S. 2991, The Consumer-First Energy Act of 2008

[Sapiens]

http://democrats.senate.gov/dpc/dpc-...me=lb-110-2-78

S. 2991, The Consumer-First Energy Act of 2008


May 7, 2008

Summary



On May 7, 2008, Senator Reid introduced S. 2991, the Consumer-First Energy Act of 2008, which would create a tax on "windfall profits" of the major oil companies at a special supplemental rate of 25 percent; repeal the Section 199 deduction for the major oil and gas companies and tightens the rules restricting the use of foreign tax credits on oil and gas related income; suspend filling of the Strategic Petroleum Reserve (SPR); punish price gouging; limit excessive speculation in the oil markets; and crack down on the Organization of the Petroleum Exporting Countries (OPEC). The "windfall profits" tax would not apply to profits of oil companies that are invested in clean, affordable and domestically produced renewable alternative fuels, expanded refinery capacity and utilization, or renewable electricity production.



Major Provisions



Title I - Tax Provisions Related to Oil and Gas



The Consumer-First Energy Act of 2008 would create a tax on "windfall profits" of the major oil companies at a special supplemental rate of 25 percent. This tax would not apply to the windfall profits of oil companies invested in clean, affordable and domestically produced renewable alternative fuels, expanded refinery capacity and utilization, or renewable electricity production, which would all help lower consumers energy bills. The bill would also would repeal the deduction for domestic production for the major oil and gas companies for their income on the sale, exchange, or other disposition of oil, natural gas, or any primary product thereof. Additionally, the legislation would also tighten the rule restricting the use of foreign tax credits on oil and gas related income. All revenue collected from the windfall profits tax and repeals of the tax deductions would be deposited into an Energy Independence and Security Act Trust Fund.



Title II - Price Gouging



America's heavy reliance on petroleum products leaves our nation and citizenry vulnerable to crippling price increases and volatility, much of which is unrelated to supply disruptions or normal market factors. Title II of the Consumer-First Energy Act of 2008 would provide the President, the Federal Trade Commission, and state Attorneys General with the tools necessary to investigate potential price gouging during energy emergencies. Specifically, the legislation would:



Give the President the authority to declare a temporary national energy emergency in instances where the President determines that a threatened or existing disruption of oil, petroleum, or biofuel supplies or significant pricing anomalies constitute a danger to the health, safety, welfare, or economic well-being of the citizens of the United States. This is similar to the emergency authority provided to Governors under many individual state statutes; and


Upon declaration of an energy emergency, price gouging is prohibited and punishable by federal civil and criminal penalties. This provision is modeled after state anti-price gouging legislation in at least 30 states. The legislation would also empower state Attorneys General with the authority to bring a civil action on behalf of citizens for price gouging during an energy emergency.


Title III - Strategic Petroleum Reserve



The Bush Administration's policy of taking oil off the market and putting it underground in the Strategic Petroleum Reserve (SPR) is a contributing factor to current high energy prices. As the SPR's capacity already exceeds our International Energy Program commitments to maintain at least 90 days of oil stocks in reserve, it makes no sense to store oil underground when oil is trading at prices that have soared beyond $120.



Title III would require the Secretary of Energy to suspend acquisition of petroleum for the SPR through 2008, including through the direct purchase or royalty-in-kind contracts. It allows the Secretary to resume filling if the price of petroleum falls to $75 per barrel.



Title IV - No Oil Producing and Exporting Cartels



Title IV of the Consumers-First Energy Act of 2008 would amend the Sherman Antitrust Act and allow the Attorney General to bring enforcement actions against any country or company that is colluding in setting the price of oil, natural gas or any petroleum product. Additionally, Title IV would seeks to address OPEC state claims that their anti-competitive behavior has sovereign immunity from U.S. courts due to a court ruling in 1979. Title IV would not authorize private lawsuits against OPEC.



