July 02, 2010

Following a long series of hearings on the Gulf of Mexico oil disaster, legislators are beginning to craft and review measures with which to take action. The need for stronger drilling regulations and increased federal oversight is broadly accepted by both parties, though it remains to be seen which strategies will gain traction and how the final bill(s) will be packaged for a floor vote. Democratic leaders recently indicated plans to bundle offshore drilling reform with a more controversial climate and energy package—a move that promises to increase bipartisan tension as Congress scrambles to take action before disbanding for elections. For more information, see the “CLIMATE DEBATE” article in this edition.

Congressional work on offshore drilling currently includes:

Oberstar bill (HR 5629): On July 1, the House Transportation and Infrastructure committee approved by voice vote a bill from Chair Jim Oberstar (D-MN) to overhaul the offshore oil drilling industry and revise spill response and liability polices. Republicans offered hesitant support, saying that care should be taken to keep the offshore oil industry in the Gulf, where it employs thousands and provides a partial alternative to imported crude. Both parties agree that the bill will need additional revisions before it’s ready for the floor. Key elements include:

• Eliminate the $75 million liability cap on oil spill-related damages
• Expand the US Coast Guard’s role in offshore drilling regulation, adding 300 additional employees to its marine safety work force, improving training, and providing over $75 million in extra funding over the next five years.
• Require EPA to conduct a more in-depth study of oil dispersant toxicity and efficiency and revise its list of pre-approved formulas accordingly.
• Expand the review of drilling safety plans and require oil-drilling vessels to register in the US (the Deepwater Horizon rig was registered in the Marshall Islands, which allowed it less extensive safety inspections). Inspections would be broader and address worst-case scenarios.
• Amend the Oil Pollution Act of 1990 to make parties responsible for a spill liable for human health impacts, in light of the many Gulf-area residents who have reported respiratory and other health issues.
• Increase insurance requirements for drillers by a factor of 10, from the current $150 million to at least $1.5 billion or more.

Bipartisan Minerals Management Service Restructuring (S 3516): On June 30, the Senate Energy and Natural Resources Committee cleared a bipartisan proposal from Chairman Jeff Bingaman (D-NM) and ranking member Lisa Murkowski (R-AK) that would add congressional approval to Interior Secretary Ken Salazar’s recent secretarial order, which divided the Minerals Management Service (MMS) into three separate offices for leasing, enforcement, and revenue collection. S 3516 would also:

• Strengthen drilling safety requirements
• Establish new research programs
• Charge companies a fee for inspections
• Increase penalties for operating infractions
• Give the leasing office more time to review exploration plans before deciding whether to approve them

Revised Rahall bill: On June 24, House Natural Resources Chair Nick Rahall (D-WV) unveiled legislation to build upon an offshore drilling bill he introduced last year (HR 3534). The new language is crafted largely in response to the ongoing disaster in the Gulf and is based on Rahall’s belief that domestic oil and gas drilling should continue, albeit with significant revisions to regulatory and management protocols. The new legislation would:

• Reorganize MMS into three separate offices (as in S 3516 and Salazar’s secretarial order)
• Prohibit the use of exemptions for environmental reviews of offshore projects. MMS gave the BP exploration plan associated with Deepwater Horizon a “categorical exclusion,” allowing it to move forward without a new environmental analysis, which would otherwise be required under the National Environmental Policy Act.
• Institute new, strict ethical standards for oil and gas inspectors
• Create a training academy for federal inspectors
• Require adequate blowout and worst-case scenario response plans for all drilling projects
• Require drillers to use technology that has tested successfully under worst-case oil release scenarios
• Institute monthly inspections of all drilling rigs
• Establish a long-term monitoring and research program to reduce the impacts of the Deepwater disaster on marine and coastal environments
• Establish an emergency habitat restoration program to provide species that migrate through the Gulf with clean habitat

Like the HR 3534, the new language would also establish a competitive program for wind and solar leasing on federal lands. Though the environmental community was generally supportive of the original legislation, representatives from both the fossil fuel and renewable energy industries had argued that it would create problematic delays; renewable groups were especially concerned about grouping all energy leasing into a single office.

Rahall was supportive of the Oberstar bill, though he maintains that Interior—not the Coast Guard—is better suited for overseeing offshore drilling.

Deepwater risk reduction: On June 30, a House Energy and Commerce panel held a hearing on a discussion draft from Representative Henry Waxman (D-CA), which would require:

• Oil companies to demonstrate their ability to prevent and contain leaks on the scale of the one underway in the Gulf
• Stronger safety standards for blowout preventers, including a requirement that fail-safe devices be certified by a third party
• Additional tests on the cement barrier between the oil or gas reservoir and the well bore. (Investigations of the Deepwater Horizon rig explosion indicate that a faulty barrier played a significant role in the disaster.)
• Increased well inspections

President Obama and Senate climate leaders have both expressed their willingness to compromise on key details of a climate and energy package, so long as it puts a price on carbon.

