate royalties for independent producers under certainconditions. The Secretary would be authorized to prescribe different standards for marginalproperties in lieu of those in this section. This section would take effect on October 1, 2004.

Section 314: Incentives for Natural Gas Production From Deep Wells in the ShallowWaters of the Gulf of Mexico. Royalty reductions would be provided for shallow water deep gasproduction at certain depths not later than180 days after enactment. An "ultra-deep" well would alsobe defined in this section. This section would take effect on October 1, 2004.

Section 315: Royalty Reductions for Deep Water Production. Royalty reductions wouldbe provided for deepwater areas at fixed production levels at certain depths.

Section 316: Alaska Offshore Royalty Suspension. Planning areas in offshore Alaskawould be included under section 8(a)(3)(B) of the Outer Continental Shelf Lands Act (OCSLA, 43U.S.C. 1337(a)(3)(B)). This section of OCSLA currently provides a mechanism for the Secretary ofthe Interior to reduce or eliminate royalty or net profit share established in leases for oil and gasproduction in Gulf of Mexico planning areas. This provision was not in the House or Senate bills.

Section 317: Oil and Gas Leasing in the National Petroleum Reserve in Alaska. Thecompetitive leasing system for oil and gas in the National Petroleum Reserve in Alaska would bemodified. Leases would be issued for successive 10-year terms if leases met specific criteria. Activeparticipation would be sought by the state of Alaska and Regional Corporations as defined under theAlaska Native Claims Settlement Act (43 U.S.C. 1602). The Secretary of the Interior could grantroyalty reductions if they were found to be in the public interest. This section was not in the Houseor Senate bills.

Section 318: Orphaned, Abandoned, or Idled Wells on Federal Land. Within a year afterenactment, the Secretary would establish a technical assistance program to help states remediate andclose abandoned or idled wells. Technical and financial assistance would be made available over a10-year period to quantify and mitigate environmental dangers. A program would be established forreimbursing the private sector with credits against federal royalties for reclaiming, remediating, andclosing orphaned wells.

Section 319: Combined Hydrocarbon Leasing. The Mineral Leasing Act would beamended to allow separate leases for tar sands and for oil and gas in the same area. Tar sands wouldbe leased under the same system as for oil and gas and would require a minimum accepted bid of $2per acre.

Section 320: Liquefied Natural Gas. This section would amend the Natural Gas Act tolimit the criteria upon which FERC could reject a proposed liquefied natural gas (LNG) project.Under the conference bill, FERC could not deny a "certificate of convenience and necessity" solelybecause a facility would be at least partly dedicated to importing the project sponsor's own naturalgas.

Current Law. Under the Natural Gas Act, FERC reviews jurisdictional project proposals(including those for natural gas importation) to determine if a public need would be met. A widevariety of criteria are applied in making such a determination. The Commission can reject a projectfor a range of reasons, including impact on the competitive nature of U.S. natural gas markets.

Policy Context. Growth in U.S. natural gas demand has created a need for additional gassupplies, and imports from plentiful reserves abroad -- in the form of LNG -- have attracted recentinterest. An increasing number of projects are under consideration, and FERC may have to pick andchoose which to certificate.

Section 321: Alternate Related Uses on the Outer Continental Shelf. The Secretarywould be authorized to grant rights-of-way or easements on the OCS for energy-related activity ona competitive or noncompetitive basis and would charge fees for such access. A surety bond or otherfinancial guarantee would be required.

Section 322: Preservation of Geological and Geophysical Data. Under the proposed"National Geological and Geophysical Data Preservation Program Act of 2003," the InteriorDepartment through the U.S. Geological Survey would establish a program to archive geologic,geophysical, and engineering data, maps, well logs, and samples; provide a national catalog ofarchival material; and provide technical and financial assistance related to the archival material. State agencies that elect to be part of the data archive system that stores and preserves geologicsamples would receive 50% financial assistance, subject to the availability of appropriations. Privatecontributions would be applied to the non-federal share. Appropriations of $30 million per year fromFY2004 through FY2008 would be authorized.

Section 323: Oil and Gas Lease Acreage Limitations. Lease acreage limits would bealtered so that additional federal lands would not fall under the Mineral Leasing Act's single-stateownership limitations.

Section 324: Assessment of Dependence of State of Hawaii on Oil. Concern surfacesperiodically about the vulnerability of U.S. territories and Hawaii in the event of an oil supplydisruption. The conference bill would require a broad study that would assess the "economicimplication" of Hawaii's reliance upon oil in both the electricity and transportation sectors. Thereport would explore the technical and economic feasibility of displacing the use of residual fuel oilfor the generation of electricity with renewables and liquefied natural gas. Delivery of a report wouldbe required roughly 10 months after enactment.

Section 325: Deadline for Decision on Appeals under the Coastal Zone ManagementAct. This section would replace language in Section 319 of the Coastal Zone Management Act of1972 (CZMA),as amended (16 U.S.C. 1465). Section 319 had been added as an amendment in 1996. It established a time line for appeals to the Secretary of Commerce on consistency determinationswhen a state and federal agency are unable to reach agreement. The consistency provisions, set forthin Section 307 of the CZMA, require federal activities in or affecting the coastal zone to beconsistent with the policies of a federally approved and state-administered coastal zone managementplan. (Federal activities include activities and development projects performed by a federal agencyor by a contractor on behalf of a federal agency, and federal financial assistance.) A proposal tomodify the appeals time line with deadlines very similar to this legislation was included in aproposed rule on federal consistency, published in the June 11, 2003, Federal Register . A final rulehas not been issued.

The consistency provision creates an unusual relationship where states can halt most federalactions that are incompatible with state interests. When enacted, the consistency requirement wasviewed as a main reason why states would pursue development and implementation of coastal planssince the other incentive to participate, federal financial grants, always has been modest. This viewappears to have some validity as 34 or the 35 eligible states and territories are now administeringfederally approved coastal management programs.

Current Law. The consistency provisions in Section 307 of the CZMA guides stateconsideration of whether a proposed federal activity will be compatible with a federally approvedand state-administered coastal zone management plan. Since the first state plan was approved in themid-1970s, there has been considerable friction between states and federal agencies over the reachof the consistency provisions. States have sought broader application to have a strong role indecisions about the largest possible array of proposed federal activities, while the federal governmenthas 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 inhalting a proposal from actions on which the state does not have such powers has been a subject offederal appeals and litigation, including decisions by the U.S. Supreme Court (notably Secretary ofthe Interior v. California , 464 U.S. 312 (1984), in which the court determined that the sale of oil andgas leases on the outer continental shelf 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. Mostdisagreements are resolved through this process, but if no agreement can be reached, the final stepis an appeal to the Secretary of Commerce to make a decision. Appeals to the Secretary have notbeen common. According to citations of appeals posted on the website of the Office of Ocean andCoastal Resource Management in the National Oceanic and Atmospheric Administration (NOAA),as of December 30, 2003, 38 consistency determinations were appealed to the Secretary between1984 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 theDecember 8, 2000, Federal Register.

Section 319 in current law has less detail than the proposed amendment. It states that theSecretary will either issue a final decision on the appeal or publish a notice in the Federal Register stating why a decision cannot be reached within 90 days after the record has closed. If the Secretarypublishes a notice that a decision has not been made, that decision must be issued within 45 days ofthe date of publication of that notice.

Conference Agreement. The conference agreement would replace the current Section 319of the CZMA with a new set of provisions that would stipulate three sequential deadlines, andthereby limit the overall length of this appeals process to a total of 270 days from the date when anappeal is filed. The first deadline would be for the Secretary of Commerce to publish an initialnotice of an appeal in the Federal Register within 30 days of the appeal's filing. The second deadlinewould be that the administrative record would be open for no more than 120 days. During that timeperiod, the Secretary could receive filings related to the appeal. The final deadline would give theSecretary up to 120 days to issue a decision after the administrative record had been closed. Thesecond and third deadlines would also apply to all pending appeals not resolved prior to the date ofenactment. Also, any appeals in which the record is open on the date of enactment would have tobe closed within 120 days of that date.

Policy Context. Consistency appeals have been contentious and, in some instances, theappeals process has dragged on for long time periods. The 1996 amendments in Section 319 weremeant to address those delays by establishing some time limits. This has proved unsatisfactory tosome, who seek additional statutory language that would remove decisions about deadlines from theunpredictable rule-making process by defining the length of component steps in law, and thereforethe overall process, after an appeal to the Secretary has been filed.

Section 326: Reimbursement for Costs of NEPA Analysis, Documentation, and Studies. The Minerals Leasing Act would be amended to provide reimbursement for costs of NEPA-relatedstudies under certain circumstances. This provision would not take effect until October 1, 2008.

Section 327: Hydraulic Fracturing. This section would amend the Safe Drinking WaterAct (SDWA, 42 U.S.C. 300h(d)) to specify that the definition of "underground injection" excludesthe injection of fluids or propping agents used in hydraulic fracturing operations for oil and gasproduction.

In response to a 1997 court ruling directing EPA to regulate hydraulic fracturing asunderground injection, Section 327 would expressly preclude EPA from regulating the undergroundinjection of fluids used in hydraulic fracturing for oil and gas production. The provision adoptslanguage from the House bill that exempts hydraulic fracturing from the definition of undergroundinjection. The Senate bill directed EPA to study the effects of hydraulic fracturing ofhydrocarbon-bearing formations on underground sources of drinking water, and to determinewhether regulation was necessary. The Senate bill also directed the National Academy of Sciencesto study the effects of coalbed methane production on surface and ground water resources.

Current Law. The SDWA required EPA to promulgate regulations for state undergroundinjection control (UIC) programs that included minimum requirements for programs to preventunderground injection that endangers sources of drinking water. The Act specifies that UIC programregulations may not prescribe requirements that interfere with "any underground injection for thesecondary or tertiary recovery of oil or natural gas, unless such requirements are essential to assurethat underground sources of drinking water will not be endangered by such injection" (SDWAÂ§1421(b)(2)).

Policy Context. EPA reports that before 1997 it had not considered regulating hydraulicfracturing for oil and gas development, because the Agency did not view this well-productionprocess as an activity subject to regulation under SDWA's UIC program. In 1997, the 11th CircuitCourt of Appeals ruled that the injection of fluids for the purpose of hydraulic fracturing constitutedunderground injection as defined under the SDWA, that all underground injection must be regulated,and that hydraulic fracturing of coalbed methane wells in Alabama should be regulated under thestate's UIC program ( LEAF v. EPA , 118 F. 3d 1467). In 1999, EPA approved a revision toAlabama's UIC program to include regulations for hydraulic fracturing of coalbed methane wells.

Following the court's decision, EPA decided it needed more information before makingfurther decisions regarding the regulation of hydraulic fracturing, and undertook a study to evaluateimpacts on drinking water sources from hydraulic fracturing practices used in coalbed methaneproduction. In 2002, EPA issued a draft report that identified water quality and quantity problemsattributed to hydraulic fracturing in several states in the West and Southeast, but tentativelyconcluded that the overall impact was small. (5) EPA is expected to issued a final report in early 2004.

In 2003, EPA's National Drinking Water Advisory Council recommended that EPA (1) work,either through voluntary means or regulation, to eliminate the use of diesel fuel and related additivesin fracturing fluids that are injected into formations containing drinking water sources; (2) continueto study the health and environmental problems that could occur from hydraulic fracturing forcoalbed methane production; and (3) defend its authority and discretion to implement the UICprogram in a way that advances protection of groundwater resources from contamination.

Section 328: Oil and Gas Exploration and Production Defined. This section wouldprovide a permanent exemption from Clean Water Act (CWA) stormwater runoff rules for theconstruction of exploration and production facilities by oil and gas companies or the roads thatservice those sites. Currently under that Act, the operation of facilities involved in oil and gasexploration, production, processing, transmission, or treatment is generally exempt from compliancewith stormwater runoff regulations, but the construction of associated facilities is not. Theamendment would modify the CWA to specifically include construction activities in the types of oiland gas facilities that are covered by the law's statutory exemption from stormwater rules.

The issue arises from stormwater-permitting rules for small construction sites and municipalseparate storm sewer systems that were issued by the Environmental Protection Agency (EPA) in1999 and which became effective March 10, 2003. Those rules, known as Phase II of the CleanWater Act stormwater program, require most small construction sites disturbing one to five acresand municipal separate storm sewer systems serving populations of up to 100,000 people to have aCWA discharge permit. The permits require pollution-prevention plans describing practices forcurbing sediment and other pollutants from being washed by stormwater runoff into local waterbodies. 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 obtaindischarge permits beginning in 1991. (6)

As the March 2003 compliance deadline approached, EPA proposed a two-year extensionof the Phase II rules for small oil and gas construction sites to allow the agency to assess theeconomic impact of the rule on that industry. EPA said the delay was needed to comply withPresident Bush's Executive Order 13211, which directed agencies to consider the effects of theiractions on energy-related production activities. EPA had initially assumed that most oil and gasfacilities would be smaller than one acre and thus excluded from the Phase II rules, but recentDepartment of Energy data indicate that several thousand new sites per year would be of sizessubject to the rule. The postponement did not affect other industries or small cities covered by the1999 rule.

Conference Agreement. The provision in the conference bill is similar to one inHouse-passed H.R. 6 : It makes EPA's two-year delay permanent and makes it applicableto construction activities at all oil and gas development and production sites, regardless of size,including those covered by Phase I of the stormwater program. The Senate version included nosimilar provision. Industry officials contended that the EPA stormwater rule created costlypermitting requirements, even though the short construction period for drilling sites carried littlepotential for stormwater runoff pollution. Supporters said the provision was intended to clarifyexisting CWA language. Opponents argued that the provision did not belong in the energylegislation and that there was no evidence that construction at oil and gas sites caused less pollutionthan other construction activities. However, they were unsuccessful in efforts to remove theprovision during House consideration of H.R. 6 in April 2003 and also during conferencedeliberations. On November 7, by a 188-210 vote, the House defeated a motion offered byRepresentative Filner that would have instructed conferees to strike the oil and gas exemptionprovision from the bill.

Section 329: Outer Continental Shelf Provisions. For applications to build deepwaterports, the Secretary of Transportation could use environmental impact statements or other studiesprepared by other federal agencies instead of conducting separate studies. Information from state andlocal governments and private-sector sources could also be used. This provision was not includedin the House and Senate bills.

Section 330: Appeals Relating to Pipeline Construction or Offshore MineralDevelopment Projects. Appeals of decisions under the Coastal Zone Management Act on naturalgas pipelines and offshore energy projects would be based exclusively on the record compiled byFERC or the relevant permitting agency. It would be the sense of Congress that appeals relating tonatural gas pipeline construction would be coordinated within FERC's established timeframes undersections 3 and 7 of the Natural Gas Act (15 U.S.C. 717 b 717 (f).

Section 331: Bilateral International Oil Supply Agreements. Prior to the Camp Davidaccords, the United States entered into treaties and agreements with Israel to provide oil to thatnation if Israel could not purchase all the oil it needed in the markets. This commitment wasrenewed in 1995 and requires reauthorization in early FY2005. This provision would have the effectof making these agreements permanent and with the force of law.

Sections 332 and 333: Natural Gas Market Reform. These sections would address naturalgas price reporting issues in the wake of the Enron scandal. During extremely volatile marketepisodes in 2000-2001 -- when gas prices briefly soared to unprecedented levels -- it was alleged thatmarket participants reported false trading information to price-reporting services. Beyond creatinghigher prices for the market participants involved, these price-reporting schemes arguably resultedin higher transactions prices for unrelated gas deals whose prices were derived from published priceindices artificially escalated by the allegedly false reports.

Section 332 , entitled "Natural Gas Market Reform," would modify the Commodity ExchangeAct (CEA, 7 U.S.C. 13), banning "knowingly false or knowingly misleading or knowingly inaccuratereports." It also increases the penalties for false reporting.

Section 333 , entitled "Natural Gas Market Transparency," would direct FERC to issue rulescalling for the timely reporting of natural gas prices and availability and to evaluate the data foraccuracy. The language specifies that FERC not impinge on the role of commercial publishers ofnatural gas prices.

Current Law. The Commodity Futures Trading Commission regulates public trading in gasunder a variety of securities laws, including the CEA FERC also has existing authority to preventmarket manipulation and issued Order 644 on November 13, 2003. Order 644 is designed to preventmarket abuse, set "rules of the road," and provide a more stable marketplace for both electricity andnatural gas. It establishes rules relating to market manipulation, data reporting, and record retention.It also makes sellers subject to disgorgement of unjust profits and revocation of FERC authoritiesto operate under market-based rules (i.e. without direct regulatory supervision) and/or to do business.

The New York Mercantile Exchange (NYMEX) -- where much of the trading in natural gasfutures takes place -- also has some authority to prevent trading abuses on its platform. In November2003, it formulated a proposal regarding strict record keeping, price disclosure, and use of a commoncomputer-based data format, such that trading information could be electronically scanned to findtrading anomalies.

Subtitle C -- Access to Federal Land

Sections 341-348: Leasing and Permitting Processes. These sections would addressconcerns over delays in the permitting process for oil and gas development after leases are granted. Some lease stipulations are considered by the Administration to be impediments to domestic oil andgas development. However, concerns have also been raised that faster permitting could bypassimportant environmental protections.

Current Law. The federal oil and gas leasing program is governed under the MineralLeasing 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. TheAPD is posted for 30 days. Within 5 working days after the 30-day period, the BLM consults withsurface-managing agencies whose consent is also required, then notifies the applicant of the results.The BLM is also required to process the application within the 35-day period. The BushAdministration has taken some action on this issue, including processing and conductingenvironmental analyses on multiple permit applications with similar characteristics, implementinggeographic area development planning for oil and gas fields or areas within a field, and allowing forblock surveys of cultural resources.

Conference Agreement. An Office of Federal Energy Project Coordination (FEPC) wouldbe established to review and report on accomplishments that are considered more efficient andeffective for federal permitting (Sec. 341) . The Secretary of the Interior would perform an internalreview of the federal onshore oil and gas leasing and permitting process with particular focus onlease stipulations affecting the environment and conflicts over resource use (Sec. 342). TheSecretary would be required to ensure expeditious completion of environmental and other reviewsand implement "best management practices" that would lead to timely action on oil and gas leasesand drilling permits (Sec. 343) . The Secretaries of the Interior and Agriculture would be required tosign an MOU on the "timely processing" of oil and gas lease applications, surface use plans anddrilling applications, the elimination of duplication, and ensuring consistency in applying leasestipulations (Sec. 344) .

The U.S. Geological Survey would be required to estimate onshore oil and gas resources andidentify impediments and restrictions that might delay permits. The Department of Energy wouldbe required to make regular assessments of economic reserves (Sec. 345) . Compliance withExecutive Order No. 13211 (42 U.S.C. 12301 note), requiring energy impact studies, would berequired before taking action on regulations having an effect on domestic energy supply (Sec. 346) .

