By: Kristin Van Veen-Hincke/Vikki Cooper & Associates
July/August 2010

“This is going to change the face of American energy,” Sen. John Kerry (D-MA) said at the unveiling of the Senate’s energy bill. The long awaited “pollution reduction and investment” legislation was introduced in the Senate on May 12. The legislation, called the American Power Act (S.1733), was drafted by Senators Kerry and Joe Lieberman (I-CT). Senator Lindsey Graham (R-SC) initially worked on the bill, but pulled support for the legislation before it was introduced. The nearly 1,000 page document requires those companies responsible for more than 50 percent of energy-related greenhouse gas emissions to pay for and eventually lessen those emissions.

“The American Power Act will finally change our nation’s energy policy from a national weakness into a national strength,” Senator Kerry said in a press release. “We can finally tell the world that America is ready to take back our role as the world’s clean energy leader. This is a bill for energy independence after a devastating oil spill, a bill to hold polluters accountable, a bill for billions of dollars to create the next generation of jobs, and a bill to end America’s addiction to foreign oil and protect the air our children breathe and the water they drink.”

“We are proud to have support from a growing and unprecedented coalition of business, national security, faith, and environmental communities, who are energized to work hard to pass his bill this year,” Senator Lieberman said in a press release. “America has a lot to gain from getting started now.”

The main goal of the Senate bill is to reduce harmful emissions by 17 percent from 2005 levels by 2020 and by 83 percent by 2050. It requires a national set of tailpipe emission standards. In response to the recent BP accident, the legislation allows coastal states to ban drilling within 75 miles of their coastlines. Those who agree to offshore drilling would share in nearly 40 percent of the profits.

However, approximately 13 percent of that revenue would have to be earmarked for conservation projects. Adjacent states could also veto drilling if there was concern that the state’s shoreline could sustain damage from a crude oil spill. The bill also calls for “liability mechanisms to ensure adequate  funds are available to mitigate the economic and environmental impacts of offshore drilling accidents,” while also calling for additional safety measures geared toward workers and the environment as well as new studies of spill mitigation procedures and tools. These provisions are contained in the part of the bill that is focused on reducing U.S. dependence on foreign oil. This section also provides $7 billion a year for improvements in highways and mass transit systems and a reduction in the greenhouse gas emissions currently emitted in the U.S. According to a statement released by the Senators, this also includes “money for the Highway Trust Fund, almost $2 billion for state and local projects that reduce oil consumption and greenhouse gas emissions, and almost $2 billion for TIGER (Transportation Investment Generating Economic Recovery) grants.”

Carbon emissions would be a source of revenue for the government provided by this legislation. In an effort to promote the natural gas fuel market as well as electric car technology and other alternative energy expertise, $7 billion in incentives has been added to the carbon emission permitting program.

Nuclear energy is also addressed with $54 billion in loan guarantees, a more streamlined permitting process, a manufacturing credit to encourage new investment, and as much as $500 million in risk insurance for delayed construction on current nuclear power plants. Not to be left out, the coal industry would receive $2 billion a year for research into clean coal technologies as well as funding for national studies on processes such as carbon capture and sequestration.

In response to concerns raised by the Waxman-Markey bill in the House, Kerry and Lieberman devised a plan that would protect emission credits and permits from Wall Street speculators. With this legislation, only “regulated carbon market participants” could participate in the market giving jurisdiction over the market to the Commodity Futures Trading Commission. An auction would be held four times a year for permits, and price limits would be set in an effort to prevent manipulation of the market. In an effort to treat refiners and fuel providers in a more reasonable manner, the bill proposes that instead of imposing a domestic carbon cap-and-trade system, refiners would bid or trade for allowances.

In a summary of the bill, Kerry and Lieberman said, “Since a robust domestic refining industry is critical to our national security, we needed to make a change. We took fuel providers out of the market. Instead of every refinery participating in the market for allowances, we made sure the price of carbon was constant across the industry. That means all fuel providers see the same price of carbon in a given quarter.”

Opponents of the bill including Oklahoma Senator James Inhofe (R), ranking minority member of the Senate Environment and Public Works Committee, charge that this legislation is the same idea that has been rejected by the Senate previously. Inhofe called the bill “the same old cap-and-trade scheme that the Senate has defeated three times since 2003. In fact, it has a strong resemblance to the disastrous Waxman-Markey bill. Only now, along with paying skyrocketing electricity prices, consumers will pay a gas tax,” he said. Inhofe references the bill’s “linked fee” which is for transportation fuels. Inhofe has stated that he believes this is “Washington speak for a gas tax.”

Senate Majority Leader Harry Reid (D-NV) praised the bill while remarking that it would need “significant” bipartisan backing to pass. He vowed to seek action on the bill during this session calling on the recent accident in the Gulf as motivation to address energy legislation in 2010.

Supporters of the bill include oil giants Shell, BP and ConocoPhillips.