Taxes, Liability, Incentives and an ‘Energy Bill’

Senate Majority Leader Harry Reid (D-NV) introduced the long-awaited “energy bill” on Tuesday, legislation that has no cap-and-trade, no utility-only CO2 limits, nor any renewable energy portfolio standards. All to the better…

The legislation is being called “Clean Energy Jobs and Oil Company Accountability Act.” (Reid statement, bill summary, text.)

The Wall Street Journal’s coverage of the bill is straightforward, “Energy Bill Would End Oil Claims Cap“:

WASHINGTON—A draft energy bill unveiled Tuesday would eliminate the cap on damage claims oil companies must pay for spills, and offer new federal subsidies for natural gas and electric vehicles. But the proposal by Senate Democrats faces an uphill fight….

Mr. Reid’s draft bill would lift the current $75 million cap on economic damages paid to residents and small businesses by oil companies after oil spills. It would also provide various subsidies to encourage the production and purchase of natural-gas and electric vehicles. A new program would encourage homeowners to make energy efficiency upgrades.

The measure’s estimated $15 billion cost would be financed by raising the per-barrel surcharge that oil companies contribute to the federal Oil Spill Liability Trust Fund.

Jack Gerard, president and CEO of the American Petroleum Institute, reacted to the bill with a critical statement, “Senate Energy Bill Threatens Jobs, Economic Growth“:

[The] liability provision sticks out as a jobs killer. Requiring an unattainable level of insurance coverage for domestic energy producers on the Outer Continental Shelf will force the vast majority of American companies out of U.S. waters, according to insurers. 

This would cut domestic production, kill American jobs, slow economic growth and cost billions in federal oil and natural gas revenues.

The Journal also refers to the concerns that the bill’s goal of switching transportation to natural gas, coming at the same time that environmental groups and some politicians are calling for increased regulation of hydrofracturing, could produce a price spike as demand outstrips supply. This release last week from the energy consumers explains the objections, “Coalition of Consumers Urges Senate Not to Legislate Natural Gas Demand in Energy/Climate Bill.”

In a letter to Senate Majority Leader Harry Reid, 67 industrial and agriculture energy consumers — representing farm and food concerns and makers of chemicals, fertilizer, glass, paper and steel — expressed concern about artificially creating power and transportation sector demand for natural gas through legislative incentives. Doing so, they said, would cause the type of fuel switching that has ripple effects through the economy.

Paul Cicio, president of the Industrial Energy Consumers of America (IECA), said legislating new demand would prompt increased price volatility and higher prices. Higher natural gas prices also mean higher electricity costs.

“The impact will be felt by all consumers, not just industrial users,” Cicio said. “Farmers will pay more for fertilizer, natural gas to dry their crops and electricity to run their irrigation systems; homeowners will pay more to heat and cool their homes; and manufacturers would be confronted with greater competitiveness challenges which threaten jobs at home.”  

The bill also includes $5 billion in Home Star energy rebates to encourage homeowners to install such things as energy-efficient doors and windows. The NAM has supported Home Star as a stand-alone bill.

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