Energy Policy Act of 2005

The Energy Policy Act of 2005 is a bill passed by the United States Congress on July 29, 2005, and signed into law by President George W. Bush on August 8, 2005, at Sandia National Laboratories in Albuquerque, New Mexico. The act, described by proponents as an attempt to combat growing energy problems, changed US energy policy by providing tax incentives and loan guarantees for energy production of various types.

General provisions

 * Authorizes loan guarantees for "innovative technologies" that avoid greenhouse gases, which might include advanced nuclear reactor designs (such as PBMR) as well as clean coal and renewable energy;
 * Increases the amount of biofuel (usually ethanol) that must be mixed with gasoline sold in the United States to 4 billion gallons by 2006, 6.1 billion gallons by 2009 and 7.5 billion gallons by 2012;
 * Seeks to increase coal as an energy source while also reducing air pollution, through authorizing $200 million annually for clean coal initiatives, repealing the current 160-acre cap on coal leases, allowing the advanced payment of royalties from coal mines and requiring an assessment of coal resources on federal lands that are not national parks;
 * Authorizes subsidies for wind and other alternative energy producers;
 * Adds ocean energy sources including wave and tidal power for the first time as separately identified, renewable technologies;
 * Authorizes $50 million annually over the life of the law for biomass grants;
 * Contains provisions aimed at making geothermal energy more competitive with fossil fuels in generating electricity;
 * Requires the US Department of Energy to study and report on existing natural energy resources including wind, solar, waves and tides;
 * Authorizes the Department of the Interior to grant leases for activity that involves the production, transportation or transmission of energy on Outer Continental Shelf lands from sources other than gas and oil (Section 388);
 * Requires the U.S. Department of Energy to study and report on national benefits of demand response and make a recommendation on achieving specific levels of benefits and encourages time-based pricing and other forms of demand response as a policy decision;
 * Requires all public electric utilities to offer net metering on request to their customers;
 * Requires the DOE to designate National Interest Electric Transmission Corridors where there are significant transmission limitations adversely affecting the public. The Federal Energy Regulatory Commission may authorize federal permits for transmission projects in these regions.
 * Provides tax breaks for those making energy conservation improvements to their homes;
 * Provides incentives to companies drilling for oil in the Gulf of Mexico;
 * Exempts oil and gas producers from certain requirements of the Safe Drinking Water Act;
 * Extends daylight saving time by four to five weeks, depending upon the year (see below);
 * Requires that no drilling for gas or oil may be done in or underneath the Great Lakes;
 * Requires that Federal Fleet vehicles capable of operating on alternative fuels be operated on these fuels exclusively (Section 701.)
 * Sets federal reliability standards regulating the electrical grid (done in response to the Blackout of 2003);
 * Nuclear-specific provisions:
 * Extends the Price-Anderson Nuclear Industries Indemnity Act through 2025;
 * Authorizes cost-overrun support of up to $2 billion total for up to six new nuclear power plants;
 * Authorizes a production tax credit of up to $125 million total per year, estimated at 1.8 US¢/kWh during the first eight years of operation for the first 6.000 MW of capacity; consistent with renewables;
 * Authorizes loan guarantees of up to 80% of project cost to be repaid within 30 years or 90% of the project's life ;
 * Authorizes $2.95 billion for R&D and the building of an advanced hydrogen cogeneration reactor at Idaho National Laboratory;
 * Authorizes 'standby support' for new reactor delays that offset the financial impact of delays beyond the industry's control for the first six reactors, including 100% coverage of the first two plants with up to $500 million each and 50% of the cost of delays for plants three through six with up to $350 million each for ;
 * Allows nuclear plant employees and certain contractors to carry firearms;
 * Prohibits the sale, export or transfer of nuclear materials and "sensitive nuclear technology" to any state sponsor of terrorist activities;
 * Updates tax treatment of decommissioning funds;
 * A provision for the U.S. Department of Energy to report in one year on how to dispose of high-level nuclear waste;


 * Directs the Secretary of the Interior to complete a programmatic environmental impact statement for a commercial leasing program for oil shale and tar sands resources on public lands with an emphasis on the most geologically prospective lands within each of the states of Colorado, Utah, and Wyoming.

