Washington, DC - Citing the bill's high cost to taxpayers and its failure to protect consumers and the environment, U.S. Senator Dianne Feinstein (D-Calif.) today announced that she would vote against the energy bill developed in closed-door sessions that excluded bipartisan contributions and is now being brought before the House and Senate for consideration. The following is a statement by Senator Feinstein:

"I will proudly vote against this legislation that purports to be a comprehensive energy bill, but is in fact a giant holiday gift basket for the energy industry. I will also vote against a cloture vote to consider the bill.

With very little time for review or input, we're now being asked to approve a wide assortment of tax breaks, subsidies and other giveaways costing at least $31.4 billion, according to the Congressional Budget Office, including $25.7 billion in tax incentives alone between 2004-2008. And the bill authorizes a wide range of other projects that could cost tens of billions of dollars more - many added to encourage support from members.

I had hoped that Congress, after the West Coast energy crisis and last summer's blackout in the Northeast, would pass a sensible energy bill that would improve our nation's energy supply, while protecting consumers, the environment, and the economy. Sadly, this is not the case.

In fact, this 1,200-page grab-bag legislation will do very little to prevent a future blackout, does nothing to protect consumers from the manipulation and gaming of the system that we experienced in California, does nothing to improve our nation's energy security by increasing fuel economy standards, and is a giant boondoggle to special interests, particularly the ethanol, MTBE, oil, gas and nuclear power industries.

Protecting Consumer from Energy Market Manipulation

First, this bill does not strengthen consumer protections to fix our broken energy markets and prevent another energy crisis like the one we experienced in the West.

This bill would significantly impede the ability of federal and state agencies to investigate and prosecute fraud and price manipulation in energy markets. These provisions would make it easier to manipulate energy markets without detection. This bill sends this country in the wrong direction. Rather than preventing Enron-type schemes such as "Fat Boy," Ricochet," "Death Star," and "Get Shorty," this bill clearly weakens oversight of energy markets.

The bill also repeals the Public Utility Holding Company Act (PUHCA) but fails to strengthen FERC's merger authority. And the bill includes a provision that would mean that California's overcharges during the energy crisis would never be refunded by the Federal Energy Regulatory Commission (FERC). Basically, this provision places the physical contract above the importance of enforcing just and reasonable rates.

FERC recently announced a settlement in which El Paso Corporation and its subsidies would pay about $1.6 billion to resolve a complaint that the company withheld supplies of natural gas into California, driving up prices for gas and electricity during the State's energy crisis in 2000 and 2001. California officials believe that El Paso's price manipulation cost consumers and businesses $3.7 billion. Yet, this bill fails to give FERC significant new powers to ensure this kind of price manipulation does not happen again.

Ethanol:

Second, the bill includes an ethanol mandate that is essentially a hidden gas tax. It will increase automobile emissions in the most polluted areas of the country and will not reduce our dependence on oil. Not only is this mandate unnecessary, but it may have serious unintended environmental consequences. There are several reasons why I am so adamantly opposed to mandating an increase in ethanol consumption from 3.1 billion gallons a year to 5 billion gallons:

• The ethanol mandate is unnecessary-we do not need to use ethanol as an additive in gasoline. Gasoline suppliers in California have found other ways to make cleaner gas than gas that is blended with ethanol.
  
• The marketplace is dominated by one large conglomerate - ADM - which will have undue control over our entire nation's ethanol supplies and has already been criminally convicted for price fixing.
  
• The West and East coasts do not have the infrastructure to produce or refine ethanol and as a result, Californians and residents of other coastal states will be subsidizing the Midwest corn-growers.
  
• This summer, southern California had the worst air quality in five years. One of the culprits was ethanol-blended gasoline. In a state that has serious air quality problems, the last thing we need is an additive that will contribute to air pollution.

• The negative impact on the Highway Trust Fund. Because we subsidize ethanol out of our transportation dollars, any increase in the use of ethanol will mean a decrease in the amount of money going to the Highway Trust fund. In fact, California stands to lose approximately $900 million in funding for highway project over the next seven years. The total for the entire country will be approximately $10 billion.

MTBE:

Third, with regard to MTBE, an oxygenate which contaminates water supply, the bill gives incentives to those who pollute and no incentives to those that do not. First, the bill does not ban MTBE nationwide. Additionally, it gives MTBE producers $2 billion in transition assistance to transition out of a product they are allowed to continue to make-especially for exports. Third, the bill provides MTBE producers with liability protection-despite the fact that the Courts have already found that they make a "defective product." And worse yet, the liability protection is retroactive to September 5, 2003-nullifying $1.2 billion in lawsuits in California alone. This is unconscionable.

