Hitchin’ a Ride: Pork Projects in the Energy Bill

Like a massive freight train, the revamped omnibus energy bill (S. 2095, the "Energy Policy Act of 2003") is a hulking behemoth, indifferent to its constitution and barreling forward with reckless abandon. Such enormous legislation presents to members of Congress a perfect opportunity to quietly attach provisions that benefit the special interests to which they are beholden. Hitching a ride on the fate of the big energy bill is the only chance these blatant giveaways have of success.

Among the pork projects in the energy bill are the following:

COAL

  • $800 Million to Excelsior Energy for a New Coal Power-Generating Plant. [Title IV, Subtitle B, Sec. 413] A gift to this Minnesota company would come in the form of loan guarantees for the construction of a new 1,000-megawatt coal-gasification power plant.  The provision was included in neither the House nor the Senate version of the bill; rather, it was slipped in by the Republican-controlled energy conference committee, a negotiating body charged with reconciling the differences between House and Senate legislation, not inserting new language.  But in an effort to secure an important vote for the bill, Sen. Pete Domenici (R-N.M.), one of the co-chairmen of the conference committee, added the provision as a favor to Minnesota’s Republican Senator, Norm Coleman.[1]

  • Hundreds of Millions of Dollars in Loan Guarantees to West Virginia Company. [Title IV, Subtitle B, Sec. 412] Authorizes federal loan guarantees for a coal gasification plant owned by Massey Energy in West Virginia. Massey Energy and its Board of Directors have given nearly $200,000 to federal candidates since 2001; 99 percent of which has gone to Republicans. The company’s director, James H. “Buck” Harless, is a “Pioneer” fundraiser for President George W. Bush.

  • Hundreds of Millions of Dollars in Loan Guarantees for Louisiana Power Plant. [Title IV, Subtitle B, Sec. 414] Provides hundreds of millions of dollars in federal loan guarantees for a petroleum coke gasification plant owned and operated by three companies: TECO Energy, ChevronTexaco, and Citgo. The plant will be located in Lake Charles, Louisiana. Since 2001, these three companies have given federal candidates nearly $1.8 million in campaign contributions, with three-quarters of this total going to Republicans. These three companies have also spent an additional $14 million lobbying Congress and the White House over this same time period. Moreover, the wisdom of providing hundreds of millions of dollars in taxpayer loan guarantees for a Louisiana power plant must be questioned, especially in light of the fact that TECO Energy may soon be forced to jettison its investment in power plants in Arkansas and Arizona due to their poor earnings in a glutted power market. [i]

  • Hundreds of Millions of Dollars in Loan Guarantees for North Dakota Power Plant. [Title IV, Subtitle B, Sec. 415] Provides hundreds of millions of dollars in federal loan guarantees for a coal power plant to be located in North Dakota. This provision was inserted without a vote during the conference committee process and directly benefits two energy concerns: North Dakota-based Basin Electric Power Cooperative and Ohio-based Nacco Industries. Basin Electric Power Cooperative owns the Great Plains Synfuels facility in Beulah, North Dakota, an alternative fuels plant originally financed mostly by the federal government and later sold to the Cooperative for a tiny fraction of the amount invested in the plant. The plant gasifies lignite coal to produce synthetic natural gas as well as fertilizers and other chemicals. Nacco Industries would benefit from the loan guarantees because it has long-term contracts to supply Basin Electric with lignite from the nearby Freedom Mine, which Nacco owns. In addition, Basin Electric and Nacco Industries co-own the Antelope Valley Station, a coal-fired power plant at the same location as the Great Plains Synfuel Plant and the Freedom Mine.Since 2001, Basin Electric and Nacco Industries have contributed over $100,000 to federal politicians, with contributions evenly split between Republicans (51%) and Democrats (49%). And Senator Byron Dorgan (D-ND) and the Democratic party of North Dakota have received $7,200 in contributions from Basin Electric and Nacco since 2001.

NUCLEAR

  • $1.1 Billion for a Nuclear-Hydrogen “Co-generation” Facility in Idaho. [Title VI, Subtitle C] This radioactive boondoggle—which makes a mockery of clean energy goals by using nuclear energy to produce hydrogen—would be constructed at the Idaho National Engineering and Environmental Laboratory, which is also designated as the “lead laboratory” for the project.