Meanwhile, Senate Democrats say they have a restored sense of unity following a June 24 caucus meeting, where they devised a new strategy for moving forward with a climate and energy package this year. Though leadership has been quiet on the details, and the legislators have yet to determine the best bill with which to move forward, the basic approach appears to be bundling climate and energy with legislation to overhaul offshore drilling regulations. Given the broad support for the latter initiative, such a move would force Republicans to either move forward with pricing carbon or block efforts to reform offshore drilling regulations—a move that would likely be presented as siding with “Big Oil.” This strategy echoes that of the financial reform debate, where Senate Democrats harnessed public outrage at big business to force Republicans to the table, ultimately winning the support of four Republicans—enough to offset the two Democrats who voted against the measure.

Republicans, meanwhile, are attempting to turn the tables by accusing Democrats of bogging down urgent and necessary reforms with what they say is a political ploy.

Indeed, the connection between offshore drilling and climate legislation is not a straightforward one. While Democratic leaders have been working to tie the disaster in the Gulf to the need for new climate and energy policies, the majority of US energy consumption is associated with the electric utility sector—natural gas, coal, nuclear power and renewable resources make up 63 percent of US energy use. Petroleum products account for the remaining 37 percent.

A cap-and-trade system, such as the one laid out in the House-passed climate and energy bill (HR 2454) would have only a small impact on petroleum use, at least until technology advances and the carbon price increases. According to a US Energy Information Administration analysis, consumption would drop by only 5 percent by 2030—less if the economy improves rapidly, more if technological advancements make alternative energy more efficient.

Because while electric utilities may be conducive to regulation via cap-and-trade, economists say that (absent improvements in energy efficiency and clean energy) transportation-related emissions—and therefore oil consumption—will only drop significantly in response to price increases. And without adequate alternatives to filling up, even higher prices won’t take care of the matter entirely—people will continue to drive. Further, pricing carbon under the current legislative options would not produce a significant increase in the cost of gasoline. Economic analyses indicate that under HR 2454, Kerry-Lieberman, and Cantwell-Collins, a $20 per-ton carbon price would increase gas prices by only 20 cents a gallon.

Mandated increases in corporate average fuel economy (CAFE), such as those being rolled out by the US Environmental Protection Agency, will also cut fuel consumption by increasing efficiency. Still, some experts say this will have the opposite effect of higher prices at the pump, since higher efficiency will make it less expensive to travel a given distance.

Since utility-related emissions are comparatively easy to address and a sizeable portion of the problem in this case, and since pricing carbon is the top priority, lawmakers are considering—albeit reluctantly— a scaled-down emissions cap that would be imposed only on the utility sector. Still, comments from undecided Senators indicate that such a compromise may do little to sway the debate.

To move closer to a party consensus, Senator Charles Schumer (D-NY) has put forth a proposal to create a working group similar to the one used to usher along healthcare reform—roughly 10 Democratic senators would draft compromise legislation and work to keep the caucus together during the floor debate.

In the event that a carbon-pricing bill makes it out of the Senate this session, it is increasingly likely that a conference committee will merge the House and Senate versions during a “lame duck” session after the November elections. This schedule would allow climate leaders a good amount of room to strengthen the bill by drawing more stringent measure from each chambers’ package—measures that may have initially been toned down to gain centrist buy-in. This added flexibility is largely a function of timing and sequence—while lawmakers can proceed after election pressure is off, it remains difficult for centrist lawmakers to reject the compromise if they risked voting for it during their chambers’ floor debates. There had previously been some question of whether the final bill would be crafted via a House-Senate conference, since one chamber is often forced to accept the version of the other after smaller scale leadership negotiations. But Democratic leaders have stated that conference committee negotiations are in store, even with the Senate carbon-pricing strategy yet undecided.

The Interior Department recently issued a stop-work order on Louisiana’s efforts to build an offshore sand wall east of the Mississippi River to limit the passage of oil. The rushed coastal re-engineering, pushed by Louisiana Governor Bobby Jindal (R), has prompted many concerns about unintended environmental impacts since it was proposed. Still, the Army Corps of Engineers issued an emergency permit on May 27 for a smaller barrier (45 miles, compared to the proposed 128). Interior ordered the project shutdown after state officials failed to meet an already-extended deadline to draw sand from the approving dredging area 2 miles away from the Chandeleur Islands, deteriorating barrier islands that serve as nesting grounds for thousands of pelicans. According to federal officials, further dredging will cause irreversible damage to the very islands that the barrier seeks to protect. The barrier and its construction could block coastal currents and disturb or destroy nests. Further, as the process continues and oil makes its way to shore, dredging will contaminate the remaining clean sand needed for future coastal restoration efforts.

