This summer, in an 84-3 vote, the United States Senate moved forward a wide-ranging piece of bipartisan energy legislation, the Energy Policy Modernization Act. The nearly 800-page bill tackles everything from the security of the electrical grid to exports of natural gas and is considered the first significant broad-based change in the nation’s energy laws in nearly a decade. Provisions include more streamlined processes for the construction of energy efficient buildings as well as pollution-cutting measures that could address the climate-warming effects of greenhouse gases.
Most prominent are the provisions on how best to speed the export of domestically produced natural gas and promote renewable energy production.
At present, the two chambers are in formal negotiations to resolve differences between the Senate and House versions of the bill. After that, it is expected to go to the President seeking his signature.
The law’s progress this year is a sign of a shift in overall energy production, pricing and environmental legislation. It comes at a time when the nation’s energy landscape has changed dramatically. For decades, the nation’s legislative focus was on spurring domestic energy production and on reducing dependence on foreign sources of oil. With improvements in energy extraction methods and efficiencies in exploration, production and storage, the US is the world’s leading producer of both oil and gas, and the use of wind and solar power is increasing as other costs decline.
Notably, new environmental regulations that are going into effect under the Obama Administration are causing certain electric utilities to close coal-fired power plants and consider building business models and making investments that focus on natural gas production and alternative sources of energy.
New business opportunities have arisen for natural gas companies that want to export their products, for alternative energy providers, for companies that have technology that can help secure the electrical grid against terrorism or natural disaster, and for developers and contractors that know how to construct smart buildings that conserve energy. This bill has provisions that could help all of them.
The bill was shepherded through the Senate by members of both parties. It represents a consensus on the less-controversial issues that it deals with and has been described by its leading supporters, Senators Lisa Murkowski (R-AK) and Maria Cantwell (D-WA), as helping to align the nation’s oil, gas and electric systems with the changing ways in which energy is produced and consumed today. Murkowski and Cantwell are, respectively, the chair and the ranking minority member of the Senate Energy Committee.
President Barack Obama has said that he supports many of the Senate bill’s provisions but has problems with certain of its provisions. GovTrack US, a nonpartisan publication that covers Congress, has given the bill an approximately 37 percent chance of final passage into law.
The Senate bill received broad support in the energy industries and more mixed blessings from environmental groups. Among the supporters of the bill were the United States Chamber of Commerce, the Alliance of Automobile Manufacturers, the Alliance to Save Energy and the Pew Charitable Trusts.
Many environmentalists, while unhappy that the bill, in their view, did nothing to reduce the nation’s dependence on fossil fuels, did support the bill’s emphasis on energy conservation and smart buildings.
The below points summarize the bill’s most important provisions:
- Expedite the export of natural gas by reducing red tape that, industry says, has stalled the approval of applications for permits to export it. The bill requires the Department of Energy to accelerate the approval of permits to build coastal terminals for shipping natural gas abroad. This provision requires the Department to make a decision on an application for an LNG project within 45 days of the completion of an environmental assessment. An industry blog noted in May in response to the bill, that “companies, recognizing the need [for LNG worldwide], continue to submit applications to the federal government for LNG export terminal facilities. Yet, due to an open-ended review process, these significant opportunities slip down the rabbit hole in a process riddled with bureaucratic red tape and delay.”
- Promote renewable energy by requiring operators of electricity lines, transformers, and other parts of the electrical grid to upgrade the system, with a focus on the creation of large-scale storage systems for electricity to accommodate the expanding production of wind and solar power. This would also help make the grid more distributed and resilient and would help protect the grid in the case of emergencies, both natural disasters and intentional attacks on the system.
- Promote investment in improved technologies such as smart buildings and smart grids, thus improving the energy efficiency of new construction of buildings. A new public-private partnership model would demonstrate and evaluate the potential of new “smart building” and “smart grid” technology. On average, the building sector uses more than 40 percent of the nation’s energy. The new technology, once implemented, is intended to save energy, help the environment and create new jobs.
- Enhance cybersecurity protections for the electrical grid, aiming to double the Energy Department’s recent investments in cybersecurity research and development and would provide for new public-private partnerships for information-sharing on threats to the grid. The improvement of cybersecurity for a wide range of critical infrastructure is a priority across the Administration and Congress.
- Improve energy efficiency by reauthorizing state energy programs, including the Weatherization Assistance Program, which helps low-income families who lack the resources to make their homes more energy efficient. The State Energy Program leverages federal investment with state and local funds to increase energy efficiency, develop alternative energy sources, promote energy development, and reduce energy dependency.
- Permanently extend the Land and Water Conservation Fund, which was due to sunset after 50 years in existence. The fund takes a portion of federal royalties from offshore oil drilling and uses them for matching grants to create and protect national parks, areas around rivers and lakes, national forests, and national wildlife refuges from development, and to provide matching grants for state and local parks and recreation projects. The Heritage Foundation and other conservative advocates had supported termination of the fund.
What does this mean for industry?
Until and unless the Energy Policy Modernization Act is passed into law, companies need not make huge accommodations.
There is some concern among industry that the bill will expand the federal government’s role in the energy. What the bill does indicate: a steep shift in legislative priorities, both delivering accelerated permitting for oil and gas drilling and curbing some of the detrimental effects of negative environmental output. Compliance with regulatory and legislative frameworks should be driven with an eye to innovation.
Learn more about the potential impact of this legislation by contacting the author.