Heard on the Street - The Latest About The Kerry-Lieberman (not Graham) Energy Bill
Here's the latest rumors about the contents of the Kerry-Lieberman Senate Energy Bill. It used to be the Kerry-Graham-Lieberman Senate Energy Bill, but Sen. Graham has bailed out. It is not clear whether this information is accurate, but here it is, for what its worth. This is being sold as a "transformational" law. The drafters don't want to do much - just fundamentally remake the entire US economy.
1. This is a cap and trade bill covering the entire economy. When Sen. Graham said "cap and trade is dead," he meant the term, not the program. In any event, the caps are phased in by sector. First utilities, then transportation, then manufacturing. There is a "five year plan" (honestly) for the caps. There will be a "price collar" pegged to CPI. Secondary and derivative carbon trading will take place regulated by the CFTC. There will be international and domestic agricultural offsets. The government will take about 20% off the top from the allowance fund to cover its increased energy costs and for deficit reduction. However, the drafters were very vague about how the money will be handled, who will actually sell the allowances, whether a new agency is required, what the revenue projections are, etc. Apparently, the Environmental Defense Fund is doing the economic modeling for the bill
2. There will be a gasoline tax, though its not called that. Refiners get some breaks in the form of free allowances. There will be very extensive and expensive building and home efficiency requirements - this means commercial real estate owners and developers are facing increased costs and regulatory requirements. There will be more money for solar/wind development. There will be a "robust" nuclear title, with reforms in permitting, insurance, siting requirements, etc. to speed deployment. There will be provisions for continued use of coal provided there is carbon capture and sequestration (CCS) technology available. No viable CCS, no coal. The bill contains no liability relief or siting assistance for CCS operations, further complicating deployment. There may be siting assistance for new transmission lines, but nothing else. Off shore drilling is still in, but may be out by the time the draft is made available to the public (supposedly next week). Nothing for natural gas - the drafters said that the bill will drive people away from coal, and encourage the use of natural gas trucks, so their market is made without more.
3. There will be "rebates" to consumers to cover higher utility bills. However, these will be in the forms of tax credits and/or grants to community organizations, not necessarily in the form of checks. Only the "vulnerable populations" will qualify for direct cash rebates. Also, some of the allowance revenue will be "recycled" in the form of funding for the highway trust fund, grants for solar arrays or wind farms, battery research, etc. No real analysis of job losses or economic impact has been done.
4. The drafters tacitly admitted that the bill, if enacted, will not have any material impact on the increase in worldwide CO2 levels. They said that they hope China and India will agree to reduce CO2 emissions based on our example. The trade provisions in the bill are still under discussion.
5. There is not so much preemption. EPA cannot call CO2 a hazardous air pollutant, or set a NAAQS for GHGs, and state CO2 registries and exchanges are out of business. That's it. EPA may continue to regulate mobile sources (cars and trucks). Tort suits go forward. Claims under ESA, CWA, NEPA, state laws, etc. all in play. Also, the bill leaves the door open for EPA to step back in and re-regulate GHGs if worldwide levels exceed an as of yet undefined benchmark.
6. The bill will be about 1500 pages long. It will incorporate provisions of three other energy bills now kicking around the Senate. If passed, there may be a conference to reconcile with Waxman-Markey. Alternatively, they'll use reconciliation ala health care. The primary difference between this bill and Waxman-Markey seems to be more effort has been made to buy off coal state Democrats and to strengthen nuclear power development to reduce Republican opposition. Substantively though, the bills are very similar.
No matter what anyone says, it seems that the primary purpose of the bill is to "transform the US economy." It will be pitched as a jobs bill and an energy security bill for political reasons, however, there are no data/studies supporting these claims.
The bill is very much a work in process, but the basic outlines are unlikely to change in any material way.
