Sweeping new Senate bill addresses grid expansion, renewables funding

April 3, 2009
Katherine Ling, E&E reporter
A moderate Senate Democrat who participated in last year's "Gang of 10" energy discussions introduced sweeping legislation yesterday that would modernize the grid, expand offshore drilling, provide nuclear-power incentives and tap oil and gas revenues to fund renewable energy and efficiency.
"The energy crisis last summer caught the country flat-footed," Nebraska Sen. Ben Nelson said. "This bill intends to make sure that does not happen again," he said.
The measure flows from discussions that began last fall among 10 senators who formed a bipartisan group that tried to negotiate compromises on expanded outer continental shelf leasing and alternative-energy and conservation provisions, Nelson's office said in a statement. The group was unable to reach a compromise last year, although an extension of the renewable energy tax incentives did pass in other legislation.
Nelson's legislation emphasizes investment in an "energy superhighway" -- a high-voltage transmission line that could carry renewable energy from North Dakota, Nebraska, Oklahoma and other sparsely populated states to cities with high power demand. There are several other bills focusing on establishing a streamlined transmission process circulating in the Senate -- including one from Senate Majority Leader Harry Reid (D-Nev.), Sen. Jeff Bingaman (D-N.M.) and Sen. Byron Dorgan (D-N.D.).
Nelson's bill goes beyond other proposals, giving the Federal Energy Regulatory Commission not only siting authority for the superhighway transmission line but also backstop siting authority for "secondary connections" -- new lines or lines that are rerouted or converted to support the high-voltage system.
The measure also makes FERC the lead agency for all transmission siting on federal lands -- a significant issue in the West. The plan gives FERC a year to create a superhighway plan, with input from stakeholders, and gives Congress 30 days to approve or disapprove the proposal.
FERC would have to include in the plan a cost-allocation process, the incorporation of "smart grid" technology and a tariff rebate for renewable and nuclear energy production, according to a summary of the bill. The bill also provides additional funding mechanisms to build transmission for renewable resources.
Nelson's legislation would also set up an "energy security trust fund" generated by oil and natural gas revenues that would help fund incentives for renewable energy, biofuels and energy efficiency for vehicles and other sectors.
Regulating commodity futures
Another provision would require greater transparency and regulation over the commodity markets through position limits and greater trade reporting "to ensure market integrity for energy and agriculture commodities," the bill summary says. It would also place any trading of greenhouse gas emissions under the authority of the Commodity Futures Trading Commission.
The bill would also change the 2005 energy loan guarantee program by abolishing the "cross-collateralization" requirement that inhibits public power companies, simplify the project cost formula and create a new category for biofuels and their supporting infrastructure.
On the traditional energy production side, the bill would expedite the process for offshore drilling in areas considered the most productive, but it would provide a $3 per acre fee on non-producing leases.
Nuclear energy would receive a wish list of provisions such as a full production tax credit, more staff for the Nuclear Regulatory Commission, five-year accelerated depreciation for new nuclear power facilities, a "sense of the Senate" to encourage small-scale reactors and the construction of a spent fuel recycling research and development facility within one year of enactment.
The bill would also create a 12-member National Commission on Comprehensive Energy Policy and Global Climate Change in the legislative branch.
Nelson wants the legislation to affect the debate and spur discussion on energy policy, but he hasn't yet decided on a path forward, said Clay Westrope, a Nelson spokesman.
Reid says he intends to take energy legislation that the Senate Energy and Natural Resources Committee has started marking up and combine it with climate legislation. He said he plans to have the bill on the Senate floor this summer.