updated 3/9/2005 12:42:48 PM ET 2005-03-09T17:42:48

Energy and consumer groups will watch Wednesday’s speech by President George W. Bush in Ohio for signs of a renewed commitment to put the weight of his office behind the comprehensive energy policy that the United States has lacked for 20 years.

Two failed attempts to push an energy bill through Congress are viewed as a disappointment of Mr. Bush's first term. Energy policy still lacks the momentum it was afforded following his first election, which included 110 recommendations from a taskforce headed by Dick Cheney, vice-president.

But Spencer Abraham, who served as energy secretary during Mr. Bush’s first term, said he believed the environment for passing an energy bill was “strong,” pointing to a strengthened Republican majority in Congress and the impact of rising energy costs.

While gasoline prices are topping $2 a gallon, it is high natural gas prices that are expected to provoke the most intense lobbying from industrial groups. Some elements of the powerful agricultural and chemicals lobbies have suggested caps on gas prices.

“American people recognize that we have to do something,” Mr. Abraham told the FT. “We spent the better part of four years trying to find a consensus deal. I don’t suspect that people are going to want to dramatically depart from the earlier bill.”

For the oil and gas companies, that means opening up more federal lands to drilling and lightening the regulatory burden, and in particular, streamlining permits for building new oil refineries and terminals to import liquefied natural gas.

“It’s a very supply-focused plan rather than demand control,” says Mark Williams, an energy expert at Boston University, who believes that the more environmentally friendly elements of the president's campaign policies are being diluted.

The bill, blocked by the Senate in November 2003, included more than $30 billion in appropriations sprayed across the energy, utility and auto sectors.

Some political analysts believe the Republicans may opt for a stripped-down bill costing around $12 billion, focusing on the supply measures and steering away from the research elements, notably for renewables and for energy conservation that inflated the costs of the previous proposal.

While the energy policy drew some criticism for its limited attention to conservation and efficiency measures, it was the sheer scale of the proposed tax breaks and incentives that fuelled most opposition.

The most controversial element was the proposal to pay for the clean-up of MTBE, a fuel additive that has caused extensive pollution, notably in north-east states. Analysts believe this will remain the most contentious component if included in a new bill.

Joe Barton, head of the House energy and commerce committee and a strong proponent of adding refinery capacity and opening up more drilling opportunities, has also signaled a willingness to split up any bill to secure the passage of key elements.

The proposal to open up parts of the Alaska National Wildlife Refuge to exploration, a proposal that helped sink the first attempt at a bill, is still expected to be stripped out and inserted into a budget bill. The administration’s emphasis on nuclear energy has led some industry observers to speculate that a new bill would have to include strong financial incentives for utilities to build new plants.

Rob Wallace, the manager of government relations for GE Energy, said there were still a number of contentious issues that would require goodwill on both sides, including whether to include regulation of carbon dioxide.

© The Financial Times Ltd 2010. "FT" and "Financial Times" are trademarks of the Financial Times.


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