A pilot program would be established to demonstrate energy development on federal landin accordance with the multiple-use mandate; Wyoming, Montana, Colorado, Utah, and New Mexicowould be asked to participate (Sec. 347) . The Secretary of the Interior would have 10 days afterreceiving an application for a permit to drill (APD) to notify the applicant whether the APD wascomplete. The Secretary would have 30 days after a complete APD was submitted to issue or defera permit with correcting measures. If deferred, the applicant would have a two-year window tocomplete the application, as specified by the Secretary. If the applicant met the requirements, thenthe Secretary would issue a permit within 10 days. The Secretary would deny the permit if thecriteria were not met within the two-year period (Sec. 348) .

Section 349: Fair Market Rental Value Determinations for Public Land and ForestService Rights-of-Way. The Secretaries of the Interior and Agriculture would annually revise andupdate rental fees for land encumbered by linear rights-of-way to reflect fair market value.

Section 350: Energy Facility Rights-of-Way and Corridors on Federal Lands. Not laterthan one year after enactment, the Secretaries of the Interior and Agriculture, in consultation withSecretaries of Defense, Commerce, and Energy and FERC, would submit to Congress a reportaddressing the location of existing rights-of-way on federal land for oil and gas pipelines and electrictransmission and distribution facilities.

Section 351: Consultation Regarding Energy Rights-of-Way on Public Land. Withinsix months after enactment, the Secretaries of the Interior and Agriculture would be required to enterinto an MOU to coordinate environmental compliance and processing of rights-of-way applications.

Section 352: Renewable Energy on Federal Lands. The Secretaries of Agriculture and theInterior, in consultation with others, would prepare a five-year plan for encouraging renewableenergy development, including an analysis of rights of way and projected net benefits of governmentincentives. A National Academy of Sciences study would be required within two years to assessrenewable energy on the outer continental shelf. This provision is new to the conference report.

Section 353: Electricity Transmission Line Right-of-Way in Cleveland National Forestand Adjacent Public Land. The Bureau of Land Management would become the lead federalagency for environmental and other necessary reviews for a high-voltage electricity transmission lineright-of-way through the Trabuco Ranger District of the Cleveland National Forest in California.

Section 354: Sense of Congress Regarding Development of Minerals Under PadreIsland National Seashore. In recognition of the split estate on Padre Island National Seashore, itwould be the sense of Congress that the federal government owns the surface rights while themineral rights are held privately and also by the state of Texas. The implications of this section areuncertain.

Section 355: Encouraging Prohibition of Offshore Drilling in the Great Lakes. Statesadjacent to the Great Lakes would be encouraged to prohibit off-shore drilling in the Great Lakes.

Section 356: Finger Lakes National Forest Withdrawal. This provision would withdrawall federal land within the boundary of Finger Lakes National Forest in the state of New York fromentry, appropriation, or disposal under public land laws and disposition under all laws relating to oiland gas leasing. This section was not included in the House and Senate bills.

Section 357: Study on Lease Exchanges in the Rocky Mountain Front. The Secretaryof the Interior would, among other things, consider opportunities for domestic oil and gas productionthrough the exchange of non-producing leases in defined areas of the Rocky Mountain Front forother comparable tracts, consider compensation for the exchange or cancellation of a non-producinglease, and assess the economic impact on the lessees and the state under a lease exchange orcancellation. Statutory guidelines would be provided for valuation of non-producing leases. Thissection was not included in the House and Senate bills.

Section 358: Federal Coalbed Methane Regulation. States on the list of "affected states"under section 1339(b) of the Energy Policy Act of 1992 (42 U.S.C. 13368(b)) would be removed ifthey took specified actions within three years after enactment of H.R. 6 or hadpreviously taken action under section 1339(b). The list of "affected states" established under theEnergy Policy Act of 1992 (42 U.S.C. 13368 (b)) includes 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 toencourage CBM development in the state, and no current extensive development of CBM. A statemay be removed from the list through a petitioning process initiated by the governor of that state. This provision was not included in the House and Senate bills.

Section 359: Livingston Parish Mineral Rights Transfer. Section 102 of P.L. 102-562 is amended by striking the "Conveyance of Lands" provision, which maintains the reservation ofmineral rights held by the United States in specific areas of Livingston Parish, Louisiana. Thisprovision was not included in the House and Senate bills.

Subtitle D -- Alaska Natural Gas Pipeline

This Subtitle would facilitate the construction of a pipeline to transport natural gas from theAlaskan North Slope (ANS) to the lower 48 states.

Section 371: Short Title. Subtitle D would be cited as the Alaska Natural Gas Pipeline Act.

Section 372: Definitions. ANS natural gas would be defined as lying north of 64 degreesnorth latitude; the Transportation Project would be defined as delivering this gas to theAlaska-Canada border by a route heading south from Prudhoe Bay.

Section 373: Issuance of Certificate of Public Convenience and Necessity. FERC wouldbe directed to issue a certificate of convenience and necessity for an applicant seeking to build thispipeline under the terms the Natural Gas Act alone, presuming both a public need and that sufficienttransport capacity existed at the Canadian end of the pipe to deliver the gas to U.S. markets. Anexpedited hearing process would be provided for, directing FERC to issue a certificate within 60days after the issuance of a final environmental impact statement.

Section 373 (d) would prohibit construction of a pipeline via a northerly route to Canadatransiting under the Beaufort Sea. This would preclude a proposal that was floated a few years agobut garnered little support.

In order to elicit interest in the pipeline project, an "open season" for potential customerswould be held 120 days after the energy bill was enacted. An open season is a formalized proceedingin which the public demand for a project is gauged, giving an indication of the capacity that mightbe called for in an Alaska Gas Transport project.

An assessment of Alaska in-state gas needs would also be made under this section, andaccess to the state's royalty gas for consumption within Alaska would be facilitated.

Section 374: Environmental Reviews. This section would fast-track NEPA compliance bythe proposed Alaska gas pipeline. FERC would be designated as the lead agency under NEPA,setting the schedule and coordinating environmental reviews, rather than having each federal agencywith jurisdiction over an aspect of the project proceed separately with the review process. TheCommission would be responsible for consolidating the environmental reviews of all other federalagencies into one environmental impact statement (EIS), which would satisfy all NEPA requirementsfor the project. The section would require FERC to issue a draft EIS within one year after a projectapplication date, and a final EIS within 180 days after issuing the draft, unless there were delays "forgood cause."

Section 375: Pipeline Expansion. This section would provide FERC with authority to orderthe capacity of the project to be expanded -- after holding a hearing -- on the basis of one or morerequests for additional capacity. The applicant would have to make a firm commitment for transportservices. The hearing would determine that tariffs were non-discriminatory, the expansion would notadversely impact other shippers, and that adequate downstream facilities existed that would deal withadditional throughput.

Section 376: Federal Coordinator. An independent executive branch Office of the FederalCoordinator for Alaska Natural Gas Transportation Projects would be established, headed by apresidential appointee who would be confirmed by the Senate. The Secretary of Energy would holdthese authorities for up to 18 months while a coordinator was being put in place. The coordinatorwould be responsible for expeditious discharge of other agencies' responsibilities and ensuring thatthe provisions of the Alaska gas subtitle of this bill were complied with.

The coordinator would not have authority to override or amend FERC decisions. He or shewould enter into an agreement with the state to jointly monitor Transportation System construction,with the state and federal governments having primary responsibility for sections of the projectcrossing their respective lands.

Section 377: Judicial Review. The U.S. Court of Appeals for the District of Columbiawould be designated as having original and exclusive jurisdiction over disputes arising from thisproposed legislation. Claims arising under this subtitle would have to be brought not later than 60days after the action giving rise to the claim, and the court would be directed to give them expeditedconsideration.

Section 378: State Jurisdiction Over In-State Delivery of Natural Gas. Were the Alaskapipeline project to be constructed, the state could benefit by using it as a backbone system fordistributing gas. This section would provide that the state hold jurisdiction over intrastatedistribution pipelines that might be supplied by the Transportation Project, ensuring that statepipelines and natural gas would not fall under FERC jurisdiction. Sec. 338 notes that FERC wouldhave tariff jurisdiction of the Transportation Project, and that the state should coordinate regardingrates for in-state consumers.

Section 379: Study of Alternative Means of Construction. Were no application forTransportation Project construction to be filed within 18 months of the enactment of this act, theSecretary of Energy would be required to conduct a study of alternative construction approaches. Thebill calls for consideration of such factors as establishing a federal corporation, joint federal andprivate-sector ownership, and securing alternative means of financing. The Secretary would reportto Congress on the study's findings and make recommendations on how the project might beaccomplished.

Section 380: Clarification of ANGTA Status and Authorities. The bill would not changeanything previously done under the Alaska Natural Gas Transportation Act of 1976 (ANGTA, 15U.S.C. 719g), but would provide authority for responsible agencies to update decisions made in prioryears to meet current project requirements. The project sponsor could be required to updateenvironmental impact studies and analyses and compliance plans.

Section 381: Sense of Congress Concerning Use of Steel Manufactured in NorthAmerica and Negotiation of a Project Labor Agreement. The project sponsors should make"every effort" to use steel manufactured in North America and to negotiate a project labor agreement.

Section 382: Sense of Congress and Study Concerning Participation by Small BusinessConcerns. Were the project to go forward, it would be the sense of Congress that small businesses-- as defined in the Small Business Act (15 U.S.C. 632(a)) -- should participate to the maximum. TheComptroller General would be directed to study the extent of possible participation and report toCongress not later than one year after enactment. An update every five years would also be calledfor.

Section 383: Alaska Pipeline Construction Training Program. This section wouldauthorize grants to recruit and train adult workers in Alaska to work on the gas transport project. Itwould call for the Governor of Alaska to request funds after certifying that the constructions workwas reasonably expected to begin within two years.

Section 384: Sense of Congress Concerning Natural Gas Demand. This section wouldexpress congressional concern that the demand for natural gas will outstrip supplies from NorthAmerican producing areas that already have pipeline connections. It would express the belief thatboth Alaskan and Canadian resources are needed to meet future demand, and that such demandwould be strong enough that historic Canadian and lower 48 U.S. producers would not be displacedin the marketplace.

Section 385: Sense of Congress Concerning Alaskan Ownership. This section wouldconvey the sense of Congress that it is in the economic interest of Alaska to have local ownershipof a share of the pipeline, and that project sponsors would be encouraged to work with interestedlocal parties seeking to participate.

Section 386: Loan Guarantees. The bill would grant authority to the Secretary of Energyto issue "Federal guarantee instruments," providing loan guaranties to pipeline certificate holders.The instruments would expire two years after the certificate had been issued, meaning that theproject sponsor would have to be in the project financing stage by that time. The loan or debtobligation would have to be issued by a qualified lender, the loan could not be for more than 30years, and the total amount of the guaranteed debt obligations would be limited to $18 billion,adjusted for inflation from the date of enactment. The guaranteed loan could cover all legitimatecomponents of the transport system.

The bill also would authorize the Secretary to extend these loan guarantees to the Canadiansegment of the Alaska gas transportation project.

Current Law. The basic law addressing the certification of pipelines is the Natural Gas Act,which gives FERC broad-based authority to certificate pipelines, facilitating their construction andensuring that their rates and tariffs are "just and reasonable." In addition to the NGA, the AlaskaNatural Gas Transportation Act of 1976 was enacted specifically to pave the way for the projectvisualized in H.R. 6 . Under ANGTA, a presidential finding specified the pipeline routethat is the focal point of Subtitle D.

Policy Context. Significant amounts of proven ANS gas reserves lie in and around thePrudhoe Bay field and remain there because a transportation system has not been developed, despiteenactment of ANGTA in 1976. Demand for natural gas in the lower 48 states has grown in the recentpast, and supply has become tight, resulting in steadily increasing average prices and disruptive pricevolatility during high-demand winter months. While an Alaskan gas pipeline is many years off --even if construction began today -- the current supply-demand situation has become a source oflonger-term concern among policymakers.

Proponents of the loan guarantees contend that the inherent risk is so high in building anAlaska pipeline, at an estimated cost of $20 billion, that it could not be financed by conventionalmeans. The conference bill's loan guarantees would offer those providing the project's capital someassurance that a certain amount of their investment would be repaid, although exposing the federalgovernment to potential losses. Other proposals have utilized commodity price guarantees or acombination of loan and price guarantees.

Title IV -- Coal

Subtitle A -- Clean Coal Power Initiative

Sections 401-404: Clean Coal Power Initiative. The Clean Coal Power Initiative (CCPI)is in its third year of funding under a 10-year, $2 billion program outlined by the BushAdministration. According to DOE, the program supports cost-shared projects with the privatesector to demonstrate new technologies that could boost the efficiency and reduce emissions fromcoal-fired power plants.

Current Law. CCPI does not currently have a specific authorization, although it has beenfunded through the annual Interior and Related Agencies Appropriations bill. The programsupersedes the Clean Coal Technology Program, which has completed most of its projects and hasbeen subject to rescissions and deferrals since the mid-1990s.

Conference Agreement. Funding for CCPI would be authorized for $200 million for eachyear from FY2004-FY2012 (Sec. 401) . The technical criteria would be established for coal-basedgasification and other projects. The federal share of financing for each clean coal project would notexceed 50% (Sec. 402) . A report on the projects' status and technical milestones would be submittedafter the first year and every two years by the Secretary of Energy to various congressionalcommittees (Sec. 403) . The program would include grants to universities to establish Centers ofExcellence for energy systems of the future (Sec. 404) .

Policy Context. A key ingredient of President Bush's May 2001 National Energy Policy isto bolster U.S. energy supply. One of its goals is to use coal more efficiently, as coal is an abundantnational resource. The Administration contends that new technologies could cost-effectively reduceemissions from coal-fired power plants and overcome barriers to expanded coal use.

Subtitle B -- Clean Power Projects

Sections 411-416: Clean Power Projects. The Secretary of Energy would be authorized toprovide a $125 million loan to an experimental clean coal power plant in Healy, Alaska (Sec. 411) . Loan guarantees would be authorized for a power plant using integrated combined-cycle (IGCC)technology in a deregulated market and receiving no ratepayer subsidy (Sec. 412) . A power plantusing IGCC technology in a taconite-producing region of the United States could receive loanguarantees (Sec. 413) . Loan guarantees would be available for at least one petro-coke gasificationpolygeneration project, involving co-production of electricity and fuels (Sec. 414) . Loan guaranteeswould be authorized for an IGCC project using low-Btu coal that would be combined withrenewable energy sources, offer the potential to sequester carbon dioxide emissions, and providehydrogen for fuel-cell demonstrations. The facility would be located in the Upper Great Plains, andits goal would be to provide at least 200 megawatts of power at competitive rates (Sec. 415) . TheSecretary of Energy would be directed to use $5 million of appropriated funds to begin a projectmanaged by the DOE Chicago Operations Office to demonstrate high-energy electron scrubbingtechnology for high-sulfur coal emissions (Sec. 416) .

Subtitle C -- Federal Coal Leases

Sections 421-427: Federal Coal Leases. This subtitle would modify federal coal leasingprocedures to encourage greater coal production on federal lands. Issues raised by these provisionsinclude their impact on regional competition and returns to the U.S. Treasury.

Current Law. Under the Mineral Leasing Act of 1920 (30 U.S.C. 203), modifications to anexisting coal lease shall not exceed 160 acres or add acreage larger than that in the original lease.Coal leases are subject to diligent development requirements, but the Secretary of the Interior maysuspend the condition upon payment of advance royalties. Advance royalties are computed on a fixedproduction reserve ratio, and the aggregate number of years advance royalties may be accepted inlieu of production is 10. An operation and reclamation plan must be submitted within three yearsafter a lease is issued under the Leasing Act (30 U.S.C. 207). Financial assurance is required toguarantee payment of bonus bid installments (30 U.S.C. 201 (a)).

Conference Agreement. The conference agreement would repeal the 160 acre limitation oncoal lease modifications. The total area added to an existing coal lease through a modification couldnot exceed 1,280 acres or add acreage larger than the original lease (Sec. 421) . Criteria would beestablished for extending the mine-out period of a coal lease beyond 40 years (Sec. 422) . TheSecretary may upon payment of an advance royalty, suspend a coal lessee's requirement forcontinuous operation. Advance royalties would be based on the average price of coal sold on the spotmarket from the same region, and the aggregate number of years advance royalties could be acceptedin lieu of production would be 20 (Sec. 423) . The current three-year deadline for submission of acoal lease operation and reclamation plan would be repealed (Sec. 424) . The financial surety bondor other financial guarantee for a bonus bid would no longer be required (Sec. 425) . The Secretaryof the Interior, in consultation with the Secretaries of Agriculture and Energy, would be required toassess coal on public lands, including low-sulfur coal and various impediments to developing suchresources (Sec. 426) . Amendments made under this provision would apply to any coal lease issuedbefore, on, or after the date of enactment (Sec. 427) .

Subtitle D -- Coal and Related Programs

Section 441: Clean Air Coal Program. This section would amend the Energy Policy Actof 1992 with the addition of a clean air coal program to promote increased use of coal, acceptanceof new clean coal technologies, and advance deployment of pollution control equipment to meet theClean Air Act (42 U.S.C. 7402 et seq.).

A total of $500 million over FY2005-FY2009 would be authorized for pollution controlprojects to control mercury, nitrogen dioxide, sulfur dioxide emissions, particulate matter, or morethan one pollutant; and allow use of the waste byproducts. Additional authorizations totaling $1.5billion over FY2006-FY2012 would be provided for projects using coal-based electrical generationequipment and processes, and associated environmental control equipment.

Project selection criteria would be based on significantly improving air quality, replacing lessefficient units, and improving thermal efficiency. Up to 25% of projects would be cogeneration orother gasification projects. At least 25% of the projects would be solely for electrical generation,with priority for those generating less than 600 MW. Federal loans or loan guarantees would notexceed 30% of the total funds obligated during any fiscal year. The federal share of projects fundedwould not exceed 50%.

No technology funded by the program, or level of emissions reduction achieved by fundedprojects, would be considered adequately demonstrated for purposes of Sections 111, 169, or 171of the Clean Air Act.

Title V -- Indian Energy

Section 501: Short Title. The "Indian Tribal Energy Development and Self-DeterminationAct of 2003."

Section 502: Office of Indian Energy Policy and Programs. Title II of the Departmentof Energy Organization Act (42 U.S.C. 7131 et. seq.) would be amended to create the Office ofIndian Energy Policy and Programs at the Department of Energy.

