By Rich Heidorn Jr.
WASHINGTON — The U.S. Senate overwhelmingly passed its first major energy bill in almost a decade Thursday but faces a tight calendar to reach agreement with the House, where Republicans approved their own measure with little Democratic support.
The Senate’s Energy Policy Modernization Act of 2016 passed 85-12, with support of all but a handful of Republicans. The House’s North American Energy Security and Infrastructure Act cleared 249-170 in December with support from only three Democrats.
President Obama has threatened to veto the House bill but expressed support for most of the Senate provisions.
House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) said he hopes to craft a compromise that can clear both houses and win Obama’s approval.
Senate Energy Committee Chair Lisa Murkowski (R-Alaska) acknowledged some House Republicans won’t be pleased that the Senate bill permanently authorized the Land and Water Conservation Fund and did not end the controversial Department of Energy loan guarantee program.
“My hope is that the House takes a look at the strong vote over here,” she said in a press conference with the committee’s top Democrat, Sen. Maria Cantwell (D-Wash.), after the vote. “I think we have demonstrated, with the process that we have used here on the Senate side … we can work through issues. [The] calendar is a little more challenging,” she added, noting that a formal conference committee would require that both houses be in session at the same time.
Cantwell praised Murkowski’s stewardship of the bill. “Because of her willingness to work in a bipartisan fashion — have an open amendment process in the committee and on the floor and consider so many pieces of legislation by our colleagues — I think that was what the success in today’s resounding vote is about.”
The 424-page Senate bill authorizes increased spending on energy research, improves cybersecurity protections and encourages more efficient buildings and vehicles. It also adds taxpayer protections to the loan guarantee program and streamlines federal approvals of electric transmission, pipeline, hydropower and LNG facilities.
The bill won broad support by largely sidestepping polarizing issues such as climate change and oil and gas production. Nevertheless, there were some provisions that displeased environmentalists, including its support for accelerated approval of LNG export terminals.
And although it won the backing of the U.S. Chamber of Commerce, the conservative Heritage Foundation decried it as a “continuation of government meddling in the energy economy.”
Below is a summary of the provisions of interest to electric industry stakeholders. Bill sections are identified in parentheses.
Noting that the federal government is the single largest energy consumer in the country, the bill directs the head of each federal agency to reduce their building energy intensity by 2.5% annually through fiscal year 2025 (1017).
It also requires the Secretary of Energy to revise federal building energy efficiency performance standards (1016); develop an efficiency metric for data centers (1011); and support the updating of energy efficiency provisions in model building codes (1001).
The bill encourages federal agencies to implement energy and water conservation measures (1006) and extends the maximum length of utility energy service contracts from 10 to 25 years (1005).
It repeals the requirement that new federal buildings and those undergoing major renovations phase out fossil fuel-generated energy consumption by 2030 (1015).
The legislation also blocks a final rule establishing a condensing furnace efficiency standard absent a finding by an advisory group convened by the Energy Secretary that a nationwide requirement is “technically feasible and economically justified” (1103).
The bill cites a prediction that appliance standards put in place for more than 30 products since 2009 will reduce consumers’ utility bills by almost $1.8 trillion by 2030. It requires the Energy Department to establish a rebate program to encourage the replacement of inefficient electric motors (1101) and transformers (1102).
The manufacturing sector, which represents 12% of the gross domestic product, uses almost one-third of the primary energy in the U.S.
The legislation amends the Energy Independence and Security Act (EISA) of 2007 to direct the Energy Department’s Industrial Assessment Centers to coordinate with other federal manufacturing programs, the National Laboratories and energy service and technology providers, and the department’s Office of Energy Efficiency and Renewable Energy to provide onsite technical assessments to manufacturers seeking efficiency opportunities (1201).
It also expands the scope of technologies covered by Industrial Assessment Centers to include smart manufacturing technologies and provides the centers tools and training to provide technical assistance to manufacturers (1202). It directs the department to provide small and medium manufacturers access to high-performance computers at the National Labs (1203).
The bill authorizes research and development to reduce petroleum use in passenger and commercial vehicles (1306) and improve the efficiency of medium- to heavy-duty commercial, vocational, recreational and transit vehicles (1308) and Class 8 truck and trailer platforms (1309).
