U.S. Climate Bill Cuts Carbon, Expands Oil Drilling - Simon Lomax

U.S. Climate Bill Cuts Carbon, Expands Oil Drilling

May 18, 2010 - Simon Lomax - businessweek.com

Two U.S. senators will introduce climate-change legislation tomorrow that gives coastal states a share of revenue from expanded offshore oil and natural-gas drilling in a bid to win support for greenhouse gas limits.

The proposal, scheduled to be unveiled tomorrow by Senators John Kerry, a Massachusetts Democrat, and Joseph Lieberman, a Connecticut independent, would give states a 37.5 percent share of drilling revenue and the authority to block oil and gas production from occurring within 75 miles of shore, according to a summary of the proposal obtained today.

The Senate bill aims to cut U.S. emissions of carbon dioxide and other greenhouse gases that scientists have linked to climate change to 17 percent below their 2005 level by 2020, according to the summary. That’s the same pollution reduction target in climate-change legislation that narrowly passed the U.S. House last year.

Kerry and Lieberman revamped the House bill, which stalled in the Senate, hoping it can still pass Congress this year. The Senate bill, called the American Power Act, will “transform our economy, set us on the path toward energy independence and improve the quality of the air we breathe,” according to the summary.

Whitney Smith, a spokeswoman for Kerry, and Marshall Wittmann, a spokesman for Lieberman, declined to comment on the summary.

Cap and Trade

The Senate bill would set up a cap-and-trade program for utility companies starting in 2013. Under cap-and-trade, the government issues a declining number of pollution allowances, each representing one metric ton of carbon dioxide, which companies can buy and sell.

Factories and other “industrial sources” would be brought into the carbon market created by the cap-and-trade program in 2016. The bill would enforce maximum and minimum prices for pollution allowances. The floor price would be $12 per allowance and the ceiling would be $25 in 2013.

Oil refineries wouldn’t be required to buy pollution allowances in the carbon market. Instead, they would “purchase allowances at a fixed price” from the U.S. government.

Loan Guarantees

The legislation would authorize $54 billion in federal loan guarantees for new nuclear plant construction, which should be enough to support 12 new reactor projects. The climate-change bill also offers $2 billion a year for the commercial-scale deployment of technology that captures and stores carbon dioxide emissions from coal-fired power plants.

The coastal-state veto over new oil and gas drilling within 75 miles of shore was a response to the April 20 oil rig explosion and spill in the Gulf of Mexico, according to the summary. States “can veto drilling plans if they stand to suffer significant adverse impacts in the event of an accident,” according to the summary.

Lieberman defended the climate bill’s drilling provisions last week as some Democrats called for the rejection of President Barack Obama’s March 31 proposal to expand offshore production. Giving states the right to object to drilling is a better response to the Gulf spill, Lieberman told reporters.

“The more oil and gas we can get from within the United States, as we transition I hope to a total alternative clean- energy economy, the better we are,” Lieberman said May 4.

--Editor: Dan Stets, Richard Stubbe

To contact the reporter on this story: Simon Lomax in Washington at slomax@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net