[House Report 106-359]
[From the U.S. Government Publishing Office]



106th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    106-359

======================================================================



 
           ENERGY POLICY AND CONSERVATION ACT REAUTHORIZATION

                                _______
                                

October 1, 1999.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Mr. Bliley, from the Committee on Commerce, submitted the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 2884]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Commerce, to whom was referred the bill 
(H.R. 2884) to extend energy conservation programs under the 
Energy Policy and Conservation Act through fiscal year 2003, 
having considered the same, report favorably thereon with an 
amendment and recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     2
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     2
Hearings.........................................................     4
Committee Consideration..........................................     4
Committee Votes..................................................     4
Committee Oversight Findings.....................................     4
Committee on Government Reform Oversight Findings................     4
New Budget Authority, Entitlement Authority, and Tax Expenditures     4
Committee Cost Estimate..........................................     5
Congressional Budget Office Estimate.............................     5
Federal Mandates Statement.......................................     7
Advisory Committee Statement.....................................     7
Constitutional Authority Statement...............................     7
Applicability to Legislative Branch..............................     7
Section-by-Section Analysis of the Legislation...................     7
Changes in Existing Law Made by the Bill, as Reported............     8
Dissenting Views.................................................    10

                               Amendment

  The amendment is as follows:
  Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. ENERGY POLICY AND CONSERVATION ACT AMENDMENTS.

  The Energy Policy and Conservation Act is amended--
          (1) by amending section 166 (42 U.S.C. 6246) to read as 
        follows:
                   ``authorization of appropriations
  ``Sec. 166. There are authorized to be appropriated for fiscal years 
2000 through 2003 such sums as may be necessary to implement this 
part.'';
          (2) in section 181 (42 U.S.C. 6251) by striking ``September 
        30, 1999'' both places it appears and inserting in lieu thereof 
        ``September 30, 2003''; and
          (3) in section 281 (42 U.S.C. 6285) by striking ``September 
        30, 1999'' both places it appears and inserting in lieu thereof 
        ``September 30, 2003''.

SEC. 2. PURCHASE OF OIL FROM MARGINAL WELLS.

  (a) Purchase of Oil From Marginal Wells.--Part B of Title I of the 
Energy Policy and Conservation Act (42 U.S.C. 6232 et seq.) is amended 
by adding the following new section after section 168:
                 ``purchase of oil from marginal wells
  ``Sec. 169. (a) In General.--From amounts authorized under section 
166, in any case in which the price of oil decreases to an amount less 
than $15.00 per barrel (an amount equal to the annual average well head 
price per barrel for all domestic crude oil), adjusted for inflation, 
the Secretary may purchase oil from a marginal well at $15.00 per 
barrel, adjusted for inflation.
  ``(b) Definition of Marginal Well.--The term ``marginal well'' means 
a well that--
          ``(1) has an average daily production of 15 barrels or less;
          ``(2) has an average daily production of 25 barrels or less 
        with produced water accounting for 95 percent or more of total 
        production; or
          ``(3) produces heavy oil with an API gravity less than 20 
        degrees.''.
  (b) Conforming Amendment.--The table of contents for the Energy 
Policy and Conservation Act is amended by inserting after the item 
relating to section 168 the following:

``Sec. 169. Purchase of oil from marginal wells.''.

                          Purpose and Summary

    H.R. 2884, as amended, extends until September 30, 2003, 
the authority of the Department of Energy (DOE) to buy or lease 
oil for, operate, and draw down the Strategic Petroleum 
Reserve. The bill also extends authority for the United States 
to participate in the International Energy Agency until 
September 30, 2003.

                  Background and Need for Legislation

    The Energy Policy and Conservation Act (EPCA) was enacted 
on December 22, 1975, to deal with the chronic energy supply 
shortages, particularly petroleum supply shortages, experienced 
by the U.S. in the early 1970s. Among other things, EPCA 
authorized the creation of a Strategic Petroleum Reserve (SPR) 
capable of storing up to one billion barrels of oil to reduce 
the disruption from a cut-off in petroleum imports and to meet 
U.S. obligations under the International Energy Program (IEP). 
Other provisions in EPCA restrict exports of energy; regulate 
certain joint oil exploration ventures on the Outer Continental 
Shelf; set forth Corporate Average Fuel Economy (CAFE) 
standards; provide a limited antitrust exemption for U.S. oil 
companies that participate in the International Energy Program; 
and authorize the President to allocate oil supplies in an oil 
emergency in order to comply with the United States' obligation 
under the IEP.