Section 503: Indian Energy. Title 26 the Energy Policy Act of 1992 (25 U.S.C. 3501)would be replaced by this section, which outlines procedures whereby Indian tribes would be ableto develop and manage the energy resources located on, and rights-of-way through, tribal land. Within a year of enactment of the bill, the Department of the Interior (DOI) would issue regulationson the requirements for approval of tribal energy resource agreements. Under their own tribal energyresource agreements as approved by DOI, Indian tribes would be able to enter into leases or businessagreements for energy development and grant rights-of-way over tribal land for pipelines or electriclines.

Assistance for tribal energy development would be provided through DOI by grants andlow-interest loans and through DOE by grants and loan guarantees. Federal agencies could givepreference to Indian energy when purchasing energy products and byproducts.

DOI would be required to undertake a review and make recommendations regarding tribalopportunities under the Indian Mineral Development Act of 1982 (25 U.S.C. 2101 et. seq.). TheBonneville Power Administration and Western Area Power Administration would be authorized toassist in developing distribution systems that provide power to Indian tribes using the federaltransmission system. DOE, in coordination with the Army and DOI, would conduct a study of thefeasibility of obtaining a marketable, steady electricity source from wind energy generated on triballands connected with hydropower generated by the U.S. Army Corp of Engineers at Missouri Riverpowerplants.

The language of the conference agreement combines and expands on both the House- andSenate-passed bills with regard to Indian Energy.

Section 504: Four Corners Transmission Line Project. The Dine Power Authority, anenterprise of the Navajo nation, would be eligible to receive grants and other assistance to developa transmission line from the Four Corners Area to southern Nevada, including related generationfacilities.

Section 505: Energy Efficiency in Federally Assisted Housing. The Department ofHousing and Urban Development (HUD) would be required to promote energy efficiency and energyconservation in federally assisted housing located on Indian land. This provision would expandcurrent law regarding affordable housing development for Native Americans to include use ofenergy-efficient technologies and innovations. (7)

Section 506: Consultation with Indian Tribes. The Secretaries of Energy and of theInterior would be required to consult with Indian tribes in carrying out this title.

Title VI -- Nuclear Matters

Subtitle A -- Price-Anderson Act Amendments

Sections 601-611: Price-Anderson Nuclear Liability Coverage. The Price-AndersonAct, (8) which addressesliability for damages to the general public from nuclear incidents, would be extended through 2023. The Price-Anderson liability system was up for reauthorization on August 1, 2002, and it wasextended for commercial nuclear reactors through December 31, 2003, by the FY2003 omnibuscontinuing resolution ( P.L. 108-7 ). Even without an extension, existing reactors will continue tooperate under the current Price-Anderson liability system, but any new reactors would not becovered. Price-Anderson coverage for DOE nuclear contractors was extended through December 31,2004, by the National Defense Authorization Act for FY2003 ( P.L. 107-314 ).

Current Law. Under Price-Anderson, the owners of commercial reactors must assume allliability for nuclear damages awarded to the public by the court system, and they must waive mostof 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 themaximum liability insurance available, which was increased by the insurance industry from $200million to $300 million on January 1, 2003. Any damages exceeding that amount are to be assessedequally against all covered commercial reactors, up to $95.8 million per reactor (most recentlyadjusted for inflation on August 20, 2003). Those assessments -- called "retrospective premiums"-- would be paid at an annual rate of no more than $10 million per reactor, to limit the potentialfinancial burden on reactor owners following a major accident. Including two that are not operating,105 commercial reactors are currently covered by the Price-Anderson retrospective premiumrequirement.

Funding for public compensation following a major nuclear incident, therefore, wouldinclude the $300 million in insurance coverage carried by the reactor that suffered the incident, plusthe $95.8 million in retrospective premiums from each of the 105 currently covered reactors, totaling$10.4 billion. On top of those payments, a 5% surcharge may also be imposed, raising the totalper-reactor retrospective premium to $100.6 million and the total potential compensation for eachincident to about $10.9 billion. Under Price-Anderson, the nuclear industry's liability for an incidentis capped at that amount, which varies depending on the number of covered reactors, the amount ofavailable insurance, and an inflation adjustment that is made every five years. Payment of anydamages above that liability limit would require congressional approval under special proceduresin the act.

The Price-Anderson Act also covers contractors who operate hazardous DOE nuclearfacilities. The liability limit for DOE contractors is the same as for commercial reactors, excludingthe 5% surcharge, except when the limit for commercial reactors drops because of a decline in thenumber of covered reactors. Because the most recent adjustments have raised the commercialreactor liability limit to a record high, the liability limit for DOE contractors is currently the sameas the commercial limit, minus the surcharge, or $10.4 billion. Price-Anderson authorizes DOE toindemnify its contractors for the entire amount, so that damage payments for nuclear incidents atDOE facilities would ultimately come from the U.S. Treasury. However, the law also allows DOEto fine its contractors for safety violations, and contractor employees and directors can face criminalpenalties for "knowingly and willfully" violating nuclear safety rules. However, Section 234A of theAtomic Energy Act specifically exempts seven non-profit DOE contractors and their subcontractors. Under the same section, DOE automatically remits any civil penalties imposed on non-profiteducational institutions serving as DOE contractors.

Conference Agreement. Price-Anderson liability coverage for commercial reactors and forDOE contractors would be extended through December 31, 2023 (Sec. 602) . The total retrospectivepremium for each reactor would be set at the current level of $95.8 million and the limit onper-reactor annual payments raised to $15 million (Sec. 603) , with both to be adjusted for inflationevery five years (Sec. 607) . For the purposes of those payment limits, a nuclear plant consisting ofmultiple small reactors (100-300 megawatts, up to a total of 1,300 megawatts) would be considereda single reactor (Sec. 608) . Therefore, a power plant with six 120-megawatt modular reactors wouldbe liable for retrospective premiums of up to $95.8 million, rather than $574.8 million. The liabilitylimit on DOE contractors would be set at $10 billion per accident, also to be adjusted for inflation,under the conference agreement (Sec. 604) .

The liability limit and maximum indemnification for DOE contractors for nuclear incidentsoutside the United States would be raised from $100 million to $500 million (Sec. 605) . However,Price-Anderson indemnification would be prohibited for contracts related to nuclear facilities incountries found to sponsor terrorism (Sec. 610) . None of the increased liability limits would applyto nuclear incidents taking place before the amendments are enacted (Sec. 609) . The NuclearRegulatory Commission (NRC) and DOE would have to report to Congress by the end of 2019 onthe need for further Price-Anderson extensions and modifications (Sec. 606) .

For future contracts, the conference agreement would eliminate the civil penalty exemptionfor nuclear safety violations by the seven non-profit contractors listed in current law. DOE'sauthority to automatically remit penalties imposed on all non-profit educational institutions servingas contractors would also be repealed. However, the bill would limit the civil penalties against anon-profit contractor to the amount of management fees received under that contract (Sec. 611) .

The House-passed version of H.R. 6 would have authorized the federalgovernment to sue DOE contractors to recover at least some of the compensation that thegovernment had paid for any accident caused by intentional DOE contractor managementmisconduct. Such cost recovery would have been limited to the amount of the contractor's profitunder the contract involved, and no recovery would have been allowed from nonprofit contractors. However, the conference agreement does not include that provision. Most of the major provisionsin the conference agreement are similar to provisions in both the House and Senate versions.

Policy Context. The Price-Anderson Act's limits on liability were crucial in establishing thecommercial nuclear power industry in the 1950s. Supporters of the Price-Anderson system contendthat it has worked well since that time in ensuring that nuclear accident victims would have a securesource of compensation, at little cost to the taxpayer. However, opponents contend thatPrice-Anderson subsidizes the nuclear power industry by protecting it from some of the financialconsequences of the most severe conceivable accidents.

Because no new U.S. reactors are currently planned, missing the deadline for extensionwould have little short-term effect on the nuclear power industry. However, any new DOE contractssigned during Price-Anderson expiration would have to use alternate indemnification authority.

Subtitle B -- General Nuclear Matters

Section 621: Commercial Reactor License Period. The initial 40-year period for acommercial nuclear reactor license would begin when NRC authorized the reactor to commenceoperation. Under current law (Atomic Energy Act sections 103 and 185), the 40-year period maystart before construction of a reactor begins, when a combined construction permit and operatinglicense is issued. The conference provision was taken from the House bill, but the Senate versionincluded similar language.

Section 622: NRC Training and Fellowship Program. Funding would be authorized forNRC to conduct a training and fellowship program to develop critical nuclear safety regulatory skills. This is nearly identical to a House provision.

Section 623: Cost Recovery From Government Agencies. NRC would be authorized tocharge cost-based fees for all services rendered to other federal agencies. Such authority is limitedunder current law (Atomic Energy Act, Section 161 w.) This provision is identical to language inthe House bill.

Section 624: Elimination of Pension Offset for Key NRC Personnel. When NRC has acritical need for the skills of a retired employee, NRC could hire the retiree as a contractor andexempt him or her from the annuity reductions that would otherwise apply. This is identical tolanguage in the House bill.

Section 625: Antitrust Review Suspension. NRC would no longer have to submit nuclearreactor license applications to the Attorney General for antitrust reviews, as currently required byAtomic Energy Act, Section 105 c. The Senate bill would have replaced the existing antitrust reviewrequirement with modified procedures for new reactor applications; the House version had noprovision.

Section 626: Decommissioning Fund Protection. NRC would be explicitly authorized toissue regulations ensuring that funds collected to decommission nuclear power plants would not beused for other purposes. This provision is particularly aimed at cases in which an original nuclearpower plant owner has sold the plant but retained control over decommissioning funds collectedbefore the ownership transfer. A similar but more detailed provision was included in the Senate bill.

Section 627: Limitation on DOE Legal Fee Reimbursement. Except as required byexisting contracts, DOE would be prohibited from reimbursing its contractors for legal expensesincurred in defending against "whistleblower" complaints that are ultimately upheld. This provisionwas taken from the House bill.

Section 628: Reactor Decommissioning Pilot Program. A DOE program would beestablished to decommission the sodium-cooled test reactor in northwest Arkansas. This provisionwas taken from the Senate bill.

Section 629: Feasibility Study for Commercial Reactors at DOE Sites. The Secretary ofEnergy would be required to submit a study to Congress on the feasibility of developing commercialnuclear power plants at existing DOE sites. This provision was taken from the House bill.

Section 630: Government Uranium Sales. With certain exceptions, DOE uranium saleswould be restricted to 3 million pounds per year from FY2004-FY2009, 5 million pounds per yearin FY2010-FY2011, 7 million pounds per year in FY2012, and 10 million pounds per year thereafter. Up to 21 million pounds could be transferred to the uranium enrichment company USEC Inc., aprivatized former government corporation. Similar provisions were included in both the House andSenate bills.

Section 631: Uranium Mining Research and Development. Funding would be authorizedfor a cost-shared research and development program by DOE and domestic uranium producers onin-situ leaching mining technologies and related environmental restoration technologies. Thisprovision was taken from the House bill.

Section 632: Whistleblower Protection. Existing whistleblower protections for employeesof nuclear power plants and other NRC licensees and employees of DOE contractors would beextended to employees of NRC contractors. An employee whose whistleblower retaliationcomplaint did not receive a final decision by the Secretary of Labor within 540 days could take thecase to federal court. The House bill would have further extended whistleblower protection to DOEand NRC employees and given the Secretary of Labor 180 days for a decision; the Senate bill hadno related provision.

Section 633: Uranium Exports for Medical Isotope Production. Highly enriched uranium(HEU) could be exported to Canada, Belgium, France, Germany, and the Netherlands for productionof medical isotopes in nuclear reactors. Those countries would be exempt from existingrequirements (under Section 134 of the Atomic Energy Act) that they agree to switch to low-enricheduranium (LEU) as soon as possible and that LEU fuel for their reactors be under active development. Instead, those countries would have to agree to convert to suitable LEU fuel when it becameavailable. The exemption in the conference bill would terminate upon certification by the Secretaryof Energy that U.S. medical isotope demand could be reliably and economically met with productionfacilities that do not use HEU. The conference provision is based on language in the House bill,which would have allowed NRC to exempt additional countries from the HEU export restrictionsand did not include the termination procedure. The current HEU export restrictions are intended tospur foreign cooperation with U.S. efforts to convert all HEU reactors to LEU, but supporters of theexemption contend that the restrictions could disrupt the supply of medical isotopes produced inforeign HEU reactors.

Section 634: Fernald Byproduct Material. DOE-managed material in the concrete silosat the Fernald uranium processing facility would be considered byproduct material (as defined bysection 11 e.(2) of the Atomic Energy Act of 1954 (42 U.S.C. 2014(e)(2)). DOE would dispose ofthe material in an NRC- or state-regulated facility. This section is new to the conference bill.

Section 635: Safe Disposal of Greater-than-Class-C Radioactive Waste. DOE woulddesignate an office with the responsibility for developing a comprehensive plan for permanentdisposal of all low-level radioactive waste with concentrations of radionuclides that exceed the limitsestablished by the NRC for Class C radioactive waste. The plan would include developing a newfacility or use of an existing facility for disposal. This section is new to the conference bill.

Section 636: Prohibition on Nuclear Exports to Terrorism Sponsors. Exports of nuclearmaterials, equipment, and sensitive technology would be prohibited to any country identified by theSecretary of State as a sponsor of terrorism. The President could waive the export restriction undercertain conditions. This provision, without the waiver, is similar to language in the House bill. It isintended to block implementation of a 1994 agreement under which North Korea was to receive aU.S.-designed nuclear power plant in return for abandoning its nuclear weapons program.

Section 637: Uranium Enrichment Facilities. NRC would be required to issue a finaldecision on a license to build and operate a uranium enrichment facility within two years after anapplication is submitted. Various procedural requirements would be established to ensure that thetwo-year licensing schedule could be met. DOE would be required to take title to and possessionof any depleted uranium hexafluoride resulting from the enrichment process; the cost assessed byDOE could not exceed the amount assessed to USEC Inc., the sole existing U.S. enrichment firm. Residual material from depleted uranium would be considered low-level radioactive waste. Aproposed uranium enrichment plant in New Mexico could be the first to take advantage of thissection, which was not in the House and Senate bills.

Section 638: National Uranium Stockpile. The Secretary of Energy would be authorizedto create a national low-enriched uranium stockpile. This provision is new to the conference bill.

Subtitle C -- Advanced Reactor Hydrogen Cogeneration Project

Sections 651-655: Idaho Hydrogen Production Reactor. DOE would be authorized todesign, construct, and operate an advanced hydrogen-producing nuclear reactor (Secs. 651-652) . Theproject would be managed by the DOE Office of Nuclear Energy, Science, and Technology, and thereactor would be located at the Idaho National Engineering and Environmental Laboratory (Sec.653) . Among other requirements, the project should begin producing hydrogen or electricity by 2010unless the Secretary of Energy finds that goal infeasible (Sec. 654) . Funding for the program wouldbe authorized at $635 million through FY2008, plus $500 million for construction (Sec. 655) . Thisprovision is similar to language in S. 14 , but there was no similar provision in the Houseand Senate versions of H.R. 6 .

Subtitle D -- Nuclear Security

Section 661: Nuclear Facility Threats. In consultation with NRC and other appropriateagencies, the President would be required to identify types of security threats at nuclear facilities. The President would have to issue reports on the identified threats and on actions taken or to betaken to address the threats. NRC would be authorized to revise its regulations based on thePresident's threat-identification report. NRC would be required to conduct periodic force-on-forceexercises to test nuclear facility security. NRC would be authorized to issue regulations to protectinformation about nuclear facility security, and would be required to assign a security coordinator to each NRC region. This section is similar to language in the House bill.

Section 662: Fingerprinting for Criminal Background Checks. The existing requirementthat individuals be fingerprinted for criminal background checks before receiving unescorted accessto nuclear power plants (Atomic Energy Act, Section 149) would be extended to individuals withunescorted access to any radioactive material or property that could pose a health or security threat. Other biometric methods could be used instead of fingerprinting. This section was not included inthe House and Senate bills.

Section 663: Use of Firearms by Nuclear Licensees. NRC would be authorized to allowthe use of firearms by security personnel at nuclear power plants and other facilities licensed orregulated by NRC. Federal law currently authorizes NRC employees and contractors to use firearms,but not employees or contractors of nuclear licensees (Atomic Energy Act, Section 161 k.). Thisprovision would counter some state laws that preclude private guard forces from utilizing someweapons. The House version of H.R. 6 had included similar firearms language but hadalso provided arrest authority.

Section 664: Unauthorized Introduction of Dangerous Weapons. Existing NRC controlson the entry of dangerous weapons or materials into Commission facilities (Atomic Energy Act,Section 229 a.) would be extended to commercial nuclear power plants and other NRC-regulatedfacilities. This provision was taken from the House bill.

Section 665: Sabotage of Nuclear Facilities or Fuel. Maximum penalties for sabotage oflicensed nuclear facilities or materials (Atomic Energy Act, Section 236 a.) would be increased from$10,000 and 10 years in prison to $1 million and life imprisonment without parole. The languagewould clarify that the penalties could apply to facilities "certified" as well as "licensed" by NRC, andalso to sabotage of facilities under construction. This provision was taken from the House bill.

Section 666: Secure Transfer of Nuclear Materials. Nuclear materials transferred orreceived in the United States pursuant to an import or export license would have to be accompaniedby a detailed manifest. Every worker involved in such shipments would have to undergo a federalsecurity background check. Language in the House bill would also have imposed those requirementson nuclear materials transferred from any NRC- or state-licensed facility.

Section 667: Department of Homeland Security Consultation. Before issuing a licensefor a nuclear power plant, NRC would have to consult with the Department of Homeland Securityabout the vulnerability of the proposed plant location to terrorist attack. A similar provision wasincluded in the House bill. Under current law, most other NRC costs must be recovered throughlicensee fees. Appropriation of such sums as necessary to carry out this subtitle would be authorized. This section is new to the conference report.

Title VII -- Vehicles and Fuels

Subtitle A -- Existing Programs

The sections of this subtitle refer to alternative fuel and vehicle purchase requirements underthe Energy Policy and Conservation Act (EPCA) ( P.L. 94-163 ) and the Energy Policy Act of 1992(EPAct, P.L. 102-486 ). Various requirements apply to federal vehicle fleets, as well as state fleetsand fleets operated by alternative fuel providers.

Section 701: Use of Alternative Fuels by Dual-Fueled Vehicles. Section 400AA of EPCAwould be amended to require that all federal agencies operate dual-fueled vehicles on alternativefuels or petition the Secretary of Energy for a waiver from the requirement. Under current law,agencies are not required to file a petition to be exempted from the requirement. A dual-fuel vehicleis one that can be operated on either an alternative fuel (e.g., ethanol or natural gas) or a conventionalfuel (e.g., gasoline). Currently, most federally owned dual-fuel vehicles are operated on gasoline asopposed to alternative fuel. This provision is similar to a provision in the Senate version of the bill;the House version contained no similar provision.

