Energy bill a special-interests triumph Part 3

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http://www.boston.com/news/nation/articles/2004/10/04/energy_bill_a_special_inte\

rests_triumph?pg=7

 

Page 7 of 9 -- While environmentalists like to demonize the profitable

oil industry, Maisano said, oil companies need financial incentives to

search for reserves in untested areas. For example, some potential oil

reserves are more expensive to get at, because they are deep in the

earth; without a tax break, most companies wouldn't take the financial

risk of drilling there, he said.

 

 

But critics, who include many fiscally conservative Republicans along

with Democrats, insist that the tax breaks got out of hand during all

the closed-door meetings, with many benefiting interests as narrow as

individual companies. When the original version of the bill was

finished, it had an estimated $20 billion in tax credits and subsidies

to the energy industry.

 

But analysts believe the biggest financial windfall for the industry

is in the deregulation provisions, which energy companies spent

hundreds of millions of dollars to secure.

 

First on the to-do list was the elimination of a longtime regulation

called the Public Utility Holding Company Act. Little known outside

the energy and financial world, the regulation is a critical issue for

the electrical industry, whose vast team of lobbyists persuaded

negotiators in Congress to eradicate the law. In the hundreds of

lobbying reports filed by those seeking to influence the energy bill,

getting rid of electricity industry regulations shows up 98 times.

 

Electricity interests spent millions of dollars trying to kill the

law. The Edison Electric Institute, which represents the electricity

industry, spent $12,540,000 on a team of 35 lobbyists at its own shop

and at 12 other firms to lobby Congress, the White House, and federal

agencies against PUHCA and on other energy matters. Individual

electricity companies and others against the landmark regulatory law

dumped another $56,420,670 million on lobbying last year, according to

reports filed with the clerks of the House and the Senate.

 

Nor has the industry been stingy in handing out campaign

contributions. Electricity industry PACs and executives gave a total

of $7,733,941 for the 2004 election cycle, making the industry the

19th biggest contributor, according to the Center for Responsive

Politics. Tauzin, the powerful former chairman of the House Energy and

Commerce Committee, was especially enriched, receiving more than

$150,000 in campaign funds from the energy industry as a whole,

including nearly $76,000 from the electricity sector, according to the

center.

 

The effort was successful: Language killing the watershed regulatory

law is included in all versions of the energy bill now on Capitol

Hill. If the measure becomes law, both supporters and critics

anticipate an explosion in energy investments.

 

But where financiers see investment opportunities, consumer advocates

see future Enrons in the making, because the law was intended to

insulate utilities from the kind of energy-trading schemes that caused

the Houston-based Enron to collapse in the greatest bankruptcy in

history. Get rid of the rules restricting cross-investment by utility

holding companies, consumer advocates say, and the country faces an

energy and stock market debacle much like the one that led to the

creation of the public utilities act.

 

Page 8 of 9 -- The law's roots go all the way back to the Great

Depression and the stock market crash of 1929. The then-nascent

electricity industry was largely owned by a small group of holding

companies, which used their reliable receipts from selling electricity

to invest in riskier ventures.

 

 

When those ventures faltered, the holding companies imploded, and 53

electricity companies went bankrupt; the collapse helped deepen the

Great Depression. Consolidation in the industry also allowed holding

companies to manipulate the market and overcharge consumers for power.

 

After an investigation and hearings, Congress approved the PUHCA

regulations in 1935, imposing historic controls on energy holding

companies. Now, however, energy industry spokesmen say the law is

outdated and so onerous that investors are discouraged from putting

money into electricity.

 

" This is a fairly capital-intensive business. The repeal of PUHCA

would serve to potentially encourage capital to flow back into the

energy market, " said Pete Sheffield, a spokesman for Duke Energy,

which once employed Andrew Lundquist, the director of Cheney's energy

task force, to lobby for the elimination of the law.

 

The Clinton and Bush administrations have already weakened the

regulations by allowing companies to be exempt from certain PUHCA

rules. But eliminating the law entirely could have a catastrophic

effect on both the financial markets and consumers, critics say.

 

" It's the only thing between us and a cartel, " said Lynn Hargis, a

former staff attorney with the Federal Energy Regulatory Commission

who now works for the watchdog group Public Citizen.