                      Strategic Petroleum Reserve

    H.R. 2884 extends the EPCA authority to buy or lease oil 
for, operate, and draw down the Strategic Petroleum Reserve 
through September 30, 2003, for such sums as may be necessary. 
Absent this extension, authority for the SPR expires September 
30, 1999. The SPR costs approximately $160 million per year to 
operate, although recent maintenance and repair programs have 
led to higher costs in the past few years. DOE has requested 
funding of $159 million for Fiscal Year 2000.
    The SPR presently consists of six sites on the Gulf Coast 
in Texas and Louisiana. These sites currently contain about 
563.8 million barrels of crude oil and have a total storage 
capacity of 700 million barrels. The current storage level is 
equivalent to approximately 60 days of net U.S. imported oil 
consumption. By law, the SPR is required to contain one billion 
barrels of oil. However, recent budget constraints have forced 
the Department to end plans to expand the SPR's capacity and to 
stop buying oil for the SPR. In addition, Congress authorized 
three sales of oil from the Reserve for budgetary purposes over 
the objections of the Committee on Commerce. As a result, the 
SPR has gotten smaller rather than larger. This trend appears 
to have been reversed over the last year, with the acceptance 
by DOE of 28 million barrels of oil as an in-kind payment of 
royalties from oil production on Federal lands. Importantly, 
increasing energy consumption and diminishing domestic 
production has resulted in U.S. dependence on foreign oil 
imports continuing to grow.

                      International Energy Program

    H.R. 2884 also extends funding and authority for the U.S. 
to participate in the International Energy Agency (IEA) for 
such sums as may be necessary through September 30, 2003. 
Absent such an extension, U.S. participation in the IEA expires 
at the end of Fiscal Year 1999.
    The U.S. has participated in the IEA since 1974. The 
purpose of the IEA is to coordinate the responses of oil 
consuming nations to oil supply disruptions to minimize the 
global impact of those disruptions. EPCA authorizes the 
President to participate in the program and gives the oil 
companies a limited antitrust exemption for their 
participation.

                   Oil Purchases From Marginal Wells

    H.R. 2884 also contains a provision which grants the 
Secretary of Energy the authority to purchase oil from marginal 
wells at $15 per barrel, adjusted for inflation, whenever the 
price of oil falls below $15 per barrel, adjusted for 
inflation. Marginal wells are generally defined as wells that 
produce less than 15 barrels per day. Importantly, the 
provision does not require the Department of Energy to make 
such purchases, but merely gives them the option to do so, if 
feasible. The purpose of this provision is to assure that 
marginal wells, an important and significant source of oil, are 
not shut-in during periods of extraordinarily low oil prices.

                                Hearings

    The Subcommittee on Energy and Power held a hearing on 
September 23, 1999, on Reauthorization of Expiring Energy 
Policy and Conservation Act Programs. The Subcommittee received 
testimony from: The Honorable Robert Gee, Assistant Secretary 
for Fossil Energy, Department of Energy; Mr. Lee Fuller, Vice 
President of Government Relations, Independent Petroleum 
Association of America (IPAA), representing IPAA and the 
National Stripper Well Association; and Mr. Michael Canes, 
Senior Economic Adviser to the President, American Petroleum 
Institute.

                        Committee Consideration

    On September 23, 1999, the Subcommittee on Energy and Power 
met in open markup session and approved H.R. 2884 for Full 
Committee consideration, amended, by a voice vote. The Full 
Committee met in open markup session on September 29, 1999, and 
ordered H.R. 2884 reported to the House, as amended, by a voice 
vote, a quorum being present.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House requires 
the Committee to list the record votes on the motion to report 
legislation and amendments thereto. There were no record votes 
taken in connection with ordering H.R. 2884 reported. A motion 
by Mr. Bliley to order H.R. 2884 reported to the House, as 
amended, was agreed to by a voice vote, a quorum being present.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee held a legislative 
hearing and made findings that are reflected in this report.