In a case brought by South Tahoe Public Utility District in California, the Court held Shell, Texaco, Tosco, Lyondell Chemical (ARCO Chemical), and Equilon Enterprises liable for selling a defective product--gasoline with MTBE-while failing to warn of its pollution hazard, forcing the MTBE producers to pay the water district $60 million. In other words, MTBE manufacturers have already been found liable for producing and selling a defective product. Yet the conferees want to shield them from further prosecution.

Simply speaking, this is terrible public policy. Why should we shield MTBE producers from liability when they themselves have known since the 1980s that the product they were producing would contaminate groundwater?

Fuel Economy:

Fourth, the bill does nothing to increase the fuel economy of our vehicles to reduce the amount of oil we consume, lessen the amount of carbon dioxide released into our atmosphere, and save families and businesses money at the pump. In fact, the bill actually makes it more difficult for the Department of Transportation to do so in the future by including a new list of criteria the Department must consider when revising standards. Increasing the Corporate Average Fuel Economy Standards of Sport Utility Vehicles and light trucks is the single most important step the United States can take to limit dependence on petroleum and better protect our environment.

Earlier this year, Senator Olympia Snowe and I introduced bipartisan legislation to close the SUV loophole. Unfortunately, we were unable to offer this carefully crafted legislation as an amendment to the Senate version of the Energy Bill when it was on the floor. Our legislation would do the following:

• Save the U.S. 1 million barrels of oil a day and reduce our dependence on foreign oil imports by 10 percent.
• Prevent about 240 million tons of carbon dioxide -- the top greenhouse gas and biggest single cause of global warming -- from entering the atmosphere each year.
• Save SUV and light duty truck owners hundreds of dollars each year in gasoline costs.

Raising the fuel economy standards for SUVs and light trucks would save Americans millions of dollars at the pump. If we were to close the SUV loophole, it is estimated that SUV and light truck owners would save $318 annually if gas costs $1.50 per gallon. This savings is more than the average middle-income taxpayer will receive from the Bush tax cut next year. And this savings won't further delete federal coffers.

It is time to reduce our nation's dependence on oil, especially oil from foreign nations. Our economic security relies on the stability of oil prices. The United States imports more than nine billion barrels of oil a year. Any disruption in this supply of oil can cause prices to rise, thus taking money away from consumers who could otherwise be spending this money on clothes, computers, or other products where the money goes back into the U.S. economy and helping the U.S. weather this economic slowdown more quickly. Unfortunately, this energy fails to decrease our dependence on foreign oil by taking steps such as increasing the fuel economy standards of SUVs and light trucks.

There are other areas of concern as well:

• Slightly increases energy production while irrevocably damaging our environment.

• Does nothing to address global warming and does not include any policy on climate change. The Senate-passed energy bill contained a greenhouse gas inventory and registry that became mandatory if it had not captured 60 percent of all greenhouse gas emissions within 5 years. That provision was dropped from the final bill.

• Ignores the will of the Senate to encourage the development of new renewable power from solar, wind, and geothermal resources. Rather, it increases subsidies to oil and gas producers. And it implies that nuclear power is a form of renewable power by putting it on equal footing in the Tax Code. The bill also authorizes a minimum of $1.1billion for a major new nuclear reactor at the Idaho National Engineering Laboratory. This funding would allow for a demonstration project to use nuclear power to produce hydrogen for fuel cells and other uses.
  
• Limits California's ability to protect its coastline by giving the Secretary of the Interior broad discretion to allow leases, easements, and rights-of-way for energy projects on the Outer Continental Shelf. While this would not allow for more drilling, it would still limit state input into other projects on the Outer Continental Shelf.
  
• Provides authorization for the Alaska Gas Natural Pipeline but does not provide the production tax credit that was included in the Senate-passed bill. The natural gas industry says that it will not build the pipeline without those credits. All of California's new power plants use natural gas. If new natural gas supplies are not brought on line, prices will go higher and higher, meaning that California's electricity rates will increase.
  
• Creates legal limbo for federal regulators of the Electric Utility Industry. Between now and 2007, any rule promulgated by the Federal Energy Regulatory Commission that would generally apply to electricity markets in a region or across the country will be subject to legal challenge under a provision that both says that such rules are prohibited and that the authorities and obligations of FERC haven't been modified or diminished. The result is that all such rules will be trapped in endless litigation, and FERC will be powerless to respond to market crises like the California electricity crisis of 2000.
  
• Threatens water supplies by exemptions of water pollution laws. The bill exempts all construction activities at oil and gas drilling sites from coverage under the runoff requirements of the Clean Water Act. Removes hydraulic fracturing (an underground oil and gas recovery technique) from coverage under the Safe Drinking Water Act.
  
• Weakens the Clean Air Act by allowing several cities in Texas, along with Baton Rouge, Atlanta, and Washington, DC. to delay cleaning up their air.

• And finally, provides $25.7 billion in tax incentives - more than three times the amount requested by President Bush, at a time when our nation is facing record budget deficits."

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