In Congressional bills an "authorization" of a discretionary program is a permission to spend money, while an "appropriation" is the actual decision to spend it; none of the authorizations above will mean anything if the money is never appropriated.

Tax reductions by subject area

 * $4.3 billion for nuclear power
 * $2.8 billion for fossil fuel production
 * $2.7 billion to extend the renewable electricity production credit
 * $1.6 billion in tax incentives for investments in clean coal facilities
 * $1.3 billion for conservation and energy efficiency
 * $1.3 billion for alternative motor vehicles and fuels (bioethanol, biomethane, liquified natural gas, propane)
 * $500 million Clean Renewable Energy Bonds (CREBS) for government agencies for renewable energy projects.

Change to daylight saving time
The bill amends the Uniform Time Act of 1966 by changing the start and end dates of daylight saving time, beginning in 2007. Clocks were set ahead one hour on the second Sunday of March (March 11, 2007) instead of on the first Sunday of April (April 1, 2007). Clocks were set back one hour on the first Sunday in November (November 4, 2007), rather than on the last Sunday of October (October 28, 2007).

Lobbyists for this provision included the Sporting Goods Manufacturers Association, the National Association of Convenience Stores, and the National Retinitis Pigmentosa Foundation Fighting Blindness.

Lobbyists against this provision included the U.S. Conference of Catholic Bishops, the United Synagogue of Conservative Judaism, the National Parent-Teacher Association, the Calendaring and Scheduling Consortium, the Edison Electric Institute, and the Air Transport Association. This section of the act is controversial; some have questioned whether daylight saving results in net energy savings.

Commercial building deduction
The Act contains provisions for commercial buildings that make improvements to their energy systems. Energy improvements completed in 2006 and 2007 are eligible for tax deductions of as much as $1.80 per square foot. The incentives focus on improvements to lighting, HVAC and building envelope. Improvements are compared to a baseline of ASHRAE 2001 standards.

Many buildings are eligible for tax deductions for improvements completed or planned within the normal course of business, and can thus "free ride" for the new incentives. Achievement of these benefits requires cooperation between the facilities/energy division of a business and its tax department. A tax advisor with engineers on staff may serve as a bridge between these two historically separate business divisions. For municipal buildings, benefits are passed through to the primary designers/architects in an attempt to encourage innovative municipal design.

Energy management
The commercial building tax deductions can be used to improve the payback period of a prospective energy improvement investment.

Often the deductions are combined with participation in demand response programs where buildings agree to curtail usage at peak times for a premium.

The most common qualifying projects are in the lighting area. According to the Interim Rules for Lighting Projects: The lighting system energy savings target is a LPD (Lighting Power Density), or watts per square foot, that is 25% to 40% lower than the minimum requirements of ASHRAE/IESNA Standard 90.1–2001 For warehouses, the lighting power density (W/sq. ft.) must be 50% lower than the minimum requirements of ASHRAE Standard 90.1–2001 to be eligible for $0.60 per square foot. Lighting power density (W/sq. ft.) reductions of <25% are ineligible for any tax deduction.

In addition to demonstrating a reduction in lighting power density lower than the requirements for Standard 90.1–2001:

Control provisions (i.e. Automatic Lighting Shutoff) relating to lighting systems as set forth in the Standard must be met. Bi-level switching must be installed. The lighting system must also meet the minimum requirements for calculated light levels as set forth in the 9th Edition of the IESNA Lighting Handbook.

Congressional Budget Office (CBO) cost estimate
The Congressional Budget Office review of the conference version of the bill estimated the Act will increase direct spending by $1.6 billion, and reduce revenue by $12.3 billion between 2006 and 2015. The CBO noted that the bill could have additional effects on discretionary spending, but did not attempt to estimate those effects.

Support
The collective reduction in national consumption of energy (gas and electricity) is significant for home heating. The Act provided tangible financial incentives (tax credits) for average homeowners to make environmentally positive changes to their homes. It made improvements to home energy use more affordable for walls, doors, windows, roofs, water heaters, etc. Consumer spending, and hence the national economy, was abetted. Industry grew for manufacture of these environmentally positive improvements. These positive improvements have been near and long-term in effect.

