Peoria Journal Star 

June 29, 2005

Senate energy bill contains goodies for Illinois
But difficult negotiations with House lie ahead

By Dori Meinert
Copley News Service

WASHINGTON, D.C. - The Senate on Tuesday overwhelmingly approved an energy bill that would dramatically increase the use of ethanol, providing Illinois farmers a steady market for corn and bolstering the growing ethanol industry in the state.

In an 85-12 vote, the Senate passed the bill that also contains tax credits for clean coal technology supported by the Illinois Coal Association.

In addition, the Senate bill would establish a $1 billion grant and loan program to retrofit existing diesel engines to reduce air pollution, a provision supported by Caterpillar Inc.

Illinois' two Democratic senators, Dick Durbin and Barack Obama, voted for the bill, which still faces significant obstacles in a House-Senate conference.

Durbin called Senate passage "a very small step in a long journey toward energy independence and security."

While he praised the provision that would require refiners to double their use of ethanol to 8 billion gallons a year by 2012, Durbin said he was disappointed that the Senate rejected his amendment to increase fuel efficiency in automobiles.

"The journey to energy independence begins with this bill, but we have a long way to go before we reach our destination," Durbin said. "Democrats believe Congress must do much more so America is no longer beholden to oil cartels and Saudi sheiks."

The measure also would provide up to a $30,000 tax credit for the construction of E85 ethanol refueling stations, where owners of flexible-fuel vehicles can buy fuel made from 85 percent ethanol.

The bill contains a provision authored by Obama that would provide $40 million for research into combined electric and E85 flexible fuel vehicles that have the potential to drive 500 miles per gallon of gasoline used.

The bill also contains $85 million total for Southern Illinois University, Purdue University and the University of Kentucky for research and testing on ways to turn Illinois basin coal into transportation fuels.

But Obama agreed that the bill falls short of what should be done to achieve U.S. energy independence.

"Experts say that this bill will reduce our energy consumption by only 3 percent, while our own Department of Energy predicts that American demand will jump by 50 percent over the next 15 years," he said.

President Bush applauded the Senate for working in a bipartisan way and urged the House and Senate to get a compromise bill to him before the planned August recess.

"This bill will help our economic growth by addressing the root causes of high energy prices and reducing our dependence on foreign sources of energy," Bush said in a statement issued by the White House.

Lawmakers acknowledged the bill will do little to immediately lower the prices of gasoline or natural gas.

The House and Senate bills have some major differences that could make a compromise bill difficult to reach. The House bill, passed in April, contains a controversial provision that would give liability protection to the makers of MTBE, a fuel additive found to contaminate groundwater.

The Senate bill doesn't address the liability issue.

Two years ago, an energy bill died when the Senate rejected a compromise bill containing an MTBE liability issue. Durbin voted against it, saying it would limit Illinois communities' ability to seek damages and force taxpayers to pay clean-up costs.

"The House leadership indicates they are working on a solution. I take them at their word," said Senate Energy and Natural Resources Chairman Pete Domenici, R-N.M. "I can't tell you what that means in terms of when or how, but I think we will solve this issue in one way or another and in a way that will be satisfactory to the senators."

Energy Secretary Samuel Bodman also said "we would hope there could be a compromise that could be agreed on soon."

The Bush administration hasn't yet taken a position on the MTBE issue. Domenici cast doubt on reports that MTBE liability protection would be added to the pending transportation bill, describing it as "rumor."

"Nobody has told me about that," he said.

The Senate bill's requirement for refiners to use 8 billion gallons of ethanol by 2012 could add 6 to 8 new ethanol plants in the state over the next 10 years, according to the Illinois Corn Growers Association. The House bill would require refiners to use 5 billion gallons, a level that ethanol supporters say could be reached by 2007 without congressional mandate.

Ethanol is a corn-based fuel additive that reduces polluting emissions from vehicles.

Another contentious issue is oil drilling in the Arctic National Wildlife Refuge. The House bill would allow it, the Senate bill would not.

Numerous other potential sticking points remain. The Senate bill, estimated to cost about $16 billion over 10 years, is much more than the $8 billion estimated cost of the House bill or the $6.7 billion that the White House sought.

The tax incentives in the Senate bill favor renewable fuels, while the House bill's incentives are geared more to oil, natural gas and coal producers.

Illinois Corn Growers Association Roger Sy praised the Senate action, pledging to work to keep the Senate's 8 billion gallon target on ethanol "because the higher the number, the more opportunity for Illinois to participate in industry expansion and the associated economic opportunity."