About 32% of reported cyberattacks involve the energy sector, the bill says. The bill establishes the Energy Department as the agency responsible for energy sector cybersecurity protections and directs it to carry out cybersecurity research and development (2002).
The bill adds a new section to the Federal Power Act (224) that gives the Secretary of Energy authority to order actions necessary to protect the grid from cyber threats in an emergency. It also orders FERC to permit entities to seek recovery of prudently incurred costs as a result of an emergency. The new FPA section also prohibits the unauthorized disclosure of critical electric infrastructure information (CEII) by FERC personnel or agents of the commission (2001), a provision apparently inspired by the controversy over former FERC Chairman Jon Wellinghoff’s public disclosures of information from a confidential FERC analysis on grid security. (See FERC Criticism of Ex-Chair Mounts.)
The bill also creates programs to identify and test supply chain vulnerabilities and response capabilities between the DOE and other agencies. It increases industry participation in information sharing and expands the department’s cooperation with the intelligence community (2002).
The Energy and Natural Resources Committee report on the bill refers to the federal permitting process for electric transmission as “notoriously slow and unpredictable,” citing NERC data that transmission projects take six to 15 years to engineer, site, permit and construct.
The Obama administration sought to improve coordination in federal agencies’ review of electric transmission facilities on federal land through a 2009 memorandum of understanding signed by nine agencies. To accelerate the deployment of seven pilot transmission projects, the administration in 2011 created a Rapid Response Team for Transmission with the nine signatories.
The bill codifies the Rapid Response Team and creates an ombudsperson at the Council of Environmental Quality to resolve intra-agency disputes or delays related to transmission permits (2309).
Section 215 of the Federal Power Act is amended to require regional reliability entities to submit to Congress and FERC within six months, and every three years thereafter, a report describing the state of and prospects for electric reliability. They are also required to submit a reliability impact statement (RIS) on any proposed federal rule they believe will affect the reliable operation of the bulk power system. The statements are to be submitted to FERC for forwarding to the proposing agency, which “shall consider the RIS and include a detailed response in the final rule” (4301).
It also provides liability protection for generators ordered by DOE to run for grid reliability to insulate them from litigation over exceeding their environmental permits (4303).
The Senate committee called the federal review process for natural gas pipelines “complex and cumbersome,” noting that the Secretary of the Interior lacks authority to grant pipelines permission to cross National Parks — requiring an act of Congress. “This issue has come to the forefront in recent years because of growing demand for natural gas in the Northeast and rising natural gas production in the Marcellus Shale (e.g., Pennsylvania). The limited infrastructure that connects the two regions is greatly constrained, and the area is comprised of significant National Park holdings,” the committee said.
The bill designates FERC as the lead agency for all federal authorizations and National Environmental Policy Act compliance related to natural gas transportation; says such authorizations should be issued within 90 days after applications are deemed complete; and orders FERC to establish an interagency schedule and refer all interagency disputes to the CEQ for resolution. Agencies that do not act within the 90-day deadline would be required to explain delays to Congress and FERC and provide plans for eliminating the delay (3103).
Five LNG projects in Louisiana, Florida, Texas and Maryland have received final authorizations to export a total of 6.5 Bcfd. As a result, the Energy Information Administration expects the U.S. to become a net exporter of natural gas by 2020.
LNG projects require both Energy Department authorization to export the commodity and approval from FERC, which has jurisdiction over the terminals. The bill requires the department to issue a final decision on applications to export natural gas to countries that do not have free trade agreements with the U.S. within 45 days after completion of NEPA reviews of LNG facilities (2201).
The bill also requires the Secretary of Energy to submit within one year a study on the economic impacts of LNG exports, addressing manufacturers’ concerns that exports will raise domestic gas prices (3102).
Distributed Energy Resources, Storage
The bill requires the Secretary of Energy to conduct R&D and a demonstration program to address challenges identified in DOE’s 2013 Strategic Plan for Grid Energy Storage (2301). The department would be required to develop model grid architecture and a set of future scenarios to examine the impacts of different combinations of resources on the grid and to determine whether any additional standards should be developed to ensure the interoperability of the grid and associated communications networks (2302).
The bill requires the Energy Department within two years to provide Congress with an evaluation of the performance of the electric grid and a description of the quantified costs and benefits associated with the changes evaluated under the scenarios developed under section 2302 (2306).
