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Gas Promotion Bill is a Long Shot

Daniel Malloy, Post-Gazette Washington Bureau
Pittsburgh Post-Gazette

December 5, 2010

Environmentalists, energy industry both oppose measure

Washington -- Thwarted time and again on energy policy in this Congress, Senate Majority Leader Harry Reid has proposed a final bill that would spur natural gas production.

But with time running out on the lame-duck Congress, and environmentalists and industry opposed for different reasons, the bill remains a long shot for passage.

The Promoting Natural Gas and Electric Vehicles Act, as originally proposed, would provide $4.5 billion for natural gas vehicles, in the form of rebates for purchasers and subsidies for manufacturers. It would also give $1.5 billion to research for plug-in hybrid electric vehicles.

Mr. Reid was going to bring the bill to the floor earlier this month but withdrew it because the bill's co-sponsor, Sen. Orrin Hatch, R-Utah, objected. A Hatch spokeswoman said the senator didn't like the fact that the bill was paid for with a dramatic increase -- from 8 to 21 cents a barrel -- in a tax on companies for the oil spill liability fund.

He's not the only one with a beef.

Environmental groups lined up against the bill in a letter to Mr. Reid last week, protesting that it was a giveaway to the natural gas industry -- which has exploded in Pennsylvania due to the Marcellus Shale reserves -- without addressing environmental concerns over gas extraction.

"It's crazy that we would consider investing money in natural gas infrastructure and expanding the demand for natural gas when there are not basic environmental and public health protections in place to protect Pennsylvanians and all Americans from the effects of drilling," said Adam Garber, organizer for PennEnvironment.

Sen. Bob Casey, D-Pa., is the lead sponsor of the FRAC Act, which would require drilling companies to disclose all the chemicals used in the process of hydraulic fracturing -- in which water, sand and chemicals are blasted into rock formations to free the gas -- and would bring the process under federal regulation. Mr. Casey said he is still working on getting disclosure language into law, as the FRAC Act hasn't advanced.

"It may not be this vehicle," Mr. Casey said of Mr. Reid's bill. "But there may be another way to do it in the near term."

While the gas industry has fought regulation by the Environmental Protection Agency, a much more onerous prospect than the current state regulatory structure, more and more companies are disclosing the chemical compounds in the fracking fluid. Gas industry officials have argued against disclosure in the past because the fracking formulas are proprietary, but now several companies are moving to strike a balance between revealing the ingredients and giving away the recipe.

Last week, three major natural gas trade associations announced their support for an online database for disclosing fracking chemicals. The disclosure would be more comprehensive and more accessible than the material safety data sheets that drillers must have on site.

"I think it is a big step," said Jason Hutt, a partner in the environmental strategies group at Bracewell and Giuliani law firm in Washington who advises energy companies and manufacturers.

"Even though this did not get traction at the federal level in terms of registration, the industry is responding to that request from the environmental community."
Mr. Casey acknowledged the progress toward disclosure, but he is still looking for a legislative remedy.

"Some disclosure provisions, whatever they end up being, would be very helpful," he said. "I don't think we should rely on voluntary compliance."

With only a couple weeks left to legislate in this Congress, the Senate has a few more pressing items on its agenda, including an extension of the tax cuts signed by President George W. Bush, the new START weapons treaty with Russia and an extension of unemployment benefits. Mr. Reid has also indicated a willingness to move on a measure that would give legal status to illegal immigrants who arrived in the U.S. as children and attend college or serve in the military.

A consensus energy policy didn't develop this year in the Senate after failures on a cap-and-trade bill on carbon emissions, and even the Deepwater Horizon oil spill failed to galvanize action.

"Frustrating, in one word," Mr. Casey said.

But there's still hope for this relatively small measure, said Lee Fuller, executive director of natural gas lobby group Energy In Depth. Mr. Fuller said tax credits for natural gas could well be included in a catch-all tax bill that deals with expiring provisions such as the estate tax and alternative minimum tax. Mr. Fuller said the industry supports the tax provisions but would prefer a way to pay for it other than raising oil taxes.

"All those tax issues that are floating out there, if there is some process that puts all of them together or a major chunk of them together and partially pays for all of them, that would be a good place for Reid to try to slide this in," Mr. Fuller said.

"Nothing is ever done until Congress adjourns."