  • Expedited Licensing Process for Louisiana Energy Services (LES). [Title VI, Subtitle B, Sec. 637(a)] This measure would (1) require the U.S. Nuclear Regulatory Commission (NRC) complete the licensing process for a “uranium enrichment facility” within two years of the submittal of a license application; (2) strictly limit the criteria considered by the NRC in determining the need for the plant; and (3) classify such a plant’s waste (depleted uranium) as “low-level” while essentially exonerating LES from responsibility for its proper disposition (this duty is shifted to the U.S. Department of Energy). This language is intended to benefit LES, a multinational consortium of big energy companies (including utility-holding giants Entergy and Exelon) that has been forced out of communities in Louisiana and Tennessee where it had attempted to secure a site for a new facility that would produce fuel for nuclear reactors.  The British-Dutch-German consortium Urenco (based in the United Kingdom) owns 52% of LES, with Westinghouse and the utilities Entergy (New Orleans, La.), Exelon (Chicago, Ill.) and Duke Energy (Charlotte, N.C.) splitting the remaining 48%.  New Mexico’s Sen. Pete Domenici—the chairman of the Senate Energy and Natural Resources Committee—courted LES to explore a site for its plant in his home state, and this provision is a blatant favor to the company, enacting into law many of the company’s requests to the NRC for an expedited licensing process.  Since 2002, LES has hired three different lobbying firms (The Advocacy Group, The Smith-Free Group, and Winston & Strawn), paying them nearly $150,000 so far to lobby Congress and the White House on this provision.  In addition to these lobbying expenditures, the five companies comprising LES and five of their Washington lobbyists have combined to contribute nearly $4.3 million to federal candidates since the 2002 election, with two-thirds of that total going to Republicans.

  • $500 Million Subsidy in Forgone Waste Disposal Costs to Uranium Enrichment Companies. [Title VI, Subtitle B, Sec. 637(b)] Caps the amount paid by operators of new uranium enrichment plants to the U.S. Department of Energy for the disposal of depleted uranium hexafluoride (UF6), a waste product from the enrichment process. This measure seeks to provide an incentive for the development of new facilities by Louisiana Energy Services (LES) and USEC, Inc. by limiting the cost for waste disposal at $.90 per kilogram of UF6, $2.10 less than the standard rate of $3.00/KgUF6 (established by Congress when USEC—then the United States Enrichment Corporation—was privatized in 1996). According to an analysis by David Orr, this would amount to a $512 million windfall to LES and USEC, Inc. over the lifespan of their respective plants.

OIL & GAS

  • $2 billion in Cash to MTBE Manufactures to Aid in Phasing-out the Product. [Title XV, Subtitle A, Sec. 1502] This provision would “provide assistance to merchant producers of MTBE in making the transition from producing MTBE to producing other fuel additives.” This massive giveaway is entirely unwarranted, especially since the petrochemical industry lobbied for the Clean Air Act amendments that mandated oxygenate additives to gasoline, thereby creating a market for MTBE, which is derived from a byproduct of gasoline refining that had theretofore been a liability for the industry. These oil companies were well aware of the potential hazards of MTBE; now they are being rewarded for their negligence and malfeasance. Prominent defenders of MTBE producers -- Reps. Joe Barton (R-Tex.), Tom DeLay (R-Tex.), and Billy Tauzin (R-La.) -- have taken in over $278,000 from the 11 major companies producing MTBE since 2001.

  • Exonerates Negligent Polluters from Up to $2 Billion in Clean Up Costs. [Title XV, Subtitle B, Sec. 1522] Would require taxpayers to pay for the clean up of sites contaminated by gasoline and other toxic chemicals from leaking underground storage tanks, even in cases where culpability is identifiable in a person or company, as long as the cost of clean up would have the effect of “significantly impairing the ability of the owner or operator to continue in business.”

  • Limits Competition in Liquid Natural Gas Market, Potentially Forcing Higher Prices for Consumers. [Title III, Subtitle B, Sec. 320]  Requires the Federal Energy Regulatory Commission (FERC) to certify without “open access” conditions terminals for liquid natural gas (LNG), whether on land or offshore, that are used exclusively to handle affiliate LNG supplies. This provision takes away FERC’s ability to condition an LNG terminal certification (such as a condition requiring open access) solely because all the LNG suppliers using the terminal facility will be affiliates of the terminal owner. One of the first benefactors of this provision will be ExxonMobil for its proposed $600 million terminal off the coast of Texas.  By prohibiting FERC conditions on the certificate, LNG terminal owners and affiliate LNG suppliers will be allowed to negotiate whatever fee they like for affiliate “terminalling” services, even though there is clearly no competition involved.  As a result, utility ratepayers will subsidize risky LNG enterprises of ExxonMobil and its peers by having to pay market fees “negotiated” between affiliates.
  • Enormous Subsidies to Natural Gas Companies. [Title XIII, Subtitle E, Sec. 1361] This is a NEW provision that was not in the filibustered version of the energy bill (H.R. 6). This “Credit for Alaska Natural Gas” provides a huge subsidy to the natural gas companies proposing the construction of a natural gas pipeline from Alaska to the contiguous 48 states. In the case of a drop in the price of natural gas, the language herein becomes, in effect, a huge subsidy by setting the price floor at $1.35 per thousand cubic feet. If the market price falls below that amount, the federal government will pay the difference to the private companies for a maximum benefit of 52 cents per thousand cubic feet. The credit—which would be in effect for the next 25 years—is in addition to loan guarantees and other oil & gas subsidies of up to $18 billion. Only three companies stand to benefit: British Petroleum, ExxonMobil, and ConocoPhillips. ExxonMobil alone enjoyed $21.5 billion in after-tax profits in 2003. So why do they need these handouts? Perhaps related is the fact that these three companies have contributed over $2.4 million to federal candidates since 2001—with 84% of the total going to Republicans.
  • Billions of Dollars in Tax Credits for 15 Companies Using “Unconventional” Energy Sources [Title XIII, Subtitle C, Sec. 1359] Renews a tax credit (known as “Section 29”) available to energy producers using “unconventional” energy sources. One of the several unconventional energy sources is for energy produced from coalbed methane. Currently, Section 29 tax credits apply only to wells drilled between 1979 and 1993, and to production from those wells through 2002. The energy bill expands and extends the tax credit to 2007. Public Citizen has documented that only 15 companies stand to benefit from this tax change. The energy bill will also allow companies to earn the tax credit for methane “extracted up to 10 years in advance of coal mining operations,” which will result in a large increase of new drilling in unmolested areas simply to extract the methane gas.  Chalk this up as a taxpayer subsidy for already-lucrative companies that enjoyed cumulative after-tax profits of over $56 billion between 1999 and 2002. 