Title V - Market Speculation



Excessive speculation by financial traders, without adequate oversight and consumer protection, has likely increased energy prices for consumers. Today, speculators can avoid all U.S. market oversight or reporting requirements by routing their trades through the IntercontinentalExchange (ICE) in London instead of the NYMEX in New York. The Consumer-First Energy Act of 2008 would amend the Commodity Exchange Act to limit the price impacts of excessive speculation by preventing traders of U.S. crude oil from routing their transactions through off-shore markets in order to evade speculation limits and also impose reporting requirements.



Additionally, the bill would require the Commodities Futures Trading Commission to substantially increase the margin requirement on crude oil future trades within 90 days to limit excessive speculation and protect consumers. The current margin requirement varies between five and seven percent which essentially means that a commodity trader can control $10 million worth of future oil contracts by only putting $500,000 to $700,000 down.



Legislative History



The Consumer-First Energy Act of 2008 will be introduced by Senator Reid on May 7, 2008. Pursuant to Rule XIV, Senator Reid will place the bill on the Senate calendar.



Expected Amendments



The DPC will distribute information on amendments as it becomes available.



Administration Position



At the time of publication, the Bush Administration had not yet released a Statement of Administration Position on the Consumer-First Energy Act of 2008.

[Mega]

Re: S. 2991, The Consumer-First Energy Act of 2008

Yank
You lost................Face up to it.

Mike

[c1ue]

Re: S. 2991, The Consumer-First Energy Act of 2008

The nifty thing about reducing leverage is that you further empower the big boys to dominate the market.

Interesting to see how that plays out.

[Slimprofits]

Re: S. 2991, The Consumer-First Energy Act of 2008

Here is an update on another bill, S. 2191, the Lieberman-Warner cap and trade. It is up debated in the Senate this week and is receiving top billing on Fox and CNN tv.

earth2tech

But while the debate will highlight the obstacles to climate legislation, it’s unlikely that this bill will get out of the Senate and even less likely that it will be passed by the House — in fact it’s almost guaranteed to get a veto from the White House. But America’s Climate Security Act of 2007, as bill S.2191 is officially known, will be a landmark in America’s carbon constrained future.

It’s not clear if any of the three major presidential candidates will take time out of their busy schedules to cast votes, even though it’s widely expected that it will be under the next administration that climate change legislation like this gets passed. Regardless, don’t expect anyone to vote along traditional party lines. Dems and Reps will likely be making alliances across the aisle as senators jockey for carbon allowances under the bill’s proposed cap-and-trade system. Indeed, the blue vs. red battle lines are being redrawn as the green debate takes shape.

The bill’s overarching emissions reduction targets include an 18 percent cut below 2005 levels by 2020 and a 70 percent cut by 2050. To achieve these cuts, the bill proposes using a cap-and-trade system, under which carbon emitters would be issued federal emission credits, allowing them to pollute, while those who reduce their emissions can sell their leftover credits on the open market.

It will likely be the specifics of this proposed carbon cap-and-trade system that will raise the greatest debate. This bill lays out in great detail the functioning of that trade system, how credits would be issued, and what activities would qualify for offsets. However, debating all the particulars, especially the meticulous specifics of auctioned vs. free emissions permits, will boil down to regional interests as senators try to get their constituents the biggest slice of the pie.

The White House has already voiced its opposition to the legislation, warning that it could hurt GDP to the tune of 7 percent by 2050. This makes the moves of the presidential contenders, all of whom support a cap-and-trade approach, all the more important. The Washington Post reports that while he may not be voting, McCain has made his opposition to the bill clear over it’s lack of support for nuclear power, his “alternative” power of choice. Meanwhile, Barack Obama and Hilary Clinton both support the bill but may not leave the campaign trail to cast their votees.

We’ll keep an eye on this dress rehearsal this week, but don’t expect any big movement. Cleantech startups, entrepreneurs and VCs should be paying attention to the language used in debating this legislation, but there are far more near-term policy battles to be had — like the renewable energy tax credits — that will affect their business plans much sooner.