Section 702: Neighborhood Electric Vehicles. Section 301 of EPAct would be amendedto allow neighborhood electric vehicles to qualify as alternative fuel vehicles for fleet purchaserequirements under EPAct. A neighborhood electric vehicle is a small, low-speed, zero-emissionvehicle capable of operating on streets but not highways. This provision is similar to a provision inthe Senate version of the bill; the House version contained no similar provision.

Section 703: Credits for Medium and Heavy-Duty Dedicated Vehicles. Section 508 ofEPAct would be amended to allow vehicle fleets operated by states and alternative fuel providersto claim extra credits for purchasing dedicated (operating solely on alternative fuels) medium- andheavy-duty vehicles in lieu of light-duty vehicles. The purchase of a dedicated medium-duty vehiclewould count as two light-duty vehicles in meeting EPAct fleet requirements; a heavy-duty vehiclewould count as three. Currently, Executive Order 13149 grants federal fleets (and only federalfleets) three credits for the purchase of a dedicated medium-duty vehicle, and four credits for thepurchase of a dedicated heavy-duty vehicle. The House and Senate versions of the bill contained nosimilar provision.

Section 704: Incremental Cost Allocation. Section 303(c) of EPAct allows federalagencies to allocate the incremental cost of required alternative fuel vehicles across the wholevehicle fleet. The conference report would require agencies to do so. This provision is similar toa provision in the House version of H.R. 6 ; the Senate version contained no similarprovision.

Section 705: Alternative Compliance and Flexibility. The conference report would amendEPAct to allow new ways for fleets to comply with the vehicle purchase requirements. First, undersubsection (a), vehicle fleets operated by states and fuel providers would be allowed to petition theSecretary of Energy for a waiver from the purchase requirements if they met certain criteria. Thefleet would be required to develop an alternative plan to reduce petroleum consumption. Thealternative plan must result in a reduction in petroleum consumption equal to or greater than if thefleet met its purchase requirement and fueled 100% of its alternative fuel vehicles on alternative fuel100% of the time.

Second, subsection (b) would allow state and fuel provider fleets to generate vehicle purchasecredits through the purchase of hybrid-electric vehicles. Credits would be based on the performanceof the hybrid system; the purchase of one hybrid vehicle would qualify for between one-quarter ofa credit and one full credit. Under current law, hybrid vehicles do not qualify as alternative fuelvehicles because their primary fuel is gasoline. In addition, subsection (b) would allow fleets tocount investments in alternative fuel vehicle infrastructure toward vehicle purchase requirements. Each $25,000 in investments would qualify for one credit.

Third, subsection (c) would amend the definition of alternative fuel to include leasecondensate (liquids recovered from natural gas separation) and fuels derived from lease condensate. Fleets could generate one vehicle purchase credit for the use of a certain volume (to be determinedby the Secretary of Energy) of lease condensate fuel in medium- and heavy-duty vehicles. Thisprovision is similar to the existing credit structure for the use of biodiesel.

This section is significantly different from the House and Senate versions of H.R. 6 . Neither version provided for alternative compliance methods. Further, neitherversion permitted credits for the use of lease condensate fuel. However, the Senate version providedcredits for the purchase of hybrid vehicles and both versions provided credits for investment inalternative fuel infrastructure.

Section 706: Review of Energy Policy Act of 1992 Programs. The Secretary of Energywould be required to conduct a study on the effectiveness of the alternative fuel vehicle programsunder EPAct. Specifically, the Secretary would be required to assess the effects on vehicletechnology, availability, and cost.

Section 707: Report Concerning Compliance with Alternative Fuel Vehicle PurchasingRequirements. Each federal agency is required to report annually (through 2012) to Congress onits compliance with EPAct vehicle purchase requirements. The conference report would extend therequirement through 2018.

Subtitle B -- Hybrid Vehicles, Advanced Vehicles, and Fuel Cell Buses

Section 711: Hybrid Vehicles. Section 711 would require the Secretary of Energy toaccelerate research on technologies for hybrid vehicles. No new funds would be authorized.

Sections 721-724: Advanced Vehicles. The Secretary of Energy would be authorized toprovide grants to state governments, local governments, and metropolitan transit authorities for thepurchase of alternative fuel, hybrid, fuel cell, and ultra-low sulfur diesel vehicles (defined in Sec.721 ), and the infrastructure to support them. The program would be administered through the CleanCities Program. Grants would be capped at $20 million per applicant. Between 20% and 25% ofall grant funds would be used for ultra-low sulfur diesel vehicles (Sec. 722) . The Secretary wouldbe required to submit reports to Congress identifying grant recipients and evaluating the program'seffectiveness (Sec. 723) . $200 million total would be authorized for the grant program (Sec. 724) . This provision is similar to a provision in the House version of H.R. 6 ; the Senate hadno similar provision.

Section 731: Fuel Cell Transit Bus Demonstration. The Secretary of Energy would berequired to establish a program to demonstrate up to 25 fuel cell transit buses in various localities.$10 million annually would be authorized for FY2004 through FY2008. This provision is similarto a provision in the House version of H.R. 6 , but the House version would haveauthorized $40 million for the project. The Senate version contained no similar provision.

Subtitle C -- Clean School Buses

Sections 741-744: Clean School Buses. A pilot program administered by theEnvironmental Protection Agency would be established to provide grants to local governments andcontractors that provide school bus service for public school systems. Grants would be provided toaid in the purchase of alternative fuel and advanced diesel buses (as defined in Sec. 741 ), and theinfrastructure necessary to support them. A total of $200 million would be authorized for FY2005through FY2007, and a maximum of 30% of the grant funds could be used to purchase advanceddiesel buses (Sec. 742) . A pilot program would also be established to provide grants for thedevelopment and application of retrofit technologies for diesel school buses. A total of $100 millionwould be authorized for FY2005 through FY2007 (Sec. 743) . In addition, a pilot program wouldbe established for the development and demonstration of fuel cell school buses. A total of $25million would be authorized for FY2004 through FY2006 (Sec. 744) .

This subtitle is similar to provisions in both the House and Senate versions of H.R. 6 . However, the total authorized funding in the conference agreement ($325million) is greater than either the House version ($300 million) or the Senate version ($210 million).

Subtitle D -- Miscellaneous

Section 751: Railroad Efficiency. A public-private research partnership would beestablished for the development and demonstration of locomotive engines that increase fueleconomy, reduce emissions, and lower costs. A total of $110 million would be authorized forFY2005 through FY2007. This provision is similar to provisions in the House and Senate versionsof H.R. 6 , but with differing authorizations. The House authorized $90 million totalfor the partnership; the Senate authorized $130 million.

Section 752: Mobile Emission Reductions Trading. Within 180 days of enactment, theEPA Administrator would be required to submit a report to Congress on EPA's experience with thetrading of mobile source emission reduction credits to stationary sources to meet emission offsetrequirements within Clean Air Act nonattainment areas.

Section 753: Aviation Fuel Conservation and Emissions. This section would require theFederal Aviation Administration and EPA to jointly study the impact of aircraft emissions on airquality in Clean Air Act nonattainment areas, and ways to promote fuel conservation measures andreduce emissions.

Section 754: Diesel Fueled Vehicles. The Secretary of Energy would be required toaccelerate research on emissions control technologies for diesel motor vehicles. The objective ofthe research would be to enable diesel technology to meet Tier 2 emission standards not later than2010. (These standards will apply to cars and light trucks after the 2003 model year.) No newfunding would be authorized.

Section 755: Conserve by Bicycling Program. The Department of Transportation (DOT)would be directed to conduct up to 10 pilot bicycling projects to conserve energy. A minimum of20% of each project's costs would have to be provided by state or local sources. Also, DOT wouldbe directed to engage the National Academy of Sciences to conduct a research study on the feasibilityof converting motor vehicle trips to bicycle trips. Some local governments have experimented withpolice bicycle patrols and other bicycling programs. This provision may help expand such uses ofbicycling.

Section 756: Reduction of Engine Idling of Heavy-Duty Vehicles. EPA would be requiredto study whether existing models of air emissions accurately reflect emissions from idling vehicles. Further, EPA would be required to establish a program to support the deployment of idle-reductiontechnologies. A total of $95 million would be authorized for FY2004 through FY2006 for thedeployment program.

This section of the conference report varies significantly from the provisions in the Houseand Senate versions of the bill. First, both the House and Senate versions would have required theSecretary of Energy to study the potential energy savings from idle-reduction technologies. Further,the Senate version would have given the Secretary of Energy the authority to require idle-reductiontechnologies on all new heavy-duty vehicles.

Section 757: Biodiesel Engine Testing Program. The Secretary of Energy would berequired to study the effects of biodiesel and biodiesel blends on current and future emissions controltechnologies. $5 million would be authorized annually for FY2004 through FY2008.

Section 758: High Occupancy Vehicle Exception. The Transportation Equity Act for the21st Century (TEA-21, P.L. 105-178 ) would be amended to allow states to exempt hybrid anddedicated alternative fuel vehicles from high occupancy vehicle (HOV) restrictions. ThroughSeptember 30, 2003, states had the authority to exempt certain types of alternative fuel vehicles fromthe restrictions. However, hybrid vehicles and some alternative fuel vehicles did not qualify. As theexisting authorization has expired, states do not currently have the authority to exempt any type ofalternative fuel vehicle from HOV restrictions. The Senate version of H.R. 6 wouldhave allowed states to exempt alternative fuel vehicles (but not hybrids); the House versioncontained no similar provision.

Subtitle E -- Automobile Efficiency

Sections 771-774: Fuel Economy Standards. The conference bill would authorize $2million annually during FY2004-FY2008 for the National Highway Traffic Safety Administration(NHTSA) to carry out fuel economy rulemakings (Sec. 771) . It would expand the criteria that theagency would be required to take into account in setting maximum feasible fuel economy for carsand light trucks, including the effects of prospective standards on vehicle safety and automotiveindustry employment (Sec. 772) . In many instances, these additional factors may add specificity tobroader considerations that are already taken into account by NHTSA in developing its rules.

The legislation would also extend corporate average fuel economy (CAFE) credits that accrueto manufacturers of dual-fueled vehicles. The cap to the credit of 1.2 miles per gallon (mpg) earnedby any individual manufacturer would be extended to model year (MY) 2008. It was otherwisescheduled to drop to a cap of 0.9 mpg beginning in MY2005. The bill would postpone institutionof the 0.9 cap until MY2009 and authorize it through MY2013 (Sec. 773) . It also would require astudy to explore the feasibility and effects of reducing automobile fuel consumption "a significantpercentage" by MY2012 (Sec. 774) .

Current Law. The Energy Policy and Conservation Act ( P.L. 94-163 ) established CAFEstandards for passenger cars and light duty trucks. The current CAFE standards are 27.5 mpg forpassenger automobiles and 20.7 mpg for light trucks, a classification that also includes sport utilityvehicles (SUVs). A final rule issued by NHTSA on April 1, 2003, requires a boost in light truck fueleconomy to 22.2 mpg by MY 2007.

Title VIII -- Hydrogen

Sections 801-809: Hydrogen Research and Development. Title VIII of the conferencereport would reauthorize hydrogen fuel research and development at the Department of Energy (Sec.803) . The title would establish an Interagency Task Force to coordinate federal research (Sec. 804) . Further, the title would require the Secretary of Energy to develop a plan for the development ofhydrogen fuel and fuel cells (Sec. 802) , and would establish a Hydrogen Technical and Fuel CellAdvisory Committee to advise the Secretary and review the development plan (Sec. 805) . DOE'splans for the hydrogen program would be reviewed by the National Academy of Sciences (Sec. 806) ,and the Secretary of Energy would represent U.S. interests related to hydrogen programs inconsultation with relevant agencies (Sec. 807) . Specified authorities of the Secretary ofTransportation would not be affected (Sec. 808) . A total of $2.15 billion would be authorized forFY2004 through FY2008 (Sec. 809) . (Definitions are provided in Sec. 801 .)

Policy Context. There has been increased interest in hydrogen as a fuel in transportation,stationary, and mobile applications because of potential environmental and energy security benefits. In the State of the Union Address on January 28, 2003, President George W. Bush announced a newHydrogen Fuel Initiative to promote research and development on hydrogen and fuel cells. Alongwith the FreedomCAR initiative (announced in January 2002), the Administration is seeking a totalof $1.8 billion through FY2008. This request includes approximately $720 million in new funding. The conference report would authorize $2.15 billion over the same time frame, slightly higher thanthe President's request. The House version of H.R. 6 would have authorized fundingat the President's requested level ($1.8 billion), while the Senate version would have authorizedsignificantly less ($420 million). However, before it was replaced with the Senate version of H.R.6, S. 14 would have authorized nearly double the President's request ($3.0billion).

In addition to the above provisions on funding, the Senate version of H.R. 6 would have required the Secretary of Energy to develop a program to promote the availability of100,000 fuel cell vehicles by 2010 and 2.5 million vehicles by 2020. Neither the House version northe conference report on H.R. 6 contained this provision.

Title IX -- Research and Development

Section 901: Goals. DOE would be directed to conduct energy research, development,demonstration, and commercial application programs to support federal energy policy. As part ofeach annual budget request, the Secretary of Energy would be required to publish measurablefive-year cost and performance-based goals that cover energy efficiency, electricity generation,renewable energy, fossil energy, and nuclear energy programs. These programs are currently funded. Both the House and Senate versions of H.R. 6 had more specific goals, such as toreduce national energy intensity.

Section 902: Definitions. For Title IX, this section provides several definitions, includingmission, institution of higher education, and national laboratories.

Subtitle A -- Energy Efficiency

Section 904: Energy Efficiency. Funding for DOE energy efficiency programs would beauthorized for five fiscal years. Funding authorizations for most of these programs have expired.Constraints and prohibitions on funding, such as the exclusion of funding for issuing energyefficiency regulations, would be established. The Senate version had also included some goals forenergy efficiency programs.

Section 905: Next Generation Lighting Initiative. A DOE program would be created thataims to develop advanced white light-emitting diodes (LEDs) for high efficiency lighting. TheseLEDs are expected to be more efficient than incandescent and fluorescent lights. Both the House andSenate versions had a specific target date for LED development. Also, DOE would be directed toarrange for the National Academy of Sciences to conduct periodic reviews of the initiative.

Section 906: National Building Performance Initiative. An interagency group would beestablished to address energy efficiency R&D for buildings. The National Institute of Standards andTechnology would be directed to provide administrative support. This provision would increasecoordination among already existing programs.

Section 907: Secondary Electric Vehicle Battery Use Program. A program would beestablished at DOE for R&D on applications of used electric vehicle batteries for utility andcommercial power storage and power quality.

Section 908: Energy Efficiency Science Initiative. A program of competitive grants forresearch on energy efficiency would be created. An annual report would be filed with each DOEbudget request.

Section 909: Electric Motor Control Technology. DOE would be required to conduct aprogram on advanced electronic control devices to improve the energy efficiency of electric motors;heating, ventilation, and air conditioning systems; and related equipment.

Subtitle B -- Distributed Energy and Electric Energy Systems

Section 911: Distributed Energy and Electric Energy Systems. Five years of fundingauthorizations would be provided for distributed energy, electric energy, and micro-cogenerationprograms.

Section 912: Hybrid Distributed Power Systems. DOE would be directed to prepare astudy (strategy) and identify barriers for hybrid distributed power systems that use renewables,storage, and interconnection equipment.

Section 913: High Power Density Industry Program. DOE would be required to createa research, development, and demonstration (RD&D) program to improve energy efficiency and loadmanagement of data centers, computer server farms, and other high power density facilities.

Section 914: Micro-Cogeneration Energy Technology. DOE would be directed to makecompetitive grants to consortia to develop micro-cogeneration technology, including systems thatcould be used for residential heating.

Section 915: Distributed Energy Technology Demonstration Program. DOE would beauthorized to provide financial assistance to consortia for demonstrations to accelerate the use ofdistributed energy technologies in highly energy-intensive commercial applications. This provisiondid not appear in either the House or Senate version.

Section 916: Reciprocating Power. DOE would be required to create a program for fuelsystem optimization and emissions reduction after-treatment technologies for industrial reciprocatingengines, including retrofits for natural gas or diesel engines. This provision did not appear in eitherthe House or Senate version.

Subtitle C -- Renewable Energy

Section 918: Renewable Energy. Funding for DOE renewable energy programs would beauthorized for five fiscal years. Also, specific authorizations would be provided for bioenergy,concentrating solar power, and public buildings. Funding for Renewable Support andImplementation would be excluded.

Section 919: Bioenergy Programs. DOE would be directed to conduct programs onbiopower, biofuels, bio-based products, integrated biorefineries, feedstocks, enzymes, and economicanalysis. Program goals would include the development of technologies that could make biofuelsthat are price competitive with gasoline or diesel fuel.

Section 920: Concentrating Solar Power Research and Development Program. DOEwould be required to conduct a program to use concentrating solar power to produce hydrogen,including coordination with the Advanced Reactor Hydrogen Cogeneration Project established bySection 651. An assessment of the potential impact of this technology would be required. Also, areport would be required that examines the economic and technical feasibility of a pilot facility thatcould produce electricity or hydrogen. This provision did not appear in either the House or Senateversion.

Section 921: Miscellaneous Projects. DOE would be empowered to conduct programs onocean and wave energy, combinations of renewable energy technologies with one another, andcombinations with other energy technologies, including the combined use of wind power and coalgasification technologies.

Section 922: Renewable Energy in Public Buildings. DOE would be required to conductan innovative program to put renewable energy equipment in state and local buildings, providing upto 40% of a project's incremental costs. All applicants would be required to show a continuingcommitment to renewable energy use.

Section 923: Study of Marine Renewable Energy Options. DOE would be required toarrange with the National Academy of Sciences to conduct a study on renewable energy generationfrom the ocean, including energy from waves, tides, currents, and from the variation in watertemperature with ocean depth (ocean thermal energy).

Subtitle D -- Nuclear Energy

Section 924: Nuclear Energy Authorizations. Funding would be authorized throughFY2008 for nuclear energy research, development, demonstration, and commercial applicationactivities, including DOE nuclear R&D infrastructure support. Similar authorizations were includedin the House and Senate bills.

Section 925: Nuclear Energy Research and Development Programs. DOE would berequired to carry out a Nuclear Energy Research Initiative, a Nuclear Energy Plant OptimizationProgram, a Nuclear Power 2010 Program (to encourage deployment of new commercial reactors assoon as possible), and a Generation IV Nuclear Energy Systems Initiative (for longer-term reactordeployment), and nuclear infrastructure support. These programs, which were included in both theHouse and Senate bills, are currently conducted by DOE without specific funding authorizations.