 

Deleting PUHCA from the law books would put an estimated $1 trillion

in energy assets in play, she said, presenting enormous implications

for both the energy sector in particular and the financial markets as

a whole.

 

Deregulation, she predicted, would allow more episodes like the Enron

scandal, because holding companies could move capital around and put

the health of electricity providers at risk.

 

Additional deregulation

 

Lobbyists for energy interests succeeded in getting far more than

financial deregulation, however.

 

The current bill calls for deregulation of laws protecting air

quality. One provision would ease rules on ozone, which produces smog.

The language, which was not in either the original House or Senate

bill, would not only lower the standards set in the Clean Air Act for

ozone production, but would extend the time industry has to comply

with the rules. The provision, added by the conference committee,

would largely benefit oil refineries.

 

Language was also inserted in the bill that exempts the oil and gas

exploration industry from sections of the Clean Water Act; under the

bill, such companies would not be penalized for contaminating public

waterways. The provision would give oil and gas construction companies

a " free pass " to avoid clean water laws, making them the only

construction companies not subject to such regulations, said

Representative Bob Filner, a California Democrat.

 

Page 9 of 9 -- Energy lobbyists also persuaded the Bush administration

to weaken proposed rules on mercury, a toxin released in the air by

coal-fired power plants. The proposed new rules would ease emissions

limits and would give the power plants more time to comply, a

combination environmentalists say will do little to protect people

from mercury contamination in the water and in fish.

 

 

The Bush administration's view of the mercury threat is far tamer than

that of its predecessor.

 

When former President Clinton's EPA issued a December 2000 statement

announcing that reductions in mercury emissions would be required for

the first time ever, the agency described mercury as a " harmful "

substance that " has been associated with both neurological and

developmental damage in humans. The developing fetus is the most

sensitive to mercury's effects, which include damage to nervous system

development. "

 

But the Bush administration's EPA has taken a more relaxed view,

describing mercury on its website as a " naturally occurring element

that is present throughout the environment. " While mercury exposure

should be " treated seriously, " the site says, " health problems caused

by mercury depend on how much has entered your body, how long you have

been exposed to it, and how your body responds to the mercury. "

 

The energy interests and their supporters in Congress say the

provisions come down to a matter of philosophy, not lobbying clout;

industry spokesmen say too much regulation puts financial strains on

companies and makes it harder for them to update their operations with

more environmentally sensitive equipment. But those with access to

Congress clearly did well in the package, according to the Globe's

analysis of lobbying records, campaign contributions and the legislation.

 

On the Hill, legislation as complicated as the energy bill tends to be

written more by staff, who then may turn to people outside government

to help them with legal language, said a Republican senator who asked

not to be named. The specialists tend to be lobbyists, citizen

advocates say, creating a situation where lobbyists have a heightened

influence on lawmaking.

 

Outside specialists, lobbyists or not, often have expertise that can

be valuable. The trouble, some lobbyists and lawmakers say, is that

the process tends to favor those who already have close connections to

the White House, either by having held a previous job with the

administration or attracting attention by raising money for the

Bush-Cheney campaign.

 

Energy industry lobbyists say it's not a matter of payback, but simply

a situation where environmentalists are running up against an elected

majority that happens to be unsympathetic to their interests.

Environmentalists, they say, should be more flexible and recognize

they are dealing with an administration that wants to increase energy

production.

 

" I think the environmental groups have marginalized themselves to the

point where they don't get to have as much of an impact as they

probably should, " because they are so focused on attacking Bush,

Maisano said. " They're not interested in policy. They're interested in

getting the guy. "

 

Environmental lobbyists, for their part, said they bump up against a

lot of closed doors when they try to lobby on the Hill. When they do

get in to see sympathetic lawmakers, their views end up being

suppressed by a Republican majority that wants to see more exploration

and development of oil, gas, and nuclear power.

 

" On the House side, it's positively Orwellian, " said Marchant

Wentworth, a lobbyist with the Union of Concerned Scientists.

" Republican members have told me to my face that they're just not

going to confront the chairman on an issue. I've never seen anything

like it. "

 

This report was prepared with the assistance of Marc Shechtman of the

Globe library and freelance research manager Maud S. Beelman and

researchers Kevin Baron and Samiya Edwards.

© Copyright 2004 Globe Newspaper Company.