Louisiana officials disagree. Jindal and other state leaders are portraying the conflict as the latest example of what they see as out-of-touch Washington regulators delaying urgent and common-sense defense efforts by the state. But Interior has denied demands to continue dredging, creating the most tense standoff in the disaster response efforts so far, a conflict that has spilled over into Congress.

Representative Darrell Issa (R-CA), ranking member on the House Committee on Oversight and Government Reform, has opened a probe into the shutdown and the administration’s offshore drilling moratorium, both of which he says “cast serious doubt upon the federal government’s commitment to contain the leak.” Issa said that without the barrier, Plaquemines Parish and its industry “will suffer far more devastation than Hurricane Katrina caused in 2005.” But while he has accused Interior of acting without adequate scientific evidence, the agency has countered that its decisions were based on recent US Geological Survey investigations into islands’ erosion.

On June 21, the Supreme Court overturned a 2007 ruling from the US District Court in San Francisco, which had banned the sale of pesticide-resistant alfalfa seeds pending a federal environmental impact study. The Supreme Court ruled 7-1 in favor of lifting the ban.

The US Department of Agriculture (USDA) originally approved the seeds—developed by Monsanto, an agricultural biotechnology company, to resist the herbicide Roundup—in 2005. This approval prompted legal action from environmental groups, farmers, and consumers, who argued that the genetically modified (GM) crops could contaminate conventional alfalfa fields via cross-pollination, and that they would lead to the overuse of Roundup and therefore impaired soil and water quality, as well as potentially Roundup-resistant “super-weeds.” Though USDA conducted an environmental analysis, as required by the National Environmental Policy Act (NEPA), the analysis did not, according to the district court ruling, address the concerns raised in the lawsuit. The lower court ruling added that “A federal action that eliminates a farmer’s choice to grow non-genetically engineered crops, or a consumer’s choice to eat non-genetically engineered food, is an undesirable consequence.” Another court upheld this decision, before the case went to the Supreme court.

USDA has since agreed to conduct the environmental impact study, though it has not yet provided a timeline. Monsanto, meanwhile, petitioned for review, claiming that USDA’s actions would have reduced the risk of cross-pollination to a fraction of a percent.

The case marks the Supreme Court’s first ruling on GM crops. Environmental and industry groups beyond agriculture closely watched the alfalfa case because of its potential implications for NEPA lawsuits. In asking the Supreme Court to take the case, Monsanto had pointed to a decision last year in which the majority ruled that a possibility of irreparable harm to whales was insufficient to affirm a nationwide injunction.

Several conservation groups filed a friend-of-the-court brief arguing that a ruling in favor of Monsanto degrade the capacity for NEPA “to ensure a meaningful consideration by federal agencies of the impacts of their actions on the environment, and particularly wildlife and plants.”

In spite of the ruling, USDA’s Animal and Plant Health Inspection Service (APHIS) must still decide to partially deregulate the GM alfalfa before the seeds can be planted commercially. APHIS stated that it is “carefully reviewing the Supreme Court ruling before making decisions about its next regulatory actions related to the deregulation of Roundup Ready alfalfa.” The agency also said that it would complete its impact statement “in time for the spring planting of alfalfa crops in 2011.”

Monsanto’s opponents also responded to the ruling with optimism, focusing on the broader implications. As Justice Samuel Alito noted, “If and when APHIS pursues a partial deregulation that arguably runs afoul of NEPA, respondents may file a new suit challenging such action and seeking appropriate preliminary relief. Any party aggrieved by a hypothetical future deregulation decision will have ample opportunity to challenge it.”

Meanwhile, Representative Dennis Kucinich (D-OH) introduced three bills on June 25 (HR 5577, HR 5578, HR 5579), which would institute strict new safeguards on the GM crops, particularly those used to produce pharmaceuticals and industrial chemicals. Currently these crops have little share in the US, where almost all GM crops are modified for insect or pesticide resistance. Still, the implications of cross-pollination are more severe for these grown chemicals.

Kucinich’s bills would work to contain such endeavors by:

• Prohibiting open air cultivation of industrial and pharmaceutical GM crops
• Institute mandatory labeling, something that Monsanto and other biotech firms strongly oppose on the grounds that they are both unnecessary and unwarranted.
• Address liability concerns, in the event that cross-pollination occurs. The legislation would allow the crops to be exported only to countries with zero-tolerance thresholds for the presence of foreign generic material.

Currently, GM crops are regulated through a somewhat makeshift framework—USDA, the US Environmental Protection Agency, and the Food and Drug Administration share authority, under laws now are now decades old. Kucinich’s bills would not change this system significantly