Section 926: Advanced Fuel Cycle Initiative. DOE's Office of Nuclear Energy, Science,and Technology would be required to conduct an R&D program on advanced technologies for thereprocessing of spent nuclear fuel. The technologies should be resistant to nuclear weaponsproliferation and support alternative spent fuel disposal strategies and Generation IV advancedreactor concepts. DOE is currently implementing the Advanced Fuel Cycle Initiative without aspecific funding authorization. Spent fuel recycling or reprocessing involves the extraction ofplutonium and uranium from spent nuclear fuel for use in new fuel. Supporters contend that it couldextend domestic energy supplies and reduce the hazard posed by nuclear waste, while opponents areconcerned that the extracted plutonium could be used for weapons. The House and Senate versionsof H.R. 6 had similar provisions.

Section 927: University Nuclear Science and Engineering Support. DOE would berequired to support human resources and infrastructure in nuclear science and engineering andrelated fields. The program would include fellowship and faculty assistance programs and supportfor fundamental and collaborative research. The program would also be authorized to help convertresearch reactors to low-enriched fuels, provide technical assistance for relicensing and upgradingresearch reactors, and provide funding for reactor improvements. DOE funding for research projectscould be used for some of the operating costs of research reactors used in those projects. Thissection would add new statutory requirements to the existing DOE University Reactor FuelAssistance and Support Program. Similar provisions were included in the House and Senate bills.

Section 928: Security of Reactor Designs. DOE's Office of Nuclear Energy, Science, andTechnology would be required to carry out an R&D program on technology for increasing the safetyand security of reactor designs. This provision was not in the House and Senate bills.

Section 929: Alternatives to Industrial Radioactive Sources. After studying the currentmanagement of industrial radioactive sources and developing a program plan, DOE would berequired to establish an R&D program on alternatives to large industrial radioactive sources. Thisprovision was not in the House and Senate bills.

Section 930: Deep Borehole Disposal of Spent Nuclear Fuel. DOE would be required tostudy the feasibility of deep borehole disposal of spent nuclear fuel and high-level radioactive waste. Boreholes could potentially go much deeper than the currently planned underground repository atYucca Mountain, Nevada. This provision was taken from the House bill.

Subtitle E -- Fossil Energy

Section 931: Fossil Energy Authorizations. Funding levels would be authorized for fossilenergy R&D activities for FY2004-FY2008, including extended authorization for the Office ofArctic Energy for FY2004-FY2012. Institutions of higher learning would receive not less than 20%of funding during each fiscal year.

Section 932: Oil and Gas Research Programs. Oil and gas R&D programs would includegas hydrates, ultra-clean fuels, heavy oil, oil shale, and environmental research. Research into fuelcells and technology transfer are also specified. This section would require a report to Congress onnatural gas reserves and resource estimates in federal and state waters off the coast of Louisiana andTexas. Based on the existing Clean Power and Energy Research Consortium, a national center orconsortium of excellence in clean energy and power generation would be established to focus on gasturbines for power generation, emissions reduction, energy conservation, and education.

Section 933: Technology Transfer. A competitive program would be established to transferDOE offshore oil and gas technology to the private sector.

Section 934: Coal Mining Technology. An R&D program on coal mining technologieswould be established at DOE. Activities would reflect priorities of the Mining Industry of the FutureProgram along with guidance from National Academy of Sciences reports on mining technology. R&D would seek to minimize environmental contaminants, and develop techniques for horizontaldrilling in coal beds for more efficient methane recovery.

Section 935: Coal and Related Technologies Programs. In addition to the clean coalprograms authorized in Title IV, the Secretary of Energy would be required to conduct an R&Dprogram on integrated gasification combined-cycle systems, turbines for synthesis gas from coal,carbon sequestration, and other coal-related technologies. Cost and performance goals would beestablished for the cost-competitive use of coal for electricity generation, as chemical feedstock, andas transportation fuel.

Section 936: Complex Well Technology Facility. This facility would be established at theRocky Mountain Oilfield Testing Center to increase the range of extended drilling technologies.

Section 937: Fischer-Tropsch Diesel Fuel Loan Guarantee Program. Loan guaranteeswould be authorized for five years for facilities using the Fischer-Tropsch process to produce dieselfuel from coal.

Sections 941-949: Ultra-Deepwater and Unconventional Natural Gas and OtherPetroleum Resources. Part II of Subtitle E would authorize and provide funding for a DOE oil andgas research awards program. Advances in seismic surveying, improved drilling methods, and othernew technology have allowed oil and gas drilling at greater depths on the outer continental shelf andgreater production of unconventional on-shore resources. While the OCS is a major source ofdomestic oil and gas supply, offshore drilling proposals often generate substantial environmentalcontroversy.

Current Law. DOE R&D programs for natural gas and petroleum technologies are fundedin the annual Department of the Interior and Related Agencies appropriations bill.

Conference Report. R&D would be directed toward the demonstration and commercialapplication of technology for ultra-deepwater oil and gas production, including unconventional oiland gas resources. The R&D program would be designed to benefit "small producers" and addressenvironmental concerns. Complementary research would be carried out through DOE's NationalEnergy Technology Laboratory (Sec. 941) . The Secretary of Energy could contract with a consortiumto recommend ultra-deepwater research projects and manage funding awarded under this program (Sec. 942) . The Secretary would make competitive awards to research consortia for conducting R&Don advanced technologies for recovering coalbed methane and other unconventional resources (Sec.943) .

The Secretary could reduce or eliminate the non-federal cost-share requirement for awardsunder this program, 2.5% of each award would be designated for technology transfer, and variousadditional award requirements would be stipulated (Sec. 944) . An Ultra-Deepwater AdvisoryCommittee and an Unconventional Resources Technology Advisory Committee would beestablished (Sec. 945) as would criteria for foreign participation (Sec. 946) . The authority in thispart would terminate at the end of FY2011 (Sec. 947) . The terms deepwater, ultra-deepwater,unconventional oil and gas, independent producers of oil and gas, and others would be defined (Sec.948) .

The Ultra-Deepwater and Unconventional Natural Gas and Other Petroleum Research Fundwould be established. Revenues derived from federal oil and gas leases, after all previouslymandated distributions of those revenues had been made, would be deposited in the fund, up to $150million annually during FY2004-FY2013. During the same period, an additional $50 million peryear (such sums as necessary) would be authorized to be appropriated to the fund. The Secretaryof Energy could obligate money from the fund for programs in this part without an overall annuallimit, although annual percentage allocations among the programs would be spelled out (Sec. 949) .

Subtitle F -- Science

Section 951: Science Authorizations. Appropriations would be authorized for the Officeof Science for FY2004 through FY2008, with increases of 10%-15% per year. Within these totals,appropriations would be authorized for specific programs and activities of the Office. This provisionis similar to the House bill but specifies more detailed allocations and incorporates changes in someof the funding levels.

Section 952: United States Participation in ITER. Authority would be given for theUnited States to participate in the international fusion energy experiment known as ITER. Criteriawould be specified for any agreement on U.S. participation. DOE would be directed to develop aplan for ITER participation and have it reviewed by the National Academy of Sciences. Funds couldnot be expended for construction until the plan and other reports were provided to Congress. Ifconstruction of ITER appeared unlikely, DOE would be directed to submit a plan for an alternativeexperiment known as FIRE. This provision was in the House bill. A related provision was in theSenate bill.

The United States withdrew from the design phase of ITER in 1998 at congressionaldirection, largely because of concerns about cost and scope. The project has since been restructured,and in January 2003, the Administration announced its intention to reenter the project. Otherinternational partners include the European Union, Japan, Russia, and China.

Section 953: Plan for the Fusion Energy Science Program. Competitiveness in fusionenergy, including a demonstration of electric power or hydrogen production, would be declared tobe U.S. policy. DOE would be directed to submit a plan to carry out that policy, subject to certainrequirements. This provision, with some wording differences, was in the House bill. A relatedprovision was in the Senate bill.

Section 954: Spallation Neutron Source. DOE would be directed to report on theSpallation Neutron Source (SNS), including its cost and schedule, in its annual budget submissions.DOE obligations for the SNS, including prior year costs, could not exceed $1.2 billion (constructiononly) or $1.4 billion (total). This provision, with some wording differences, was in the House bill.

Construction of the SNS is scheduled to be completed in 2006. Funding for the project beganin FY1999.

Section 955: Support for Science and Energy Facilities and Infrastructure. DOE wouldbe directed to develop, implement, and report on a strategy for its nondefense laboratories andresearch facilities. The House bill contained a similar provision, but the strategy called for by theHouse provision would only have covered the laboratories and facilities of the Office of Science,whereas the conference language also covers the Office of Energy Efficiency and Renewable Energy;Office of Fossil Energy; and Office of Nuclear Energy, Science, and Technology.

Section 956: Catalysis Research and Development Program. The Office of Sciencewould be directed to support a program of catalysis R&D, which would conduct research on usingprecious metals in catalysis, design new catalytic compounds using molecular knowledge, and pursueother specified objectives. The National Academy of Sciences would review the program every threeyears. This provision of the conference report is essentially new, although the House and Senate billscontained less detailed provisions authorizing appropriations for certain types of catalysis research.

Section 957: Nanoscale Science and Engineering Research, Development,Demonstration, and Commercial Application. The Office of Science would be directed to supporta program of research, development, demonstration, and commercial application in nanoscience andnanoengineering, with specified goals and characteristics. The program would include support forresearch centers and major instrumentation. The House and Senate bills contained similar provisions.

Section 958: Advanced Scientific Computing for Energy Missions. DOE would bedirected to support advances in the nation's computing capability through research on grandchallenge computational science problems. The Networking and Information Technology Researchand Development Program would conduct research on topics specified in the bill and would becoordinated with related activities in DOE and elsewhere. DOE would have to report to Congressbefore undertaking any new initiative to develop advanced architectures for high-speed computing.This provision, with some wording differences, was in the House bill. A similar provision was in theSenate bill.

Section 959: Genomes to Life Program. DOE would be directed to establish a research,development, and demonstration program in genetics, protein science, and computational biology,with specified goals. DOE would have to submit a research plan for this program to Congress withinone year and contract with the National Academy of Sciences to review the plan within an additional18 months. Biomedical research and research related to humans would not be permitted as part ofthe program. A similar provision was in the House bill. The conference report broadened the Houselanguage to include national security among the program's goals and to specify in more detail theprogram's support for research facilities and equipment.

Section 960: Fission and Fusion Energy Materials Research Program. DOE would bedirected to establish, in its FY2006 budget request, an R&D program on materials science foradvanced fission reactors and fusion energy. This provision is new in the conference report. A relatedprovision in the House bill called for a report on the status of materials for fusion energy.

Section 961: Energy-Water Supply Program. This section would establish, within theDepartment of Energy, the Energy-Water Supply Program for the purpose of studying (1)energy-related and other issues associated with the supply of drinking water and the operation ofcommunity water systems, and (2) water supply issues related to energy. The program would bedirected to develop methods, means, procedures, equipment, and improved technologies in threeareas: (1) arsenic removal; (2) desalination; and (3) water and energy sustainability. The arsenicresearch program would be required, to the extent practicable, to evaluate the means to: reduceenergy costs of arsenic removal technologies; minimize operating and maintenance costs; andminimize waste resulting from use of such technologies. The desalination program provisions woulddirect the Secretary to work with the Commissioner of Reclamation of the Department of the Interioron a desalination R&D program, and would authorize funds to be used for construction projects. Thissection also would direct the Secretary to develop a water and energy sustainability program toidentify methods, means, and technologies necessary to ensure that sufficient quantities of water areavailable to meet energy needs and that sufficient energy is available to meet water needs. TheSecretary would be required to assess future water resource and energy needs, and develop a programplan and a technology development roadmap for the Water and Energy Sustainability Program.

Section 962: Nitrogen Fixation. DOE would be directed to support a program of research,on nitrogen fixation. This provision was in the House bill.

Subtitle G -- Energy and Environment

Section 964: U.S.-Mexico Energy Technology Cooperation. A collaborative research,development, and demonstration (RD&D) program would be established in the DOE Office ofEnvironmental Management to promote energy-efficient and environmentally sound economicdevelopment along the U.S.-Mexico border. This provision aims to minimize public health risksfrom industrial activities in the border region. A five-year authorization would be provided.

Section 965: Western Hemisphere Energy Cooperation. The Secretary of Energy wouldbe directed to conduct a cooperative effort with other nations of the Western Hemisphere to assistin formulating economic and other policies that increase energy supply and energy efficiency. Also,the Secretary would be directed to assist with the development and transfer of energy supply andefficiency technologies that would have a beneficial impact on world energy markets. To increasethe program's credibility with other Western Hemisphere countries, the Secretary would be directedto seek participation from universities, including Hispanic-serving institutions and Historically BlackColleges and Universities. A five-year authorization would be established. This provision did notappear in either the House or Senate version.

Section 966: Waste Reduction and Use of Alternatives. DOE would be authorized tomake a single grant to a university to study the feasibility of burning post-consumer carpet in cementkilns. A $500,000 authorization would be established.

Section 967: Report on Fuel Cell Test Center. The Secretary of Energy would be requiredto study the establishment of a test center for advanced fuel cells at an institution of higher education. The report would present a conceptual design and cost estimates for the center.

Section 968: Arctic Engineering Research Center. DOE, with DOT and the U.S. ArcticResearch Commission, would provide annual grants of $3 million for FY2004-FY2009 through theDOE Arctic Energy Office to an adjacent university to establish and operate an Arctic EngineeringResearch Center in Fairbanks, Alaska. The Center would conduct research on improved methods ofconstruction and materials to improve Arctic region roads, bridges, and other infrastructure.

Section 969: Barrow Geophysical Research Facility. The Department of Commerce, withDOE, DOI, EPA, and the National Science Foundation, would establish the Barrow GeophysicalResearch Facility to support Arctic scientific research activities. Appropriations of $61 millionwould be authorized for the planning, design, construction, and support of the facility.

Section 970: Western Michigan Demonstration Project. EPA, in consultation with theState of Michigan and affected local officials, would be required to conduct a demonstration projectto address the effect of transported ozone and ozone precursors on air quality in southwesternMichigan. The project would assess any difficulties the area may experience in meeting the 8-hournational ambient air quality standard for ozone due to the effect of transported ozone or ozoneprecursors. EPA would be required to complete the demonstration project within two years of thedate of enactment and would be prohibited from imposing any requirement or sanction that mightotherwise apply during the pendency of the demonstration project.

Subtitle H -- Management

Section 971: Availability of Funds. Funds authorized under this title would remainavailable until expended. This provision was in the House bill.

Section 972: Cost Sharing. Cost sharing would be required for programs carried out underthis title. The minimum non-federal share would be 20% for R&D programs and 50% fordemonstration and commercial application programs, but DOE could lower or waive theserequirements in certain circumstances. Similar provisions were in the House and Senate bills.

Section 973: Merit Review of Proposals. Awards of funds authorized under this title wouldbe permitted only after an impartial review of scientific and technical merit. This provision was inthe House bill. The Senate bill included a similar provision but specified an "independent review ...by the Department" rather than an "impartial review ... by or for the Department."

Section 974: External Technical Review of Departmental Programs. Advisory boardswould be established for DOE programs in energy efficiency, renewable energy, nuclear energy, andfossil energy. The requirement could be met by existing DOE boards or by boards established byarrangement with the National Academy of Sciences. Existing advisory committees would continuefor the programs of the Office of Science. The chairs of the Office of Science committees wouldconstitute a Science Advisory Committee for the Director of the Office. This provision was in theHouse bill. A similar provision in the Senate bill would establish an additional advisory board forclimate change technology and would omit the Science Advisory Committee of existing committeechairs.

Section 975: Improved Coordination of Technology Transfer Activities. A TechnologyTransfer Working Group would be established, made up of representatives from DOE's nationallaboratories and single-purpose research facilities. A Technology Transfer Coordinator would bedesignated to coordinate the working group's activities and oversee DOE technology transferactivities generally. This provision was in the House bill. A similar provision was in the Senate bill.

Section 976: Federal Laboratory Educational Partners. The Stevenson-WydlerTechnology Innovation Act of 1980 would be amended so that royalties to the government fromlicensing of inventions and income to the government from cooperative R&D agreements(CRADAs) could be used for educational assistance as well as for scientific R&D and other currentlypermitted purposes. This provision was in the House bill.

Section 977: Interagency Cooperation. DOE and NASA would be directed to holddiscussions leading to an interagency agreement that would make NASA expertise in energy morereadily available to DOE. This provision was in the House bill.

Section 978: Technology Infrastructure Program. DOE would be directed to establisha program to help national laboratories and single-purpose research facilities stimulate thedevelopment of technology clusters, leverage and benefit from commercial activities, and exchangescientific and technological expertise with other organizations. A report would be required in 2006on whether the program should continue and, if so, how it should be managed. A similar provisionwas in the Senate bill.

Section 979: Reprogramming. Within 60 days after any appropriation authorized under thistitle, DOE would be required to report to the appropriate authorizing committees on how theappropriated amounts would be distributed. Subsequent reprogramming would be limited to 5%unless reported to the same committee with at least 30 days' notice. This provision was in the Housebill.

Section 980: Construction with Other Laws. DOE would be directed to carry out theprograms under this title in accordance with other statutes that govern the operations of DOE andits programs. This provision was in the House bill.

Section 981: Report on Research and Development Evaluation Methodologies. DOEwould be directed to arrange with the National Academy of Sciences for a study of evaluationmethodologies for DOE's scientific and technical programs. This provision is new in the conferencereport.

Section 982: Department of Energy Science and Technology Scholarship Program. DOE would be authorized to establish a scholarship program to help recruit and prepare students forcareers in DOE. Scholarship recipients would be required to work for DOE for 24 months per yearof scholarship received. This provision, except a final subsection that authorizes appropriations, wasin the House bill. The Senate bill contained a related provision regarding postdoctoral and seniorresearch fellowships.

Section 983: Report on Equal Employment Opportunity Practices. DOE would berequired to report to Congress every two years on equal employment opportunity practices at thenational laboratories. This provision was in the House bill.

Section 984: Small Business Advocacy and Assistance. Each national laboratory wouldbe required to establish a program of assistance to small businesses and to designate a small businessadvocate to increase the participation of small businesses in programs and to provide them withtraining and technical assistance. DOE could also require small business assistance and advocatesat single-purpose research facilities. A similar provision was in both the House and the Senate bills.

Section 985: Report on Mobility of Scientific and Technical Personnel. DOE would berequired to report on disincentives to the transfer of scientific and technical personnel among thecontractor-operated national laboratories and single-purpose research facilities. This provision wasin the House bill. A similar provision was in the Senate bill.

