Debate is now under way in the Senate over a sprawling bill that would impose major changes in the country's energy policy. In theory, the country could see mandates for renewable fuel use, investment in the storage of carbon dioxide and punishment for companies that engage in price gouging.
But like the massive immigration measure that failed in the Senate earlier this month, the energy package pieced together by Majority Leader Harry Reid, D-Nev., will likely founder unless some major deals can be brokered. There are many moving parts and competing interests, and there's only a limited amount of time to get things done.
So consider this round a dry run. After all, the massive Energy Policy Act of 2005 took four years to cobble together. But the debate is still important, because it will likely set the tone of energy policy for at least the next decade--and ultimately have direct effects on what you could end up paying for food, cars and electricity during that time.
"This is just a first ride," says Frank Maisano, a spokesman for several different energy industries in Washington. "It underscores the heavy lifting that needs to be done to get this thing through."
One of the stickiest debates involves the standard for renewable fuels. The bill includes a provision to essentially quintuple the amount of renewable motor fuels to 36 billion gallons per year by 2020.
But last week, 15 food and drink producers, including Heinz (nyse: HNZ - news - people ), Kellogg (nyse: K - news - people ) and Coca-Cola (nyse: KO - news - people ), sent a letter to Reid and Minority Leader Mitch McConnell, R-Ky., warning them about the effects of such an ambitious goal and the price effects of diverting corn to ethanol production.
"[I]f our country produces anything short of a record corn crop, the changes proposed in [the bill] could deal a detrimental blow to livestock producers," the companies said, noting that food prices rose by 7.3% in the first three months of the year.
In addition, Senate Energy and Natural Resources Committee Chairman Jeff Bingaman, D-N.M., plans to introduce an amendment that will require utilities to use renewable fuels in at least 15% of their production of electricity, also by 2020. The idea has not been popular in the Southeast, where there is not a lot of wind energy, and firms like Southern Company are lobbying against such a proposal. Opponents of the standard argue that it will cause added costs to be passed on to consumers.
Kevin Book, an energy analyst at Friedman Billings Ramsey, doesn't think this proposal has enough support to pass. According to his analysis of the bill, "the 15% target conflicts with local goals or laws in 23 states and the District of Columbia." More likely, he believes, is either a bill that will allow states to set their own standards or very weak renewable standards at the national level.
Finally, a measure in the bill would require the administration to raise corporate average fuel economy (CAFE) standards from their current level of 25 miles per gallon (mpg) to 35 mpg by 2020. That increase could add as much as $7,000 to the manufacturing costs of each vehicle made in this country and possibly more to the sticker price of cars, according to one industry estimate. A key senator to watch in this debate will be Carl Levin, D-Mich. The chiefs of the Big Three automakers, who met with lawmakers here last week, support a compromise deal for weaker CAFE standards that is being crafted by Levin.
Senate leaders expect debating on the bill to last two weeks. But given the scope of the legislation, that is hardly enough time. More likely, the outcome of the debate could signal what lawmakers are willing to concede and how the House should move forward if any significant energy legislation is to be sent to President Bush's desk this year.
Eric Burgeson, a former chief of staff to Energy Secretary Samuel Bodman, says he believes the core issues of the bill are strong, but a controversial amendment such as Bingaman's 15% renewable standard could change the course of the debate. He also points out that Congress is only in session a limited number of days this summer.
"The clock is ticking," he says.
FORBES
by Brian Wingfield