When requested by a state, the department would partner with states and regional organizations to develop electric distribution plans (2307).
It also requires RTOs and ISOs to submit reports to FERC within six months identifying barriers to the deployment of distributed energy systems and microgrid systems. The reports must include potential changes to the operational requirements and costs associated with interconnecting these resources (2310). The Energy Department is to undertake a study of net energy metering (2311).
The bill seeks to simplify what the Senate committee called “a Byzantine” relicensing process for hydropower projects, noting that more than 250 projects totaling 16 GW will need new licenses in the next decade. Hydropower supplies 6% of U.S. electricity and 52% of renewable power. Relicensing currently takes eight to 10 years.
To reduce permitting backlogs, the bill designates FERC as the agency responsible for setting a binding licensing schedule and coordinating all federal authorizations. It authorizes the chairman of the CEQ to resolve interagency disputes to ensure timely decision making; requires FERC administrative law judges to preside over trial-type hearings on issues of material fact; and orders the commission to establish a voluntary pilot program to consider a regionwide approach to hydropower licensing (3001).
It also extends through fiscal year 2025 the incentives for hydroelectric production and efficiency improvements contained in the Energy Policy Act of 2005 (3002). It reinstates the license for Clark Canyon Dam in Montana and extends the deadline for starting construction for three years (3003). It also authorizes FERC to extend the construction deadline for the Gibson Dam in Montana for six years (3004).
The bill urges the Secretary of Interior to ‘‘significantly increase’’ geothermal production from federal lands and asks the U.S. Geological Survey to identify sites capable of producing 50 GW of geothermal power within 10 years (3005, 3006).
It also allows geothermal development by co-production of electricity from oil and gas leases on federal lands (3007) and creates a noncompetitive leasing process through which existing geothermal leaseholders on federal lands can lease adjoining lands without rebidding (3008).
Research and Development Funding
The bill authorizes spending of $500 million over 10 years on energy storage R&D, $290 million through 2021 on projects involving marine and hydrokinetic energy and $2 billion on technologies to improve the grid, including microgrids. However, Congress often appropriates far less than originally authorized.
Coal, Carbon Capture
The legislation repeals the existing EPACT 2005 coal programs and establishes a new coal technology program including R&D, large-scale pilot projects and demonstration projects. It authorizes $610 million annually from 2017 to 2020, and $560 million for 2021 (3401, 3402).
It requires the Energy Department to submit a report to Congress on its ability to host privately funded fusion and fission reactor prototypes at DOE-owned sites (3501), and removes the requirement that the project be built at Idaho National Laboratory (3502).
The legislation establishes the 21st Century Energy Workforce Advisory Board at the Energy Department to develop a strategy for developing a skilled workforce for the energy sector, including underrepresented populations (3601), and establishes a four-year pilot program to award competitive grants for job training programs that lead to an industry recognized credential (3602).
DOE Loan Program
The bill changes DOE’s Section 1703 loan guarantee programs created by EPACT 2005 to prohibit the subordination of taxpayer interests to those of private investors. It also sets a minimum 25% of credit subsidies to be paid by borrowers (4001) and amends EPACT 2005 to establish the terms for state participation in loan guarantees (4002).
The bill also orders the Comptroller General to issue a report on the effectiveness of DOE’s advanced fossil loan guarantee program and other incentive programs for advanced fossil energy (4003).
The Energy and Interior departments are required to establish an Interagency Coordination Committee, co-chaired by the agencies’ secretaries, to identify “energy-water nexus activities” across the federal government; improve coordination of R&D activities; and create a Nexus of Energy and Water Sustainability (NEWS) office (4101).
Holding RTOs Accountable
The committee expressed skepticism about organized RTO markets, saying their low prices are undermining the finances of nuclear generation and questioning whether they are producing “meaningful price signals” to indicate where new supply is needed. Reflecting the opinions of the American Public Power Association and other critics, the committee said RTO “capacity markets have been controversial … with a number of parties calling for their reform or elimination.”
RTOs and ISOs are required to report to FERC within six months on their reliability, capacity resources, wholesale electric prices, generation diversity and the ability of public power entities to self-supply capacity (4302).