The collective reduction in national consumption of oil is significant for automotive vehicles. The Act provided tangible financial incentives (tax credits) for operators of hybrid vehicles. It helped fuel competition among auto makers to meet rising demands for fuel-efficient vehicles. Consumer spending, and hence the national economy, was abetted. Dependence on imported oil was reduced. The national trade deficit was improved. Industry grew for manufacture of these environmentally positive improvements. These positive improvements have been near and long-term in effect.

Criticisms

 * The Washington Post contended that the spending bill is a broad collection of subsidies for United States energy companies; in particular, the nuclear and oil industries.
 * Texas companies in particular benefit from the bill. This criticism is heightened by the fact that President George W. Bush, the House Majority Leader (Tom DeLay), and the Chairman of the House Energy & Commerce Committee (Joe Barton) were all from Texas. The fact that the bill passed 66-29 with some support from Democrats for the bill has not calmed this criticism (a Philadelphia Inquirer editorial on July 28, 2005, suggested Congress had a "let's pass it and claim we did something" attitude).
 * Speaking for the National Republicans for Environmental Protection Association, President Martha Marks said that the organization was disappointed in the bill: it did not give enough support to conservation, and continued to subsidize the well-established oil and gas industries that don't require subsidizing.
 * The bill did not include provisions for drilling in the Arctic National Wildlife Refuge (ANWR) even though some Republicans claim "access to the abundant oil reserves in ANWR would strengthen America's energy independence without harming the environment."
 * Senator Hillary Rodham Clinton made the bill an issue in the 2008 Democratic Primary by criticizing Senator Barack Obama’s two votes supporting the bill, calling it the “Dick Cheney lobbyist energy bill.”

Legislative history
The Act was voted on and passed twice by the United States Senate, once prior to conference committee, and once after. In both cases, there were numerous senators who voted against the bill. John McCain, the Republican Party nominee for President of the United States in the 2008 election voted against the bill. Democrat Barack Obama, the current President of the United States, voted in favor of the bill.

Provisions in the original bill that were not in the act

 * Limited liability for producers of MTBE.
 * Drilling for oil in the Arctic National Wildlife Refuge (ANWR).
 * Increasing vehicle efficiency standards (CAFE).
 * Requiring increased reliance on non-greenhouse gas-emitting energy sources similar to the Kyoto Protocol.

Preliminary Senate vote
June 28, 2005, 10:00 a.m. Yeas - 85, Nays - 12

Conference committee
The bill's conference committee included 14 Senators and 51 House members. The senators on the committee were: Republicans Domenici, Craig, Thomas, Alexander, Murkowski, Burr, Grassley and Democrats Bingaman, Akaka, Dorgan, Wyden, Johnson, and Baucus.

Final Senate vote
July 29, 2005, 12:50 p.m. Yeas - 74, Nays - 26

Government

 * Full Text of Energy Policy Act of 2005.
 * Department of Energy spotlight on the bill - listing consumer savings (tax breaks).
 * Official News release and Allocution Bush / Albuquerque / 2005-08-08
 * Congressional Budget Office Cost Estimate for the bill conference agreement, July 27, 2005
 * |TOM:/bss/d109query.html|Congressional Research Service summary

News

 * Christian Science Monitor: How Much New Oil? Not a Lot
 * Boston Herald: Editorial
 * Reuters: brief summary
 * MSNBC: news story
 * TaxPayer.net: How the Bill Passed – a view of the reasons for the bills passage and its costs to taxpayers. See also: TaxPayer.net on Subsidies
 * Yahoo! News: bill signing
 * CNN: Bush: Energy bill effects will be long-term
 * WashingtonWatch.com page on P.L. 109-58: The Energy Policy Act of 2005
 * InfoWorld.com Sustainable IT blog: New daylight saving time not so bright an idea - a criticism of the change to daylight saving time

Non-Profit

 * Clean Fuels Ohio - This site focuses on alternative fuels as well as alt-fuels incentives created by the Energy Policy Act of 2005.