           Committee on Government Reform Oversight Findings

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, no oversight findings have been 
submitted to the Committee by the Committee on Government 
Reform.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that H.R. 
2884, a bill to extend energy conservation programs under the 
Energy Policy and Conservation Act through Fiscal Year 2003, 
would result in no new or increased budget authority, 
entitlement authority, or tax expenditures or revenues.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                Washington, DC, September 30, 1999.
Hon. Tom Bliley,
Chairman, Committee on Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2884, a bill to 
extend energy conservation programs under the Energy Policy and 
Conservation Act through fiscal year 2003.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Kathleen 
Gramp.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

H.R. 2884--A bill to extend energy conservation programs under the 
        Energy Policy and Conservation Act through fiscal year 2003

    Summary: H.R. 2884 would extend the Department of Energy's 
(DOE's) authorities related to energy emergencies through 2003 
and would authorize the appropriation of such sums as necessary 
for the operation of the Strategic Petroleum Reserve (SPR) for 
fiscal years 2000 through 2003. The bill also would authorize 
the Secretary of Energy to purchase oil from certain marginal 
wells if the price of oil falls below $15 per barrel, subject 
to the availability of appropriated funds. This threshold price 
level, as well as the price to be paid by DOE for the oil, 
would be adjusted annually for inflation.
    CBO estimates that implementing this bill would cost about 
$1.4 billion over the 2000-2003 period, assuming appropriation 
of the necessary amounts. Because the bill would not affect 
direct spending or receipts, pay-as-you-go procedures would not 
apply.
    The bill contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state local, or tribal 
governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 2884 is shown in the following table. 
The costs of this legislation fall within budget function 270 
(energy).

----------------------------------------------------------------------------------------------------------------
                                                                  By fiscal year, in millions of dollars--
                                                           -----------------------------------------------------
                                                              1999     2000     2001     2002     2003     2004
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION
SPR spending under current law:
    Budget authority \1\..................................      160        0        0        0        0        0
    Estimated outlays.....................................      197       98       34        8        0        0

        SPR Operations Projected at the 1999 Level

Proposed changes:
    Estimated authorization level.........................        0      360      360      360      360        0
    Estimated outlays.....................................        0      232      328      352      360      128

               SPR spending under H.R. 2884

    Estimated authorization level \1\.....................      160      360      360      360      360        0
    Estimated outlays.....................................      197      330      362      360      360      128

           SPR Operations Adjusted for Inflation

Proposed changes:
    Estimated authorization level.........................        0      364      367      371      375        0
    Estimated outlays.....................................        0      234      333      360      372      135
SPR spending under H.R. 2884:
    Estimated authorization level \1\.....................      160      364      367      371      375        0
    Estimated outlays.....................................      197      332      367      368      372     135
----------------------------------------------------------------------------------------------------------------
\1\ The 1999 level is the amount appropriated for that year for the SPR development, operations, and management
  account.

    Basis of estimate: In the absence of specified 
authorizations, CBO assumes that the $160 million appropriated 
for the development, operation, and management of the SPR for 
fiscal year 1999 represents the level of funding needed to 
perform the functions authorized under current law. (This 
account does not include funding for purchasing oil for the 
reserve.) The table shows two alternative sets of authorization 
levels for fiscal years 2000-2003: one in which the funding for 
the SPR operations is not adjusted for anticipated inflation 
and a second that reflects an adjustment for inflation. For 
purposes of this estimate, CBO assumes that outlays for this 
account will follow historical trends.
    In addition to continuing SPR operations, CBO estimates 
that H.R. 2884 would authorize the appropriation of about $200 
million a year over the 2000-2003 period for the purchase of 
oil for the SPR. In the absence of an energy emergency, current 
law requires that appropriations for the purchase of oil for 
the reserve be authorized on an annual basis. This bill would 
provide such authority for fiscal years 2000 through 2003, 
subject to the terms and conditions in the bill. Specifically, 
if the market price of domestic oil decreases to an amount less 
than $15 per barrel, adjusted for inflation, the Secretary of 
DOE could purchase oil from ``marginal wells'' as defined in 
the bill. The purchase price would be $15 per barrel, adjusted 
for inflation.
    CBO's estimate of the cost of this provision is based on 
the expectation that oil prices could drop below the $15 per 
barrel threshold in the bill. Under our current oil price 
projections, for example, we estimate that there is about a 35 
percent chance that the annual average price of oil will be 
below the $15 per barrel threshold in the bill in each of the 
four years. For purposes of this estimate, we assume that the 
amount of oil purchased in any year would be limited by the 
rate and type of oil that can be stored in the SPR and other 
technical factors. Our estimated cost of about $200 million a 
year is equivalent to authorizing appropriations for the 
purchase of roughly 13 million barrels of oil a year.
    Pay-as-you-go considerations: None.
    Intergovernmental and private-sector impact: H.R. 2884 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on state, local, or 
tribal governments.
    Estimate prepared by: Kathleen Gramp.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for this legislation is provided in 
Article I, section 8, clause 3, which grants Congress the power 
to regulate commerce with foreign nations, among the several 
States, and with the Indian tribes.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


