Platts Energy Week TV show: U.S. Senate must act by July for climate bill to pass

Washington - April 26, 2010

If U.S. President Barack Obama is to sign a climate-change and energy bill into law this year, the Senate must pass a measure by July at the latest, the head of a Washington-based non-profit said Sunday on Platts Energy Week. The new weekly half-hour television program, Platts Energy Week, focuses on the discussion and debate of U.S. energy policy.

"I think it's a challenge, but there is a chance it could get done," Eileen Claussen, president of the Pew Center on Climate Change told Platts Energy Week TV host Bill Loveless.

Senators John Kerry, a Massachusetts Democrat, Lindsey Graham, a South Carolina Republican, and Joseph Lieberman, a Connecticut Independent, are scheduled to unveil a bipartisan climate bill on Monday that would cut U.S. greenhouse gas emissions 17% below 2005 levels by 2020 and 80% below 2005 levels by 2050. The bill is expected to include an emissions cap-and-trade system for the electric utility sector, while providing a series of inducements for increase nuclear energy, offshore drilling and technologies that would capture and store carbon created coal combustion. The U.S. House of Representatives approved a climate bill last summer that would create an economy-wide emission cap-and-trade scheme.

Kerry, Graham and Lieberman are hoping their measure will be able to attract the 60 votes needed in the Senate to avoid a filibuster that would kill the bill. But chances for bipartisan bill were dealt a blow on Saturday when Graham threatened to pull his support for the proposal, citing what he said are plans by the White House and Senate Democrats to move on an immigration bill before tackling energy and climate change.

"Unless their plan substantially changes this weekend, I will be unable to move forward on energy independence legislation at this time. I will not allow our hard work to be rolled out in a manner that has no chance of success," he said in a letter to colleagues.

"Recent press reports indicating that immigration -- not energy -- is their priority have not been repudiated. This has destroyed my confidence that there will be a serious commitment and focus to move energy legislation this year. All of the key players, particularly the Senate leadership, have to want this debate as much as we do. This is clearly not the case," Graham added.

"I am very disappointed with this turn of events and believe their decision flies in the face of commitments made weeks ago to Senators Kerry, Lieberman and me. I deeply regret that election year politics will impede, if not derail, our efforts to make our nation energy independent," Graham said.

Claussen acknowledged that time is short for the Senate to act given upcoming congressional elections in November and an legislative agenda already crowded by financial reform, immigration and appropriations bills, as well an expected Senate confirmation vote on a nominee to replace retiring Supreme Court Justice John Paul Stevens.

The "big issues are the big ticket items," Claussen told Platts Energy Week. "Does this bill help protect the climate and enhance national security? Does it protect consumers and businesses from unreasonable price increases and does it help us innovate our way to a new, clean energy economy? Then you have all the difficult political issues like coal. What do you have in there for coal and coal-burning and coal-producing states?" Claussen said the bill's effect on agriculture and the energy-intensive manufacturing sector also be raised during the Senate debate.

The non-profit energy official said she also expects provisions in the Kerry-Graham-Lieberman bill that would encourage more oil and natural gas development on the Outer Continental Shelf could prove difficult. The offshore drilling language will be "controversial," she said. "Many in the environmental community and some coastal state senators have said it's a deal-breaker, but I don't see how you get to 60 votes without it."

During other interviews on Platts Energy Week, Richard McMahon of the Edison Electric Institute (EEI) and John Felmy of the American Petroleum Institute agreed that while financial reform legislation that could reach the Senate floor this week is "moving in the right direction," there are some details that must still be worked out before their respective industries can support the measure.

"We think there are some areas that have a little bit of vagueness that need to be improved on in terms of who is actually an end user,” said Felmy. It must be clear who is exempt from provisions that would impose mandatory clearing requirements for standardized over-the-counter derivatives and require them to trade on a registered swap execution facility or designated contract market.

Language approved by the Senate Agriculture Committee earlier this month would exempt end users -- a term used to describe physical hedgers such as energy producers and distributors -- from the mandatory clearing requirement.

"If you're a producer and you engage in a derivative trade with a bank, will that be covered" by the clearing requirement?" Felmy asked. "If it is, it will come at a much higher cost [for producers] and affect oil and gas prices."

McMahon agreed saying it's important to the utility industry that those kinds of deals be exempted from the clearing requirement." To not do so would be a "detriment to our customers," he explained, adding that EEI, which represents investor-owned electric utilities, estimates the clearing requirement could cost the utility industry $250 million to $400 million a year in increased margin charges.

"At the end of the day in the utility business we essentially have three options -- borrow the money and try to pass those financing costs through to our customers, stop doing as much risk management, which would expose our customers to market volatility, or cut back on capital programs that are being used for smart grid, renewable energy and other programs designed to bring about a revival and expansion of the utility system."

McMahon said he believes there is growing momentum in Congress to pass a financial reform bill, adding that "goal is good, but the question is, can we work out the details?"

Platts Energy Week host Bill Loveless, long-time chief editor of Platts’ Inside Energy, brings nearly three decades of energy journalism experience to the anchor chair.

Platts Energy Week airs weekly at 8 a.m. Eastern time on Sunday mornings on W*USA TV in Washington, D.C. and is available online at www.plattsenergyweektv.com shortly thereafter. The program follows an interview format featuring guests from the Obama administration, Congress, government agencies, think tanks, the investment community and the energy industry.

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