Section 986: Report on Obstacles to Commercial Application. DOE would be directedto arrange with the National Academy of Sciences for a study of obstacles to acceleratingcommercial application of energy technology and of DOE policies for technology transfer-relateddisputes between DOE contractors and the private sector. This provision was in the House bill. TheSenate bill included a related provision on acceleration of the energy R&D cycle.

Section 987: Outreach. DOE would be directed to include an information outreachcomponent in each program authorized by this title. This provision was in the House bill.

Section 988: Competitive Award of Management Contracts. Management and operatingcontracts for DOE non-military energy laboratories would have to be awarded competitively unlessthe Secretary of Energy granted a waiver on a case-by-case basis. The Secretary would not bepermitted to delegate his waiver authority and would have to give Congress 60-days' notice beforeawarding a non-competitive contract. This provision was in the House bill.

In the past, management contracts at most DOE laboratories have been extended withoutcompetition. In some cases, laboratories have been managed by the same contractor for 50 years ormore. In November 2003, DOE released the report of a blue-ribbon commission that it establishedto examine this issue. The commission's report is available online at http://www.seab.doe.gov/publications/brcDraftRpt.pdf . It states, "the issue of whether competitionshould be routinely used for research and development laboratories is subject to wide and variedopinions."

Section 989: Educational Programs in Science and Mathematics. Competitive events forstudents, designed to encourage interest in science and mathematics, would be added to the list ofauthorized education activities that may be conducted through DOE R&D facilities. This provisionis new in the conference report.

Title X -- Department of Energy Management

Section 1001: Additional Assistant Secretary Position. The DOE Organization Act (42U.S.C. 7133) would be amended to increase the number of assistant secretary positions from six toseven. It would be the sense of Congress that DOE nuclear programs, currently headed by a director,be headed by an assistant secretary. This provision was taken from the Senate bill.

Section 1002: Other Transactions Authority. This would amend Section 646 of the DOEOrganization Act (42 U.S.C. 7256) to allow the Energy Secretary to enter into additional transactionsfurthering research, development, or demonstration without requiring that title to inventions bevested in the federal government as currently specified by Section 9 of the Federal NonnuclearEnergy Research and Development Act of 1974 (42 U.S.C. 5908) or section 152 of the AtomicEnergy Act of 1954 (42 U.S.C. 2182). This section is similar to a provision in the Senate versionof H.R. 6 .

Title XI -- Personnel and Training

Section 1101: Training Guidelines for Electric Energy Industry Personnel. TheSecretary of Energy, in consultation with the Secretary of Labor, along with electric industryrepresentatives and employee representatives, would be required to develop model personnel trainingguidelines to support the reliability and safety of the electric system.

Section 1102: Improved Access to Energy-Related Scientific and Technical Careers. DOE education programs would be required to give priority to activities that encourage women andminorities to pursue scientific and technical careers. DOE national laboratories (and other DOEscience facilities if so directed by the Secretary) would be directed to increase the participation ofHistorically Black Colleges and Universities, Hispanic-serving institutions, and tribal colleges inactivities such as research, equipment transfer, training, and mentoring. DOE would be required toreport on activities under this section within two years of enactment. The Senate bill included asimilar provision.

Section 1103: National Power Plant Operations Technology and Education Center. DOE would establish a National Power Plant Operations Technology and Education Center foron-site and Internet-based training of certified operators for non-nuclear electric power generationplants.

Section 1104: International Energy Training. DOE, with the Departments of Commerce,Interior, and State, and FERC, would coordinate training and outreach efforts for internationalcommercial energy markets in countries with developing and restructuring economies. Annualappropriations of $1.5 million for FY2004-FY2007 would be authorized.

Title XII -- Electricity

Title XII of the H.R. 6 conference report deals with electric power issues. Inpart, this title would create an electric reliability organization (ERO) that would enforce mandatoryreliability standards for the bulk-power system. All ERO standards would be approved by the FederalEnergy Regulatory Commission (FERC). Under this title, the ERO could impose penalties on a user,owner, or operator of the bulk-power system that violates any FERC-approved reliability standard. This title also addresses transmission infrastructure issues. The Secretary of Energy would be ableto certify congestion on the transmission lines and issue permits to transmission owners. Permitholders would be able to petition in U.S. District Court to acquire rights-of-way for the constructionof transmission lines through the exercise of the right of eminent domain.

FERC's Standard Market Design notice of proposed rulemaking would be remanded to theCommission. The conference report would clarify native load service obligation. Federal utilitieswould be allowed to participate in regional transmission organizations.

The electricity title would repeal provisions of the Public Utility Regulatory Policies Act(PURPA) (9) that requireutilities to purchase power from specified outside sources for a price equal to the cost they wouldhave incurred to generate the additional power themselves, as determined by utility regulators. ThePublic Utility Holding Company Act of 1935 (PUHCA, 15 U.S.C. 79 et seq.) would be repealed. FERC and state regulatory bodies would be given access to utility books and records.

FERC would be required to issue rules to establish an electronic system that providesinformation about the availability and price of wholesale electric energy and transmission services. For wholesale electric rates that the Commission finds to be unjust, unreasonable, or undulydiscriminatory, the effective date for refunds would begin at the time of the filing of a complaint withFERC but not later than five months after filing of a complaint. Criminal and civil penalties wouldbe increased.

The Secretary of Energy would be required to transmit to Congress a study on whetherFERC's merger review authority duplicates other agencies' authority. The Federal Power Act (FPA,16 U.S.C. 791 et seq.) would be amended to give FERC review authority for transfer of assets valuedin excess of $10 million.

Section 1201: Short Title. This title may be cited as the "Electric Reliability Act of 2003."

Subtitle A -- Reliability Standards

Section 1211: Electric Reliability Standards. This section would require the FederalEnergy Regulatory Commission (FERC) to promulgate rules within 180 days of enactment to createa FERC-certified electric reliability organization (ERO). The ERO would develop and enforcereliability standards for the bulk-power system. All ERO standards would be approved by FERC. Under this title, the ERO could impose penalties on a user, owner, or operator of the bulk-powersystem that violates any FERC-approved reliability standard. In addition, FERC could ordercompliance with a reliability standard and could impose a penalty if FERC finds that a user, owner,or operator of the bulk-power system has engaged in, or is about to engage in, a violation of areliability standard. This provision would not give an ERO or FERC authorization to orderconstruction of additional generation or transmission capacity.

This section would also require that FERC establish a regional advisory body if requestedby at least two-thirds of the states within a region that have more than half of their electric loadserved within that region. The advisory body would be composed of one member from eachparticipating state in the region, appointed by the governor of each state, and could provide adviceto the ERO or FERC on reliability standards, proposed regional entities, proposed fees, and any otherresponsibilities requested by FERC. The entire reliability provision would not apply to Alaska orHawaii.

Subtitle B -- Transmission Infrastructure Modernization

Section 1221: Siting of Interstate Electric Transmission Facilities. Every three years, theSecretary of Energy would be required to conduct a study of electric transmission congestion. Basedon the findings, the Secretary could designate a geographic area as being congested. Under certainconditions, FERC would be authorized to issue construction permits. Under proposed new FederalPower Act Section 216(d), affected states, federal agencies, Indian tribes, property owners, and otherinterested parties would have an opportunity to present their views and recommendations withrespect to the need for, and impact of, a proposed construction permit. However, there is norequirement for a specific comment period. New FPA section 216(e) would allow permit holdersto petition in U.S. District Court to acquire rights-of-way through the exercise of the right ofeminent domain. Any exercise of eminent domain authority would be considered to be takings ofprivate property for which just compensation is due from permit holders. New FPA Section 216(g)does not state whether property owners would be required to reimburse compensation paid by permitholders if the rights-of-way were transferred back to the owner.

Under this section, an applicant for federal authorization to site transmission facilities onfederal lands could request that the Department of Energy, rather than the Department of the Interioror other land-managing agency, be the lead agency to coordinate environmental review and otherfederal authorization. Once a completed application was submitted, all related environmentalreviews would be required to be completed within one year unless another federal law makes thatimpossible. FPA section 216(h) would give the Department of Energy (DOE) new authority toprepare environmental documents and appears to give DOE additional decision-making authorityfor rights-of-way and siting on federal lands. This could give DOE input into the decision processfor creating rights-of-way. By allowing reliance on prior analysis, this section could shorten orotherwise affect review under Section 503 of the Federal Land Policy and Management Act. If afederal agency has denied an authorization required by a transmission or distributions facility, thedenial could be appealed by the applicant or relevant state to the Secretary of Energy. The Secretaryof Energy would be required to issue a decision within 90 days after the filing of an appeal. Statescould enter into interstate compacts for the purposes of siting transmission facilities and theSecretary of Energy could provide technical assistance. This section would not apply to the ElectricReliability Council of Texas (ERCOT). A similar provision was included in the House-passed H.R. 6 .

Section 1222: Third-Party Finance. The Western Area Power Administration (WAPA)and the Southwestern Power Administration (SWPA) would be able either to continue to design,develop, construct, operate, maintain, or own transmission facilities within their regions or toparticipate with other entities for the same purposes if: the Secretary of Energy designated the areaas a National Interest Electric Transmission Corridor and the project would reduce congestion, orthe project was needed to accommodate projected increases in demand for transmission capacity. The project would need to be consistent with the needs identified by the appropriate regionaltransmission organization (RTO) or independent system operator (ISO). No more than $100 millionfrom third-party financing may be used during fiscal years 2004 through 2013. This section was notincluded in either the House- or Senate-passed H.R. 6 .

Section 1223: Transmission System Monitoring. Within six months of enactment, theSecretary of Energy and the Federal Energy Regulatory Commission would be required to completea study and report to Congress on what would be required to create and implement a transmissionmonitoring system for the Eastern and Western interconnections. The monitoring system wouldprovide all transmission system owners and regional transmission organizations real-timeinformation on the operating status of all transmission lines. This section was not included in eitherthe House- or Senate-passed H.R. 6 .

Section 1224: Advanced Transmission Technologies. FERC would be directed toencourage deployment of advanced transmission technologies. This section was not included ineither the House- or Senate-passed H.R. 6 .

Section 1225: Electric Transmission and Distribution Programs. The Secretary ofEnergy acting through the Director of the Office of Electric Transmission and Distribution wouldbe required to implement a program to promote reliability and efficiency of the electric transmissionsystem. Within one year of enactment, the Secretary of Energy would be required to submit toCongress a report detailing the program's five-year plan. Within two years of enactment, theSecretary of Energy would be required to submit to Congress a report detailing the progress of theprogram. The Secretary of Energy would be directed to establish a research, development,demonstration and commercial application initiative that would focus on high-temperaturesuperconductivity. For this project, appropriations would be authorized for FY2004 throughFY2008. In part, a similar provision was included in the House-passed H.R. 6 .

Section 1226: Advanced Power System Technology Incentive Program. A programwould be established to provide incentive payments to owners or operators of advanced powergeneration systems. Eligible systems would include power generation or storage facilities using "anadvanced fuel cell, turbine, or hybrid power system." A total of $140 million would be authorizedfor FY2004 through FY2008. A similar provision was included in the House-passed H.R. 6 . In the House-passed version, $70 million would have been authorized forFY2004 through FY2010.

Section 1227: Office of Electric Transmission and Distribution. This section wouldamend Title II of the Department of Energy Organization Act (10) and would establish anOffice of Electric Transmission and Distribution. The Director of the office would, in part,coordinate and develop a strategy to improve electric transmission distribution, implementrecommendations from the Department of Energy's National Transmission Grid Study, overseeresearch, development, and demonstration to support federal energy policy related to electricitytransmission and distribution, and develop programs for workforce training and power transmissionengineering. This section was not included in either the House- or Senate-passed H.R. 6 .

Subtitle C -- Transmission Operation Improvements

Section 1231: Open Nondiscriminatory Access. FERC would be authorized, by rule ororder, to require unregulated transmitting utilities (power marketing administrations, state entities,and rural electric cooperatives) to transmit electricity for others at rates comparable to what theycharge themselves and would require that the terms and conditions of such transactions also becomparable. Exemptions would be established for utilities selling less than 4 millionmegawatt-hours of electricity per year, for distribution utilities, and for utilities that own or operatetransmission facilities that are not necessary to facilitate a nationwide interconnected transmissionsystem. This exemption could be revoked to maintain transmission system reliability. FERC wouldnot be authorized to order states or municipalities to take action under this section if such actionwould constitute a private use under section 141 of the Internal Revenue Code of 1986. FERC mayremand transmission rates to an unregulated transmitting utility if the rates do not comply with thissection. FERC is not authorized to order an unregulated transmitting utility to join a regionaltransmission organization or other FERC-approved independent transmission organization. Thissection is often referred to as "FERC-lite." Provisions on open access were included in both theHouse- and Senate-passed H.R. 6 , but the conference language differed. Terminationof exemptions for reliability purposes does not appear in either the House- or Senate-passed H.R. 6 .

Section 1232: Sense of Congress on Regional Transmission Organizations. This sectionwould establish a sense of Congress that utilities should voluntarily become members of regionaltransmission organizations. A similar provision was included in the House- and Senate-passed H.R. 6 .

Section 1233: Regional Transmission Organization Applications Progress Report. FERC would be required to report to Congress within 120 days of enactment the status of allregional transmission organization applications. Similar language was included in the House-passed H.R. 6 .

Section 1234: Federal Utility Participation in Regional Transmission Organizations. Federal utilities (power marketing administrations or the Tennessee Valley Authority) would beauthorized to participate in regional transmission organizations. A law allowing federal utilities tostudy formation and operation of a regional transmission organization would be repealed. (11) A similar provision wasincluded in the House-passed H.R. 6 .

Section 1235: Standard Market Design. FERC's proposed rulemaking on standard marketdesign (SMD) would be remanded to FERC for reconsideration (Docket No. RM01-12-000). SMDis a proposed system to provide uniform market procedures for wholesale electric powertransactions. No final rulemaking, including any rule or order of general applicability to the standardmarket design proposed rulemaking, could be issued before October 31, 2006, or could take effectbefore December 31, 2006. This section would retain FERC's ability to issue rules or orders and acton regional transmission organization or independent system operator filings. H.R. 6 ,as passed by the House and Senate, did not include a similar provision.

Section 1236: Native Load Service Obligation. This section would amend the FederalPower Act to clarify that a load-serving entity is entitled to use its transmission facilities or firmtransmission rights to serve its existing customers before it is obligated to make its transmissioncapacity available for other uses. FERC would not be able to change any approved allocation oftransmission rights by an RTO or ISO approved prior to September 15, 2003. A similar provisionwas included in the House-passed H.R. 6 .

Section 1237: Study on the Benefits of Economic Dispatch. The Secretary of Energy, inconsultation with the states, would be required to issue an annual report to Congress and the stateson the current status of economic dispatch. Economic dispatch would be defined as "the operationof generation facilities to produce energy at the lowest cost to reliably serve consumers, recognizingany operational limits of generation and transmission facilities." This section was included in theHouse-passed H.R. 6 .

Subtitle D -- Transmission Rate Reform

Section 1241: Transmission Infrastructure Investment. FERC would be required toestablish a rule to create incentive-based transmission rates. FERC would be authorized to revisethe rule. The rule would promote reliable and economically efficient electric transmission andgeneration, provide for a return on equity that would attract new investment in transmission,encourage use of technologies that increased the transfer capacity of existing transmission facilities,and allow for the recovery of all prudently incurred costs that are necessary to comply withmandatory reliability standards. In addition, FERC would be directed to implement incentiverate-making for utilities that join a regional transmission organization or Independent SystemOperator. The House-passed H.R. 6 did not include reliability in the proposed FERCrule.

Section 1242: Voluntary Transmission Pricing Plans. This would amend the FederalPower Act to allow any transmission provider including a regional transmission organization orIndependent System Operator to determine how the cost of new transmission facilities would beallocated. The cost of all transmission expansion, except what is required for reliability purposes,would be assigned so that those who benefit from the addition of the transmission would pay anappropriate share of the costs. This is referred to as participant funding. This provision wouldprotect native load customers from paying for transmission upgrades needed for new generatorinterconnection if the new generation is not required by the native load (the demand of the utility'sexisting customers.) Participant funding was included in the House-passed H.R. 6 .

Subtitle E -- Amendments to PURPA

Section 1251: Net Metering and Additional Standards. States that have not consideredimplementation and adoption of net metering standards would be required within three years ofenactment to consider such implementation. Net metering service is defined as: service to an electricconsumer under which electric energy generated by that electric consumer from an eligible on-sitegenerating facility (e.g., solar or small generator) and delivered to local distribution facilities maybe used to offset electric energy provided by the electric utility to the electric consumer during theapplicable billing period. Net metering provisions were included in the House- and Senate-passed H.R. 6 .

Section 1252: Smart Metering. For states that have not considered implementation andadoption of a smart metering standard, state regulatory authorities would be required to initiate aninvestigation within one year of enactment, and issue a decision within two years of enactmentwhether to implement a standard for time-based meters and communications devices for all electricutility customers. These devices would allow customers to participate in time-based pricing rateschedules. This section would amend the Public Utility Regulatory Policies Act of 1978 (12) (PURPA) and wouldrequire the Secretary of Energy to provide consumer education on advanced metering andcommunications technologies, to identify and address barriers to adoption of demand responseprograms, and issue a report to Congress that identifies and quantifies the benefits of demandresponse. The Secretary of Energy would provide technical assistance to regional organizations toidentify demand response potential and to develop demand response programs to respond to peakdemand or emergency needs. FERC would be directed to issue an annual report, by region, to assessdemand response resources. A provision for real-time pricing and time-of-use metering standardswas included in the House- and Senate-passed H.R. 6 .

Section 1253: Cogeneration and Small Power Production Purchase and SaleRequirements. This section would repeal the mandatory purchase requirement under Section 210of PURPA for new contracts if FERC finds that a competitive electricity market exists and aqualifying facility has access to independently administered, auction-based, day-ahead, and real-timewholesale markets, and long-term wholesale markets. Qualifying facilities would also need to haveaccess to transmission and interconnection services provided by a FERC-approved regionaltransmission entity that provides non-discriminatory treatment for all customers. Ownershiplimitations under PURPA would be repealed. Repeal of the mandatory purchase requirement wasincluded in the House- and Senate-passed H.R. 6 .

Subtitle F -- Repeal of PUHCA

Section 1261: Short Title. This subtitle may be cited as the "Public Utility HoldingCompany Act of 2003."

Section 1262: Definitions. This section would provide definitions for: affiliate, associatecompany, commission, company, electric utility company, exempt wholesale generator and foreignutility company, gas utility company, holding company, holding company system, jurisdictionalrates, natural gas company, person, public utility, public-utility company, state commission,subsidiary company, and voting security.