        Section 1. Energy Policy and Conservation Act Amendments

    Section 1 extends the EPCA authority to buy or lease oil 
for, operate, and draw down the Strategic Petroleum Reserve for 
such sums as may be necessary, through September 30, 2003. 
Absent this extension, authority for the SPR expires September 
30, 1999.
    Section 1 also extends funding and authority for the U.S. 
to participate in the International Energy Agreement until 
September 30, 2003, and authorizes such funds as may be 
necessary. Absent such an extension, U.S. participation in the 
IEA expires on September 30, 1999.

             Section 2. Purchase of Oil from Marginal Wells

    Section 2 grants the Secretary of Energy authority to 
purchase oil from marginal wells at $15 per barrel, adjusted 
for inflation, whenever the national average price of oil falls 
below $15 per barrel, adjusted for inflation. Marginal wells 
are defined as wells that produce less than 15 barrels of oil 
per day, wells that produce 25 barrels per day with 95 percent 
or greater of its total production being water, or wells that 
produce heavy oil with an API gravity of less than 20 degrees.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                  ENERGY POLICY AND CONSERVATION ACT

           *       *       *       *       *       *       *



                            TABLE OF CONTENTS

Sec. 2. Statement of purposes.
     * * * * * * *

                   Part B--Strategic Petroleum Reserve

     * * * * * * *
Sec. 169. Purchase of oil from marginal wells.
     * * * * * * *

        TITLE I--MATTERS RELATED TO DOMESTIC SUPPLY AVAILABILITY

           *       *       *       *       *       *       *


Part B--Strategic Petroleum Reserve

           *       *       *       *       *       *       *


                    [authorization of appropriations

  [Sec. 166. There are authorized to be appropriated for fiscal 
year 1999 such sums as may be necessary to implement this 
part.]


                    authorization of appropriations


  Sec. 166. There are authorized to be appropriated for fiscal 
years 2000 through 2003 such sums as may be necessary to 
implement this part.

           *       *       *       *       *       *       *



                  purchase of oil from marginal wells


  Sec. 169. (a) In General.--From amounts authorized under 
section 166, in any case in which the price of oil decreases to 
an amount less than $15.00 per barrel (an amount equal to the 
annual average well head price per barrel for all domestic 
crude oil), adjusted for inflation, the Secretary may purchase 
oil from a marginal well at $15.00 per barrel, adjusted for 
inflation.
  (b) Definition of Marginal Well.--The term ``marginal well'' 
means a well that--
          (1) has an average daily production of 15 barrels or 
        less;
          (2) has an average daily production of 25 barrels or 
        less with produced water accounting for 95 percent or 
        more of total production; or
          (3) produces heavy oil with an API gravity less than 
        20 degrees.

           *       *       *       *       *       *       *


                           Part D--Expiration

                               expiration

  Sec. 181. Except as otherwise provided in title I, all 
authority under any provision of title I (other than a 
provision of such title amending another law) and any rule, 
regulation, or order issued pursuant to such authority, shall 
expire at midnight, September 30, [1999] 2003, but such 
expiration shall not affect any action or pending proceedings, 
civil or criminal, not finally determined on such date, nor any 
action or proceeding based upon any act committed prior to 
midnight, September 30, [1999] 2003.

