Congress Passes Energy Legislation

Electricity

Culminating a six year effort, Congress passed comprehensive energy legislation and will send it to the President for signature. Today, the Senate overwhelmingly approved H.R. 6, “The Energy Policy Act of 2005,” by a vote of 74 to 26. On Thursday, the House approved the bill by a vote of 275 to 176. This final action by the Congress marks the conclusion of a bi-partisan process that addresses a wide span of issue areas in current and future U.S. energy policy.

Once enacted into law, the focus on energy policy will shift to the various agencies responsible for implementing these new laws. The legislation directs the agencies to conduct a significant number of studies on various sectors of the energy industry. In addition, many of the provisions are not self-implementing and will require agencies to develop rules and procedures for their application. Van Ness Feldman worked extensively on the provisions in this bill and are available to provide more extensive analysis and strategy recommendations upon request. Highlights of the legislation are as follows:

The Electricity Title of the bill:

Makes reliability standards mandatory;
Includes new authority for transmission siting and provides for incentive rates for transmission infrastructure;
Requires open access transmission by utilities that are not currently regulated by the Federal Power Act;
Increases the penalties that may be levied under the Federal Power Act and expands the scope of those penalties;
Creates new prohibitions on market manipulation and restrictions on corporations and persons found to have engaged in such;
Allows utilities to continue to use their transmission systems to serve their customers (so called “native load protection”);
Repeals PUHCA and increases FERC’s merger review authority; and
Repeals the mandatory purchase and sale requirements of PURPA upon a finding of access to competitive energy markets.

Natural Gas
The Natural Gas Title of the bill:

Gives FERC the exclusive jurisdiction to authorize the siting, construction, expansion and operation of liquefied natural gas (LNG) import terminals;
Codifies FERC’s policy allowing LNG terminals to determine their own economic relationships where the application is filed prior to 2015;
Allows states to conduct safety inspections on LNG terminals;
Allows natural gas companies to charge market-based rates for storage and storage related service for new natural gas storage capacity;
Provides for royalty relief for production from “marginal property” and for oil and gas drilling from deep water wells and deep wells in shallow waters;
Creates a pilot project in Wyoming, Montana, Colorado, Utah, and New Mexico designed to improve coordination of federal permits for oil and gas use authorizations on federal lands;
Increases requirements for the sharing of information and data by gas companies;
Increases criminal penalties that may be assessed under the Natural Gas Act (NGA) and Natural Gas Policy Act (NGPA) up to $1 million per day, increases civil penalties under the NGPA up to $1 million per day, and creates new civil penalties under the NGA;
Allows oil refiners to use a consolidated and streamlined permitting process at EPA;
Establishes a Coastal Impact Assistance Program that will provide $250 million per year from 2007 to 2010 for coastal states that have significant production and are not subject to moratorium (Louisiana, Texas, Mississippi, Alabama, California, and Georgia) for coastal restoration activities; and
Requires an inventory of oil and gas reserves in the Outer Continental Shelf.

Doug Smith, Janet Woodka & Curt Rich
Martindale-Hubbell