Section 1263: Repeal of the Public Utility Holding Company Act of 1935. The PublicUtility Holding Company Act of 1935 (PUHCA) would be repealed. The provision to repealPUHCA was included in both the House- and Senate-passed H.R. 6 .

Section 1264: Federal Access to Books and Records. Federal access to books and recordsof holding companies and their affiliates would be provided. Affiliate companies would have tomake available to FERC books and records of affiliate transactions. Federal officials would haveto maintain confidentiality of such books and records. A similar provision was included in theHouse-and Senate-passed H.R. 6 .

Section 1265: State Access to Books and Records. A jurisdictional state commissionwould be able to make a reasonably detailed written request to a holding company or any associatecompany for access to specific books and records, which would be kept confidential. Response tosuch a request would be mandatory. Compliance with this section would be enforceable in U.S.District Court. This section would not apply to an entity that was considered to be a holdingcompany solely by reason of ownership of one or more qualifying facilities. A similar provisionwas included in the House -and Senate-passed H.R. 6 .

Section 1266: Exemption Authority. FERC would be directed to promulgate rules to makequalifying facilities, exempt wholesale generators, and foreign utilities exempt from the requirementfor federal access to books and records in Section 1264 . A similar provision was included in theHouse- and Senate-passed H.R. 6 .

Section 1267: Affiliate Transactions. FERC would retain the authority to preventcross-subsidization and to assure that jurisdictional rates are just and reasonable. FERC and statecommissions would retain jurisdiction to determine whether associate company activities could berecovered in rates. A similar provision was included in the House- and Senate-passed H.R. 6 .

Section 1268: Applicability. Except as specifically noted, this subtitle would not apply tothe U.S. government, a state or any political subdivision of the state, or foreign governmentalauthority operating outside the U.S. A similar provision was included in the House- andSenate-passed H.R. 6 .

Section 1269: Effect on Other Regulations. FERC or state commissions would not beprecluded from exercising their jurisdiction under otherwise applicable laws to protect utilitycustomers. A similar provision was included in the House- and Senate-passed H.R. 6 .

Section 1270: Enforcement. FERC would have authority to enforce this provision undersections 306-317 of the Federal Power Act. A similar provision was included in the House- andSenate-passed H.R. 6 .

Section 1271: Savings Provisions. Persons would be able to continue to engage in legalactivities in which they have been engaged, or are authorized to engage in, on the effective date ofthis Act. This subtitle would not limit the authority of FERC under the Federal Power Act or theNatural Gas Act. A similar provision was included in the House- and Senate-passed H.R. 6 .

Section 1272: Implementation. Not later than 12 months after enactment, FERC would berequired to promulgate regulations necessary to implement this subtitle and submit to Congressrecommendations for technical or conforming amendments to federal law that would be necessaryto carry out this subtitle. A similar provision was included in the House- and Senate-passed H.R. 6 .

Section 1273: Transfer Resources. The Securities and Exchange Commission would berequired to transfer all applicable books and records to FERC. However, no time frame for transferof books and records is provided. A similar provision was included in the House- and Senate-passed H.R. 6 .

Section 1274: Effective Date. Twelve months after enactment, this subtitle would takeeffect.

Section 1275: Service Allocation. FERC would be required to review and authorize costallocations for non-power goods or administrative or management services provided by an associatecompany that was organized specifically for the purpose of providing such goods or services. Thissection would not preclude FERC or state commissions from exercising their jurisdiction under otherapplicable laws with respect to review or authorization of any costs. FERC would be required toissue rules within six months of enactment to exempt from the section any company and holdingcompany system if operations are confined substantially to a single state. This section was notincluded in either the House- or Senate-passed H.R. 6 .

Section 1276: Authorization of Appropriations. Necessary funds to carry out this subtitlewould be authorized to be appropriated. A similar provision was included in the House- andSenate-passed H.R. 6 .

Section 1277: Conforming Amendments to the Federal Power Act. The Federal PowerAct would be amended to reflect the changes to the Public Utility Holding Company Act of1935. (13)

Subtitle G -- Market Transparency, Enforcement, and Consumer Protection

Section 1281: Market Transparency Rules. Within 180 days after enactment, FERCwould be required to issue rules to establish an electronic system that provides information aboutthe availability and price of wholesale electric energy and transmission services. FERC wouldexempt from disclosure any information that, if disclosed, could be detrimental to the operation ofthe effective market or jeopardize system security. FERC would be required to assure thatconsumers in competitive markets are protected from adverse effects of potential collusion or otheranti-competitive behaviors that could occur as a result of untimely public disclosure oftransaction-specific information. This section would not affect the exclusive jurisdiction of theCommodity Futures Trading Commission with respect to accounts, agreement, contracts, ortransactions in commodities under the Commodity Exchange Act. FERC would not be allowed tocompete with, or displace, any price publisher or regulate price publishers or impose anyrequirements on the publication of information. Creation of market transparency rules was includedin the House- and Senate-passed H.R. 6 .

Section 1282: Market Manipulation. It would be unlawful to willfully and knowingly filea false report on any information relating to the price of electricity sold at wholesale or theavailability of transmission capacity with the intent to fraudulently affect data being compiled by afederal agency. It would be unlawful for any individual, corporation, or government entity(municipality, state, or power marketing administration) to engage in round-trip electricity trading. Round-trip trading is defined to include contracts in which purchase and sale transactions have nospecific financial gain or loss and are entered into with the intent to distort reported revenues, tradingvolumes, or prices.

Section 1283: Enforcement. The Federal Power Act would be amended to allow electricutilities to file a complaint with FERC and to allow complaints to be filed against transmittingutilities. Criminal and civil penalties under the Federal Power Act would be increased. Criminalpenalties would not exceed $1 million and/or five years imprisonment. In addition, a fine of $25,000could be imposed. A civil penalty not exceeding $1 million per day per violation could be assessedfor violations of sections 211, 212, 213, or 214 of the Federal Power Act.

Section 1284: Refund Effective Date. Section 206(b) of the Federal Power Act would beamended to allow the effective date for refunds to begin at the time of the filing of a complaint withFERC but not later than five months after such a filing. If FERC does not make its decision withinthe time-frame provided, FERC would be required to state its reasons for not acting in the providedtime-frame for the decision. A similar provision was included in the House- and Senate-passed H.R. 6 .

Section 1285: Refund Authority. Any entity that is not a public utility (including an entityreferred to under Section 201(f) of the Federal Power Act) and enters into a short-term sale ofelectricity would be subject to the FERC refund authority. A short-term sale would include anyagreement to the sale of electric energy at wholesale that is for a period of 31 days or less. Thissection would not apply to electric cooperatives, or any entity that sells less than 8 million megawatthours of electricity per year. FERC would have refund authority over voluntary short-term sales ofelectricity by Bonneville Power Administration if the rates charged are unjust and unreasonable. FERC would have authority over all power marketing administrations and the Tennessee ValleyAuthority to order refunds to achieve just and reasonable rates. Refund authority was provided forin the House-passed H.R. 6 .

Section 1286: Sanctity of Contract. Upon determining that failure to take action would becontrary to protection of the public interest, FERC would be authorized to modify or abrogate anycontract entered into after enactment of this section. FERC would not be able to abrogate or modifycontracts that expressly provide for a standard of review other than the public interest standard. Asimilar provision was included in the House-passed H.R. 6 .

Section 1287: Consumer Privacy and Unfair Trade Practices. The Federal TradeCommission would be authorized to issue rules to prohibit slamming and cramming. Slammingoccurs when an electric utility switches the customer's electric provider without the consumer'sknowledge. Cramming occurs when an electric utility adds additional services and charges to acustomer's account without permission of the customer. If the Federal Trade Commission determinesthat a state's regulations provide equivalent or greater protection, then the state regulations wouldapply in lieu of regulations issued by the Federal Trade Commission. The House-and Senate-Passed H.R. 6 would have required the Federal Trade Commission to issue rules to prohibitslamming and cramming.

Subtitle H -- Merger Reform

Section 1291: Merger Review Reform and Accountability. Within 180 days of enactment,the Secretary of Energy would be required to transmit to Congress a study on whether FERC'smerger review authority is duplicative with other agencies' authority and that would includerecommendations for eliminating any unnecessary duplication. FERC would be required to issuean annual report to Congress describing all conditions placed on mergers under section 203(b) of theFederal Power Act. FERC would also be required to include in its report whether such a conditioncould have been imposed under any other provision of the Federal Power Act. A similar provisionwas included in the House-passed H.R. 6 .

Section 1292: Electric Utility Mergers. The Federal Power Act would be amended to giveFERC review authority for transfer of assets valued in excess of $10 million. FERC would berequired to give state public utility commissions and governors reasonable notice in writing. FERCwould be required to establish rules to comply with this section. A similar provision was includedin the Senate-passed H.R. 6 .

Subtitles I and J -- Definitions and Conforming Amendments

Section 1295: Definitions. The definitions for "electric utility" and "transmitting utility"under the Federal Power Act would be amended. Definitions for the following terms would beadded to the Federal Power Act: electric cooperative, regional transmission organization,independent system operator, and commission.

Section 1297: Conforming Amendments. The Federal Power Act would be amended toconform with this title.

Title XIII -- Energy Tax Incentives

Sections 1300-1366. These sections are not addressed in this report. For information onthese sections, see CRS Report RL32042, Energy Tax Incentives in H.R. 6: TheConference Agreement as Compared with the House Bill and Senate Amendment .

Title XIV -- Miscellaneous

Subtitle A -- Rural and Remote Electricity Construction

Section 1401: Denali Commission. Established in 1998 by P.L. 105-277 , the DenaliCommission is a federal-state partnership designed to provide critical utilities, infrastructure, andeconomic support throughout Alaska. The conference report would authorize up to $5 millionannually to the Commission during FY2005-FY2011 for the Power Cost Equalization Program. Thelegislation also would make available up to $50 million annually during the period FY2004-FY2013,drawing upon federal royalties, rents, and bonuses from oil and gas leases in the NationalPetroleum Reserve in Alaska (NPR-A). This funding must be appropriated. These funds wouldbe used, among other purposes, for energy generation and development ranging from alternativesources to fossil fuels.

Section 1402: Rural and Remote Community Assistance. This section encourages grantsand loans to help rural communities where the electricity cost per kilowatt-hour is 150% of thenational average, grants and loans to the Denali Commission for similar purposes, and grants forareas where fuel cannot be shipped by surface transportation.

Subtitle B -- Coastal Programs

Section 1411: Royalty Payments Under Certain Leases. The lessee of a "covered leasetract" off the coast of Louisiana would be allowed to withhold royalties due to the United States ifit paid the state of Louisiana 44 cents for every dollar of the federal royalty withheld. This royaltyrelief would end when certain drainage claims were satisfied. This provision was taken from theHouse bill. The date that this section takes effect is changed from 2004 to 2008.

Section 1412: Domestic Offshore Energy Reinvestment. This would add a new Section32 at the end of the Outer Continental Shelf Lands Act (43 U.S.C. 1331 et. seq.) to return a portionof the federal revenues from offshore energy activities to affected coastal states to fund specifiedactivities. Representatives of states with offshore energy development have been seeking to returna significant portion of the federal revenues generated to these states, and particularly the coastalareas within these states that may be more affected by onshore and near-shore activities that supportthat development. Proponents of these proposals look to the rates at which funds are given tojurisdictions where energy development occurs within those jurisdictions on federal lands, and seekrevenues that will help coastal states respond to adverse onshore effects of offshore energydevelopment. Coastal destruction has received more attention in Louisiana, where many squaremiles of wetlands are being lost to the ocean each year.

A federal program to address the impacts of coastal energy development was enacted duringthe energy crisis of the late 1970s. Called the Coastal Energy Impact Assistance Program, it operatedbriefly, providing loans and grants to states through the federal Coastal Zone Management Program.

Current Law. There is no comparable program operating under in current law.

Conference Agreement. The conference agreement would create a new Domestic OffshoreEnergy Reinvestment Program. The program would be funded from a new Secure EnergyReinvestment Fund. The fund would receive deposits of all qualified revenues from energy activitieson the outer continental shelf (OCS). All spending from the fund would be subject toappropriation. These revenues would include $35 million in royalty income each year, plus allroyalty income above a specified amount that would generally increase annually (starting at $3.455billion in FY2004 and ending at $5.120 billion in FY2013), bonus bid income above $1 billion eachyear, interest income earned by the fund, authorized appropriations of up to $500 million annually,and repayments made because a recipient did not follow an approved plan when spending the money. If the royalty income were inadequate, deposits into this fund and two other federal funds thatalready receive money from this source (Land and Water Conservation Fund and HistoricPreservation Fund) would be reduced by the same proportion. The Congressional Budget Office hasreportedly estimated that the fund would total about $1 billion, and that Louisiana would receivealmost 50% of this amount. However, any changes in assumptions could make the estimate varygreatly.

Coastal states where energy activities occur offshore and coastal political subdivisions inthose states would be eligible to receive money from the fund. Eligible states and politicalsubdivisions are defined in the legislation. Allocations among eligible states would be determinedby a formula that accounts for energy revenues generated offshore in federal waters that lie betweenoutward extensions of the state's lateral boundaries over the past 10 years. Each coastal state is topass along 35% of the total it receives to eligible coastal political subdivisions, with the allocationamong these subdivisions in each state to be based on a formula that considers population, lengthof coastline, distance from leased tracts, and amount of outer continental shelf support activitieswithin that subdivision.

Each state could use these funds to implement a plan it develops that would improveenvironmental quality and address the impacts of offshore energy activities. All plans must beapproved by the Secretary of the Interior before states could receive funds. Plans must describe howrecipients will evaluate the effectiveness of their implementation efforts. Each eligible state withan approved plan would receive at least 5% of the total available amount each year. Authorized usesof the funds would be limited to (1) conserving, protecting or restoring coastal areas, includingwetlands; (2) mitigating damage to or protecting fish, wildlife, or natural resources; (3) payingreasonable planning assistance and administrative costs; (4) implementing federally approved plansor programs to minimize the effects of natural disasters, and; (5) funding onshore infrastructure andpublic service projects that mitigate impacts of outer continental shelf activities. Revisions andamendments to plans would have to be approved by the Secretary. In addition, a new coastalrestoration program would be established using 2% of the funds available each year to assess theeffects of coastal habitat restoration techniques and develop new technologies, develop improvedmodels to predict ecosystem change, and identify economic options to address socio-economicconsequences of coastal degradation. This program would be administered by the Secretaries of theInterior and Commerce. In addition to the 2% funding, an appropriation of $10 million annuallywould be authorized.

Policy Context. This is the most recent of repeated efforts to allocate a portion of federaloffshore oil and gas revenues to coastal states to assist them in addressing the impacts of theseactivities. Recent Congresses, starting with the 105th, considered numerous similar legislativeproposals. 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 LegacyInitiative proposal in 2000, and also a one-time $150 million appropriation provided in the FY2001Commerce appropriations legislation ( P.L. 106-553 ) for coastal impact assistance.

Support for the CARA proposals, which would also have funded many related federal naturalresource protection programs, grew as the deficit of the early and mid-1990s was replaced byforecasts of a surplus, as protecting natural resources came to be viewed as part of the effort toaddress sprawl, and as efforts and support to secure federal funding for coastal resource protectionand restoration efforts grew. With the replacement of the surplus forecast with deficit forecasts andchanging national priorities since the 9/11 terrorist attacks, broad support for wide-ranginglegislation like CARA has declined, but interest has remained in returning a portion of the moneycurrently paid to the federal government by private companies leasing offshore areas to thoselocations most affected by the offshore activity.

Subtitle C -- Reforms to the Board of Directors of TVA

Sections 1431-1434: Changes to Board of Directors and Staff Appointments. Currently,three people are appointed by the President to serve on the Tennessee Valley Authority (TVA) Boardfor nine-year terms. The President also designates the chairman. Historically, the board membershave been involved in the day-to-day operation of TVA. The conference bill would establish a ChiefOperating Officer (CEO), who would have the authority to offer competitive salaries to topexecutives. The number of presidential appointments to the TVA Board would expand to nine;however, the term length would be shortened to five years, and board members would meet quarterlyto serve principally in an oversight function. The board members would designate the chairman.

Subtitle D -- Other Provisions

Section 1441: Continuation of Transmission Security Order. On August 28, 2003, theSecretary of Energy issued Order No. 202-03-2, allowing the Cross Sound Cable betweenConnecticut and Long Island to begin transmitting electric power. The conference bill would requirethe order to remain in effect unless rescinded by federal statute.

Section 1442: Review of Agency Determinations on Gas Projects. This section wouldamend the Natural Gas Act, giving the D.C. Circuit Court of Appeals exclusive jurisdiction overdisputes involving "unreasonable delay" of a natural gas pipeline project certificated by FERC. Unreasonable delay would mean the failure of a permitting agency to take action within a year afterthe date of filing for the permit in question, or within 60 days after the issuance of a FERCcertificate. There is no explicit timeline in existing law for issuance of ancillary permits andlicenses, and that would consolidate authority in one court. This fast-tracking measure wouldaddress delays occurring after FERC had issued a certificate giving a pipeline project the go-ahead.The provision is directed at delays by other agencies in issuing environmental permits and otherapprovals needed to begin construction of a certificated project.

Section 1443: Attainment Dates for Downwind Ozone Nonattainment Areas. Thissection, which was not in the House or Senate versions of the bill but was added during theconference, would extend Clean Air Act deadlines for areas that have not attained ozone air qualitystandards if upwind areas "significantly contribute" to their nonattainment. Under the 1990 CleanAir Act Amendments ( P.L. 101-549 ), ozone nonattainment areas were classified in one of fivecategories: Marginal, Moderate, Serious, Severe, or Extreme. Areas with higher concentrations ofthe pollutant were given more time to reach attainment. In return for the additional time, they wererequired to implement more stringent controls on emissions. Failure to reach attainment by thespecified deadline was to result in reclassification of an area to the next higher category and theimposition of more stringent controls. Areas such as Dallas-Fort Worth, for example, classified asSerious, were required to reach attainment by 1999. If they did not do so, the law required that theybe reclassified (or "bumped up") to the Severe category, with a new deadline of 2005, and morestringent controls.

For a variety of reasons, EPA has generally not reclassified areas when they failed to reachattainment by the statutory deadlines. In several cases, the agency granted additional time to reachattainment on the grounds that a significant cause of the area's continued nonattainment waspollution generated outside the area and transported into it by prevailing winds. EPA was sued overits failure to bump up five of these areas; in the first three cases decided (Washington, D.C., St.Louis, and Beaumont-Port Arthur, Texas), the agency lost. As a result, EPA has taken steps toreclassify the three areas.