           *       *       *       *       *       *       *


                  TITLE II--STANDBY ENERGY AUTHORITIES

           *       *       *       *       *       *       *


                           Part D--Expiration

                               expiration

  Sec. 281. Except as otherwise provided in title II, all 
authority under any provision of title II (other than a 
provision of such title amending another law) and any rule, 
regulation, or order issued pursuant to such authority, shall 
expire at midnight, September 30, [1999] 2003, but such 
expiration shall not affect any action or pending proceedings, 
civil or criminal, not finally determined on such date, nor any 
action or proceeding based upon any act committed prior to 
midnight, September 30, [1999] 2003.

           *       *       *       *       *       *       *


                            DESSENTING VIEWS

    A major shortcoming of H.R. 2884 is the omission of 
reauthorization for export promotion programs for energy-
efficiency and renewable energy. The Council on Energy 
Efficiency Commerce and Trade (COEECT) and the Council for 
Renewable Energy Commerce and Trade (CORECT) were designed to 
help facilitate the export of U.S. energy-efficiency and 
renewable energy technology. These programs are needed now more 
than ever, making the failure of the Committee to include them 
in the reauthorization of the Energy Policy and Conservation 
Act a critical flaw in the bill.
    Regardless of one's view of the Kyoto Protocol on climate 
change, promoting exports of renewable energy and energy 
efficiency technology makes good sense. Both COEECT and CORECT 
were designed to help U.S. companies make contact with buyers 
in developing countries, facilitate innovative financing 
strategies, and promote the development of policies in 
developing nations that favor clean energy investments.
    We must ask why, with a soaring trade deficit, would we 
fail to support programs that are helping to sell American 
products in multi-billion dollar markets for energy equipment 
abroad, leaving U.S. manufacturers to be swallowed up by 
heavily subsidized competitors from other industrialized 
nations.
    These are tiny programs that are producing impressive 
results. Although the authorization of appropriation has 
expired, COEECT has been funded continuously. In the four years 
of its existence, funded at less than $1 million per year, 
COEECT has led over 100 U.S. producers of energy-efficient 
products to Australia, Brazil, Chile, China, Mexico, Portugal, 
Russia, the Philippines, Thailand, and other nations for 
focused meetings and workshops with foreign buyers, leveraging 
over $600,000 of in-kind company contributions, and resulting 
in over $7 million in completed sales to date, with over $10 
million worth of projects in the pipeline.
    Meanwhile, COEECT has worked hard in this country to alert 
the manufacturers of energy-efficient products to the 
opportunities available to them abroad. Many of these are small 
to medium-sized companies that do not have the resources to do 
extensive international marketing efforts. Through their work 
with COEECT, however, many of these U.S. companies have been 
able to make direct contact with key buyers around the world, 
increasing sales substantially and creating jobs here in the 
U.S.
    CORECT has a more woeful tale to tell. While similar 
positive results were being achieved on the renewable energy 
side, the export program for renewable energy has been zeroed 
out for the past two years by the Energy and Water Subcommittee 
of Appropriations. This will not be reversed unless the 
Committee reauthorizes this program. We should not be ceding 
energy policy decisions to the Appropriations Committee. In the 
business of wind turbines, photovoltaic cells, biomass 
combustion technologies and the production of other renewable 
energy technologies, U.S. companies are forced to go head to 
head against highly subsidized competitors from the 
Netherlands, Japan, and other nations. The failure of the 
Commerce Committee to reauthorize this program compounds this 
folly, making it even more difficult to restore CORECT funding 
in future years.
    There are many reasons why the U.S. government should 
support--even significantly expand--these successful, cost-
effective efforts to promote U.S. exports of renewable energy 
and energy-efficient technologies. These programs have cost us 
pennies and are yielding millions in results. We urge that 
issue be revisited in conference.

                                   John D. Dingell.
                                   Karen McCarthy.
                                   Gene Green.
                                   Bobby L. Rush.
                                   Ron Klink.
                                   Peter Deutsch.
                                   Frank Pallone, Jr.
                                   Sherrod Brown.
                                   Bart Stupak.
                                   Anna G. Eshoo.
                                   Lois Capps.
                                   Tom Barrett.
                                   Ed Markey.
                                   Ted Strickland.
                                   Edolphus Towns.
                                   Ralph M. Hall.
                                   Henry A. Waxman.
                                   Diana DeGette.
                                   Rick Boucher.
                                   Bart Gordon.
                                   Tom Sawyer.
                                   Albert R. Wynn.

                                  
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