Consumer-First Energy Act
Beaten to the punch by their Republican counterparts, Senate Democrats last week unveiled their own legislative package, which seeks to “provide energy price relief and hold oil companies and other entities accountable for their actions with regard to high energy prices.”

Introduced by Senate Majority Leader Harry Reid (D-Nev.) and 22 Democratic co-sponsors, the Consumer-First Energy Act (S. 2991) would create and Energy Independence and Security Trust Fund aimed at: (1) reducing the burden of rising energy prices, (2) diversifying and expanding the use of clean and renewable energy sources, (3) achieving net reductions in greenhouse-gas emissions, and (4) preventing energy price gorging, profiteering, and market manipulation.

The proposed Energy Independence and Security Trust Fund primarily would be funded via two methods: revenue from a temporary, 25 percent tax on the “windfall profits” of the major oil companies and the repeal of the Section 199 manufacturing tax credit for the five largest oil and gas companies, which is expected to raise $17 billion over the next decade.

Citing the half a trillion dollars they say the five largest oil companies have made since President George W. Bush came into office, Senate Democrats argued it was time for Big Oil to pay its fair share. They also pointed out that the windfall profits tax would not apply to profits that the big oil companies reinvested in clean, affordable, and domestically-produced renewable fuels, expanding refinery capacity and utilization, or renewable electricity production.

By granting the president the authority to declare an energy emergency in the event of an energy shortage, disruption, or significant pricing anomalies, S. 2991 also seeks to prevent or punish “price gorging,” as it would be illegal to set “an unconscionably excessive price” during such an emergency. Violators would face significant civil penalties.

The bill seeks to limit the price impacts of excessive oil speculation as well. It would prevent traders from routing their transaction through off-shore markets to evade speculative limits and force the Commodities Futures Trading Commission to set a 25 percent margin requirement for all crude oil futures trades, contracts or transactions.

Finally, the bill would allow the U.S. Attorney General to bring an enforcement action against any country or company (or OPEC) thought to be colluding in setting the price of oil, natural gas, or any petroleum product.

Republican reaction to the proposal was mixed, especially in regard to the windfall profits tax.. Senate Minority Leader Mitch McConnell (R-Ken.) said that much of the bill would be “supported by my conference.”  Sen. Kay Bailey Hutchinson (R-Texas) called the windfall tax “a stupid thing to do at this point.”

Strategic Petroleum Reserve Suspension
As an original component of both S. 2991 and its Republican counterpart, S. 2958, the Senate—indeed the entire Congress—appears unified on the need to suspend the delivery of approximately 70,000 barrels of crude oil to the Strategic Petroleum Reserve for the rest of the year. The U.S. uses roughly 20 million barrels each day.

The Senate yesterday approved—in a 97 to 1 vote, with Sen. Wayne Allard (R-Colo.) casting the lone dissenting vote—an amendment offered by Reid that would stop the U.S. Department of Energy from continuing to fill the nation’s emergency oil reserve for the rest of the year or until the average price of crude oil receded to at least $75 per barrel. It currently is selling at approximately $125 per barrel.

The same criteria are contained in the Strategic Petroleum Reserve Fill Suspension and Consumer Protection Act of 2008 (H.R. 6022), which the U.S. House of Representatives approved the same day, by a veto-proof margin of 385-25. H.R. 6022 was introduced by Reps. Peter Welch (D-Vermont), Nicholas Lampson (D-Texas), and Ed Markey (D-Mass.).

This rare example of bipartisan, bicameral unity should not be viewed as a panacea for rising energy prices, however. Even those that support the suspension concede it will have, at best, a modest effect on prices. Sen. Jeff Bingaman, chair of the Senate Committee on Energy and Natural Resources, said, “It will have a modest impact… It certainly couldn’t hurt.”

The three leading presidential candidates all endorse the suspension. Bush and Vice President Dick Cheney do not embrace the idea, however, arguing last month that not enough oil goes into the reserve to affect prices and that the reserve’s capacity must be maintained in the case of a severe supply disruption.