The conference bill would roll back these reclassifications and extend attainment deadlinesin areas affected by upwind pollution to the date on which the last reductions in pollution necessaryfor attainment in the downwind area are required to be achieved in the upwind area. While this datemight vary, it would appear to be 2004, 2005, or 2007 in most areas affected by the current standard. The language in the conference bill may give EPA flexibility to extend the deadlines beyond thosedates, however, and it would also apply to the agency's new standard for average ozone levels duringan eight-hour period. Deadlines for attainment of the 8-hour ozone standard have not yet beenestablished, so it is difficult to say how this section might affect them.

Section 1444: Energy Production Incentives. Congress may regulate interstate commerceunder Article 1, Section 8, Clause 3 (the Commerce Clause) of the Constitution. The states may notunduly burden interstate commerce even in the absence of federal regulation. However, Congressmay expressly authorize the states to take an action that would otherwise be an unconstitutionalburden on interstate commerce. State tax incentives that offer benefits solely to energy producedwithin the state may, depending on their design, raise constitutional concerns. The conference billwould expressly authorize the states to offer certain tax incentives that may otherwise be animpermissible burden on interstate commerce. Under the bill, the states would be allowed to providetax incentives for the in-state production of (1) electricity from in-state coal burned at a power plantusing clean coal technology, (2) electricity from renewable sources, and (2) ethanol.

Section 1445: Use of Granular Mine Tailings. This section, which was added inconference, amends the Solid Waste Disposal Act (SWDA, 42 U.S.C. 6961 et seq.) and affects onlythe Tar Creek Mining District. Located in northeastern Oklahoma, Tar Creek is a former lead andzinc mining area of approximately 40 square miles and is one of the largest Superfund hazardouswaste cleanup sites. The mine tailings (residue, referred to as "chat") are deposited in hundreds ofpiles and ponds in the area, and contain lead and other heavy metals. Residential communities arelocated among the piles, some of which are nearly 200 feet high, and approximately 25% of thechildren living on the site have elevated lead concentration levels in their blood, according to aMarch 2000 EPA report. (14)

The conference bill would direct the EPA Administrator to establish criteria for the safe andenvironmentally protective use of the granular mine tailings for cement or concrete projects, and forfederally funded highway construction projects. The criteria would include an evaluation of whetherto establish numerical standards for the concentration of lead and other hazardous substances in thetailings, and EPA would be required to consider their current and past use as an aggregate forasphalt, as well as the environmental and public health risks and benefits of their use intransportation projects.

Title XV -- Ethanol and Motor Fuels

Subtitle A -- General Provisions

Section 1501: Renewable Content of Motor Vehicle Fuel. Section 1501 would require theuse of renewable fuel in gasoline. Renewable fuels include ethanol, biodiesel, and natural gasproduced from landfills and sewage treatment plants. The conference report would require the useof 3.1 billion gallons of renewable fuel in 2005, increasing to 5.0 billion gallons in 2012. After2012, the percentage of renewable fuel in gasoline would be required to equal the percentage in2012. The Environmental Protection Agency would be required to promulgate regulations for thegeneration and trading of credits between entities; in this manner refiners and blenders who couldnot meet the requirement would be able to purchase credits from those refiners or blenders whoexceeded their requirement.

This provision is similar to provisions in the House and Senate versions of H.R. 6 . The House version, however, would have required only 2.7 billion gallons in 2005, increasing to5.0 billion gallons in 2015. The Senate version would have required 2.3 billion gallons in 2004,increasing to 5.0 billion gallons in 2012. Ethanol production was approximately 2.1 billion gallonsin 2002.

Policy Context. The Clean Air Act Amendments of 1990 established the ReformulatedGasoline (RFG) program. Among its provisions is a requirement that RFG contain oxygen. The twomain ways to meet the requirement are the use of MTBE and ethanol. However, MTBE (methyltertiary butyl ether) has been found to contaminate groundwater, and there is interest in banning thesubstance (see Sec. 1504). Because some states have acted to limit the use of MTBE, and becauseof the potential federal ban, there is interest in eliminating the oxygen standard as well (see Sec.1506).

The ethanol industry has benefitted significantly from the oxygen requirement, and some areconcerned about the future of ethanol in the absence of the requirement. Further, proponents of thefuel see ethanol use as a way to limit petroleum consumption and dependence on foreign oil. Thus,the interest in establishing a renewable fuels standard. However, opponents of ethanol have raisedconcerns that the fuel is too costly, that the efficiency of the ethanol fuel cycle is questionable, andthat the potential for groundwater contamination by ethanol-blended fuels has not been fully studied.

Section 1502: Fuels Safe Harbor . This section would provide a "safe harbor" for renewablefuels and fuels containing MTBE (i.e., such fuels could not be deemed defective in design ormanufacture by virtue of the fact that they contain renewables or MTBE). The effect of thisprovision would be to protect anyone in the product chain, from manufacturers to retailers, fromliability for cleanup of MTBE and renewable fuels or for personal injury or property damage basedon the nature of the product (a legal approach that has been used in California to require refinersto shoulder liability for MTBE cleanup). Were liability for manufacturing and design defects ruledout, plaintiffs would need to demonstrate negligence in the handling of such fuels to establishliability -- a more difficult legal standard to meet.

The conference version provides a safe harbor for renewable fuels, MTBE, and fuelscontaining them, as did the House bill. The Senate bill did not include MTBE, or fuels containingit, in the safe harbor. The conference version also differs from the House- and Senate-passed billsin setting an effective date of September 5, 2003, for the safe harbor, rather than the date ofenactment. This effective date would protect oil and chemical industry defendants from defectiveproduct claims in about 150 lawsuits that were filed in 15 states after that date.

Section 1502 (1503) : MTBE Transition Assistance. This section would amend the CleanAir Act to authorize $2 billion ($250 million in each of FY2005-FY2012) for grants to assistmerchant U.S. producers of MTBE in converting to the production of other fuel additives (includingrenewable fuels), unless EPA determines that such fuel additives may reasonably be anticipated toendanger public health or the environment. Both the House and Senate versions of the billauthorized a smaller program ($750 million). Appropriations would remain available until expended.

Sections 1503-1504 (1504-1505) : Ban on the Use of MTBE. The use of MTBE in motorvehicle fuel would be prohibited after December 31, 2014, except in states that specifically authorizeits use. In the Senate version of the bill, a ban would have been implemented four years after the dateof enactment; there was no ban in the House bill. EPA could allow MTBE in motor vehicle fuel inquantities up to 0.5% in cases the Administrator determines to be appropriate (Sec. 1503 (1504) ) . The bill would also allow the President to make a determination, not later than June 30, 2014, thatthe restrictions on the use of MTBE should not take place. The National Academy of Sciences wouldconduct a review of MTBE's beneficial and detrimental effects on environmental quality or publichealth or welfare, including costs and benefits by May 31, 2014 (Sec. 1504 (1505) ) .

Section 1505 (1506) : Elimination of Oxygen Requirement and Maintenance of ToxicEmission Reductions. This section would amend the Clean Air Act to eliminate the requirementthat reformulated gasoline contain at least 2% oxygen. This requirement has been a major stimulusto the use of MTBE. The provision would take effect 270 days after enactment, except in California,where it would take effect immediately upon enactment.

The section would also amend the Clean Air Act to require that each refinery or importer ofgasoline maintain the average annual reductions in emissions of toxic air pollutants achieved by thereformulated gasoline it produced or distributed in 1999 and 2000. This provision is intended toprevent backsliding, since the reductions actually achieved in those years exceeded the regulatoryrequirements. A credit trading program would be established among refiners and importers foremissions of toxic air pollutants.

In addition, the section would require EPA to promulgate final regulations to controlhazardous air pollutants from motor vehicles and their fuels by July 1, 2004. It would also eliminatethe less stringent requirements for volatility applicable to reformulated gasoline sold in northernstates, by applying the more stringent standards of VOC (15) Control Region 1 (southern states).

Sections 1506-1507 (1507-1508) : Analyses and Data Collection. EPA would be requiredto publish an analysis of the effects of the fuels provisions in the Clean Air Act on air pollutantemissions and air quality, within five years of enactment (Sec. 1506 (1507) ) . DOE would berequired to collect and publish monthly survey data on the production, blending, importing, demand,and price of renewable fuels, both on a national and regional basis (Sec. 1507 (1508) ) .

Section 1508 (1509) : Reducing the Proliferation of State Fuel Controls. Section 211 ofthe Clean Air Act allows states to establish their own fuel standards with approval from EPA. Theconference report would bar the EPA Administrator from approving a state fuel restriction unlessthe Administrator, after consultation with the Secretary of Energy, determined that the fuel standardwould not cause fuel supply disruptions or adversely affect the ability to produce fuel for nearbyareas in other states.

Section 1509 (1510) : Fuel System Requirements Harmonization Study. The EPAAdministrator and the Secretary of Energy would be required to study all federal, state, and localmotor fuels requirements. They would be required to analyze the effects of various standards onconsumer prices, fuel availability, domestic suppliers, air quality, and vehicle emissions. Further,they would be required to study the feasibility of developing national or regional fuel standards. Thisprovision is similar to provisions in the House and Senate versions of the bill.

Section 1510 (1511) : Commercial Byproducts from Municipal Solid Waste andCellulosic Biomass Loan Guarantee Program. The Secretary of Energy would be required toestablish a loan guarantee program for the construction of facilities to produce fuel ethanol and othercommercial byproducts from municipal solid waste and cellulosic biomass. This provision is similarto provisions in the House and Senate versions, except that the House and Senate versions appliedonly to municipal solid waste (not cellulosic biomass).

Section 1511 (1512) : Bioconversion Resource Center. Subsection (b) would authorize $4million annually for FY2004 through FY2006 for the development of a resource center at theUniversity of Mississippi and the University of Oklahoma. The center would focus on thedevelopment of bioconversion technology using low-cost biomass for the production of ethanol. Subsection (c) would authorize $25 million annually for FY2004 through FY2008 for research,development, and implementation of renewable fuel production technologies in states with lowethanol production.

Section 1512 (1513) : Cellulosic Biomass and Waste-Derived Ethanol ConversionAssistance. The conference report would allow the Secretary of Energy to provide grants for theconstruction of ethanol plants. To qualify, the ethanol must be produced from cellulosic biomass,municipal solid waste, agricultural waste, or agricultural byproducts. A total of $750 million wouldbe authorized for FY2004 through FY2006. Neither the House nor the Senate version contained anysimilar provision.

Section 1513 (1514) : Blending of Compliant Reformulated Gasolines. This provisionwould allow reformulated gasoline (RFG) retailers to blend batches with and without ethanol as longas both batches were compliant with the Clean Air Act. In a given year, retailers would be permittedto blend batches over any two 10-day periods in the summer months. Currently, retailers must draintheir tanks before switching from ethanol-blended RFG to non-ethanol RFG (or vice versa). TheHouse and Senate versions contained no similar provision.

Subtitle B -- Underground Storage Tank Compliance

Sections 1521-1533: Underground Storage Tank Provisions. Title XV, Subtitle B, wouldmake extensive amendments to Subtitle I of the Solid Waste Disposal Act, to enhance the leakprevention and enforcement provisions of the federal underground storage tank regulatory program,and to broaden the allowable uses of the Leaking Underground Storage Tank (LUST) Trust Fund.The conference report essentially incorporates the language of H.R. 3335 , theUnderground Storage Tank Compliance Act of 2003, which shares many similarities withSenate-passed S. 195 . The provisions would add new tank inspection (Sec. 1523) andoperator training requirements (Sec. 1524) ; prohibit fuel delivery to ineligible tanks (Sec. 1527) ;expand underground storage tank (UST) compliance requirements for federal facilities (Sec. 1528) ;and require EPA, with Indian tribes, to develop and implement a strategy to address releases on triballands (Sec. 1529) .

The provisions also would authorize states to use funds from the LUST Trust Fund to helpUST owners or operators pay the costs of remediating tank leaks in cases where the cost of cleanupwould significantly impair the ability of the owner or operator to continue in business (Sec. 1522) . EPA and states also would be authorized to use LUST funds to remediate oxygenated fuelcontamination (Sec. 1525) and conduct inspections and enforce federal and state UST releaseprevention and detection requirements (Sec. 1526) .

Section 1531 would authorize LUST Trust Fund appropriations of $200 million annually,FY2004 through FY2008, for remediating tank leaks generally, and another $200 million annuallyfor the same period for responding to leaks containing methyl tertiary butyl ether (MTBE) or otheroxygenated fuel additives (e.g., ethanol). (Other MTBE-related provisions are discussed above inSubtitle A.) Conforming and technical amendments are also included (Secs. 1532-1533) .

The House version of H.R. 6 would have authorized the use of $850 millionfrom the LUST Trust Fund for cleaning up underground storage tank leaks of fuels containingoxygenates (e.g., MTBE and ethanol). The Senate version of H.R. 6 proposed to authorizethe appropriation of $200 million from the Trust Fund for cleaning up MTBE and other ether fuelcontamination (from tanks and other sources). The Senate bill also would have authorized the useof LUST funds for enforcing the UST leak prevention program, and authorized new research andtechnical assistance programs.

Title XVI -- Studies

Section 1601: Study on Inventory of Petroleum and Natural Gas Storage. The Secretaryof Energy would have to report to Congress within a year of enactment on the amount of storagecapacity for petroleum and natural gas. While the oil and gas industry is subject to broad reportingrequirements under a variety of laws, this language would call for a comprehensive study of thenation's storage capability and the role it plays in the marketplace. The relationship between storagecapacity and price volatility could be significant in the current context of oil and natural gas markets-- which are experiencing another winter price spike.

Section 1602: Natural Gas Supply Shortage Report. Within six months of enactment, theSecretary of Energy would be charged with preparing a report on natural gas supply and demand. Thereport should contain recommendations on policies that would maintain the supply-demand balancein a growing market to provide reasonable and stable prices, encourage energy conservation anddevelopment of alternative energy sources, reduce pollution, and improve access to domestic naturalgas supplies.

Section 1603: Split-Estate Federal Oil and Gas Leasing and Development Practices. The Secretary of the Interior would conduct a review of how management practices by federalsubsurface oil and gas development activities affect privately owned surface users. The review woulddetail the rights and responsibilities of surface and subsurface owners, compare consent provisionsunder the Surface Mining Control and Reclamation Act of 1977 with provisions for oil and gasdevelopment, and make recommendations that would address surface owner concerns.

Section 1604: Resolution of Federal Resource Development Conflicts in the PowderRiver Basin. The Secretary of the Interior would report to Congress on plans to resolve conflictsbetween development of coal and coalbed methane in the Powder River Basin.

Section 1605: Study of Energy Efficiency Standards. DOE would be directed to have theNational Academy of Sciences study whether the goals of energy efficiency standards are best servedby focusing measurement at the site (energy end-use) or at the source (the full fuel cycle). Thisprovision relates to a previous Executive Order, which found that federal agencies should get credittoward meeting energy efficiency goals even where "source energy use declines but site energy useincreases." (16)

Section 1606: Telecommuting Study. DOE would be directed to study and report on theenergy conservation potential of widespread adoption of telecommuting by federal employees. Inthis effort, DOE would be required to consult with the Office of Personnel Management, GeneralServices Administration, and National Telecommunications and Information Administration.

Section 1607: LIHEAP Report. The Department of Health and Human Services (HHS)would be directed to report on how the Low-Income Home Energy Assistance Program could beused more effectively to prevent loss of life from extreme temperatures. In this effort, HHS wouldbe directed to consult with state officials.

Section 1608: Oil Bypass Filtration Technology. DOE and EPA would be required tojointly study the benefits of oil bypass filtration technology in reducing demand for oil and protectingthe environment. This study would include consideration of its use in federal motor vehicle fleetsand an evaluation of products and manufacturers.

Section 1609: Total Integrated Thermal Systems. DOE would be directed to study thepotential for integrated thermal systems to reduce oil demand and to protect the environment. Also,DOE would study the feasibility of using this technology in Department of Defense and other federalmotor vehicle fleets.

Section 1610: University Collaboration. DOE would be directed to report on the feasibilityof promoting collaboration between large and small colleges through grants, contracts, andcooperative agreements for energy projects. DOE would also be directed to consider providingincentives for the inclusion of small colleges in grants, contracts, and cooperative agreements. Thisprovision was in the House bill.

Section 1611: Reliability and Consumer Protection Assessment. Within five years ofenactment, and every five years thereafter, FERC would be required to assess the effects of electriccooperative and government-owned utilities' exemption from FERC ratemaking regulation undersection 201(f) of the Federal Power Act. If FERC found that the exemption resulted in adverseeffects on consumers or electric reliability, FERC would be required to make recommendations toCongress.

Table 1. Authorizations in H.R. 6 Conference Report and S. 2095 (in millions of dollars)Inthis table, text in italics indicates subcategories. Changes made by S. 2095 are in bold.

Source: Table prepared by CRS using the text of the Conference agreement of H.R. 6.

Table Notes:

This table shows funding that would be authorized including loans but not loan guarantees under the conference agreement for H.R. 6. The section number in the far left hand column is location in the bill of the authorizing language. When an activity is described a separatesection of the bill from where it is authorized, it is indicated in parentheses after the program title in column two.

The fourth column from the right, labeled "FY2004 -FY2008," provides a five-year subtotal for each line. This column has been included sothat amounts may be compared to similar five-year subtotals shown in the authorization tables for the House and Senate bills in CRS Report RL32033, Omnibus Energy Legislation (H.R. 6): Side-by-side Comparison of Non-tax Provisions.

Items that have been changed in S. 2095 are shown in bold. In the respective column, the old amount is shown in brackets. In theendnotes, details that were dropped from S. 2095 are placed in brackets and new information is in bold.

ss. Such sums as may be necessary.

a. Lump sum. No fiscal year indicated.

Endnotes:

1. Sec. 756. Funds go to the Environmental Protection Agency.

2. Sec. 771. Funds go to the National Highway Traffic Safety Administration in the Department of Transportation.

3. Sec. 949. [Plus up to $150 million per fiscal year for FY2004 - FY2013 from federal oil and gas leases issued under the Outer ContinentalShelf Lands Act (OCS) and the Mineral Leasing Act would be deposited into the fund. Revenues fluctuate year-to-year as a result of oil andgas prices and lease sales.] This provision was dropped in S. 2095.

4. Sec. 1401. Denali Commission also would receive up to $50 million per fiscal for FY2004 - FY2013, [from the federal share of federal oiland gas leases in the National Petroleum reserve in Alaska (NPR-A).] Funding is now subject to appropriations.

5. Sec. 1412. [Secure Energy Reinvestment Fund also would be funded from FY2004 to FY2013 by royalties under the Outer Continental ShelfLands Act.] An appropriation must be passed before funding may be drawn.

6. Sec. 1412. [Coastal Restoration and Enhancement would also receive 2% of amount deposited into the Secure Energy Reinvestment Fundper fiscal year.] An appropriation must be passed before funding may be drawn.