The  coalbed methane drilling process involves the massive removal of groundwater. Disposal of this byproduct water into rivers and streams can lead to contamination of surface waters, increased erosion and sedimentation, and destruction of wildlife habitat.

  • Statutory Exemptions for Big Oil. [Title III, Subtitle B, Sec. 327 & Sec. 328] Exempts from the Safe Drinking Water Act a coalbed methane drilling technique called “hydraulic fracturing,” a potential polluter of underground drinking water. One of the largest companies employing this technique is Halliburton, for which Vice President Richard Cheney acted as Chief Executive Officer in the 1990s. This exemption would kill lawsuits by Western ranchers who say that drilling for methane gas pollutes groundwater by injecting contaminated fluids underground. Sec. 328 further exempts certain oil and gas construction activities from storm water runoff pollution regulations under the Clean Water Act. Only 16 companies stand to significantly benefit from the tax credit for “unconventional” energy sources and this exemption from clean water laws.  These companies gave nearly $15 million to federal candidates—with more than three-quarters of that total going to Republicans. Moreover, the 16 companies spent more than $70 million lobbying Congress.

ELECTRICITY

  • Multi-billion Dollar Tax Break for Electric Utilities. [Title XIII, Subtitle F, Sec. 1373] $3.5 billion tax break (from 2004 to 2008) for electric utilities who sell their transmission assets to a Regional Transmission Organization (RTO). This is a major incentive for some utilities to comply with the Federal Energy Regulatory Commission’s radical deregulation plan. The electric utility industry contributed over $26 million to candidates for federal office since 2001, with two-thirds of that total going to Republicans.

  • Allows Corporations to Gouge Electricity Ratepayers [Title XII, Subtitle D, Sec. 1241] Allows a monopoly industry (e.g., transmission line owners) to charge consumers more by replacing cost-of-service ratemaking with “incentive-based” rate making—an absurdity in an inherently monopolistic industry like transmission. Rather than improving reliability (its stated purpose), this incentive-based rate making will simply allow corporations to gouge consumers, who will receive no guarantee that their higher rates will lead to better service. This measure demonstrates a blatant disregard for the recent experience of the telecom industry, which went on a billion-dollar spending spree installing new cable lines following the deregulatory Telecommunications Act of 1996. But this building binge in the inherently monopolistic lines sector resulted in massive over-capacity, which directly led to the crash of many telecommunications companies.

EMISSIONS CONTROL

  • Eviscerates Clean Air Laws to Appease Powerful Members of Congress. [Title XIV, Sec. 1443]  Amends the Clean Air Act to extend deadlines by which large metropolitan areas must meet federal guidelines governing acceptable ozone levels, without requiring more stringent air pollution controls.   This is a gift to powerful Texas Republicans such as energy conferee Joe Barton and House Majority Leader Tom DeLay, whose home districts are beset by smog problems.  Conforming to Clean Air rules would require polluting industries in and around those districts to invest in technology to control their emissions.



[1]Hotakainen, Rob.   “Energy bill may aid Range; Coleman faces decision on Alaskan drilling.”  Star-Tribune.  29 Sept. 2003.

[i]“Troubled Florida Utility TECO May Be on Verge of Unplugging Plants.” St. PetersburgTimes. 5 Jan. 2004.

[2]Brasher, Philip.   “Pork for Iowa?”  Des Moines Register.  8 Nov. 2003.

[3]“Congress’ energy bill would provide green bonds for Syracuse mall project.”  Newsday.com.  Associated Press.  18 Nov. 2003.