The Strategic Energy Efficiency and Renewables Reserve in the CLEAN Energy Act of 2007 (H.R. 6)

The Strategic Energy Efficiency and
Renewables Reserve in the CLEAN Energy
Act of 2007 (H.R. 6)
Fred Sissine
Specialist in Energy Policy
Resources, Science, and Industry Division
Summary
H.R. 6 would use revenue from certain oil and natural gas policy revisions to create
an Energy Efficiency and Renewables Reserve. The actual uses of the Reserve would
be determined by ensuing legislation. A variety of tax, spending, or regulatory bills
could draw funding from the Reserve to support liquid fuels or electricity policies. The
House budget resolution (H.Con.Res. 99) would create a deficit-neutral reserve fund
nearly identical to that proposed in H.R. 6. The Senate budget resolution (S.Con.Res.

21) would create three reserve funds with purposes related to those in H.R. 6. However,


the Senate version has more specifics about efficiency and renewables measures, and it
would allow reserve fund use for “responsible development” of oil and natural gas.
Background
H.R. 6 was introduced by the House Democratic Leadership to revise certain tax and
royalty policies for oil and natural gas and use the resulting revenue to support a reserve
for energy efficiency and renewable energy. The bill is one of several introduced on
behalf of the Democratic Leadership in the House as part of its “100 hours” package of
legislative initiatives conducted early in the 110th Congress.
Title I proposes to reduce certain oil and natural gas tax subsidies to create a revenue1
stream to support energy efficiency and renewable energy. Title II would modify certain
aspects of royalty relief for offshore oil and natural gas development to create a second2


stream of revenue to support energy efficiency and renewable energy.
1 A detailed description of existing oil and natural gas tax provisions is available in CRS Report
RL33763, Oil and Gas Tax Subsidies: Current Status and Analysis, by Salvatore Lazzari.
2 A detailed description of existing and proposed oil and natural gas royalty provisions is
(continued...)
Strategic Energy Efficiency and Renewables Reserve
Title III of H.R. 6 creates a budget procedure for the creation and use of a Strategic
Energy Efficiency and Renewable Energy Reserve, under which additional spending for
energy efficiency and renewable energy programs can be accommodated without violating
enforcement procedures in the Congressional Budget Act of 1974, as amended.
Bill Purpose and Permitted Reserve Uses
The stated purpose of the bill is to “reduce our nation’s dependency on foreign oil”
by investing in renewable energy and energy efficiency. Specifically, Section 301 (a) of
the bill would make the revenue in the Reserve available to “offset the cost of subsequent
legislation” that may be introduced “(1) to accelerate the use of domestic renewable
energy resources and alternative fuels, (2) to promote the utilization of energy-efficient
products and practices and conservation, and (3) to increase research, development, and
deployment of clean renewable energy and efficiency technologies.”
Budget Adjustment Procedure for Uses of the Reserve
The budget adjustment procedure for use of the Reserve is set out in Section 301 (b).
The procedure is similar to reserve fund procedures included in annual budget
resolutions.3 It would require the chairman of the House or Senate Budget Committee,
as appropriate, to adjust certain spending levels in the budget resolution, and the
committee spending allocations made thereunder, to accommodate a spending increase
(beyond FY2007 levels) in a reported bill, an amendment thereto, or a conference report
thereon that would address the three allowed uses of the Reserve noted above. The
adjustments for increased spending for a fiscal year could not exceed the amount of
increased receipts for that fiscal year, as estimated by the Congressional Budget Office,
attributable to H.R. 6.
Initial Revenue Estimates for the Reserve
According to the Congressional Budget Office (CBO), the proposed repeal of
selected tax incentives for oil and natural gas would make about $7.7 billion available
over 10 years, 2008 through 2017. The proposed changes to the royalty system for oil
and natural gas are estimated to generate an additional $6.3 billion. This would yield a
combined total of $14 billion for the Reserve over a 10-year period.4 The CBO estimates


2 (...continued)
available in CRS Report RS22567, Royalty Relief for U.S. Deepwater Oil and Gas Leases, by
Marc Humphries.
3 For more details on how reserve funds are used to make adjustments to a budget resolution, see
CRS Report RL33122, Congressional Budget Resolutions: Revisions and Adjustments, by Robert
Keith, p.12-13.
4 U.S. Congress. Congressional Budget Office. H.R. 6, CLEAN Energy Act of 2007. (Letter to
Chairman Nick Rahall, Committee on Natural Resources.) January 12, 2007. 4 p.
[ h t t p : / / www.cbo.gov/ f t pdocs/ 77xx/ doc7728/ hr 6pr el i m.pdf ]
show that the total annual revenue flow would vary annually over the 10-year period,
ranging from a low of about $900 million to a high of about $1.8 billion per year.
H.R. 6 Action
H.R. 6 came to the House floor for debate on January 18, 2007. In the floor debate,
opponents argued that the reduction in oil and natural gas incentives would dampen
production, cause job losses, and lead to higher prices for gasoline and other fuels.
Opponents also complained that the proposal for the Reserve does not identify specific
policies and programs that would receive funding. Proponents of the bill countered that
record profits show that the oil and natural gas incentives were not needed. They also
contended that the language that would create the Reserve would allow it to be used to
support a variety of R&D, deployment, tax incentives, and other measures for renewables
and energy efficiency, and that the specifics would evolve as legislative proposals come
forth for to draw resources from the Reserve. The bill passed the House on January 18
by a vote of 264-163.
Related Action on the Budget Resolution
In general, the budget resolution would revise the congressional budget for FY2007.
It would also establish the budget for FY2008 and set budgetary levels for FY2009
through FY2012. In particular, the House resolution (H.Con.Res. 99) would create a
single deficit-neutral reserve fund for energy efficiency and renewable energy that is
virtually identical to the reserve described in H.R. 6. In contrast, the Senate resolution
(S.Con.Res. 21) would create three reserve funds, which identify more specific efficiency
and renewables measures and would allow support for “responsible development” of oil
and natural gas.
House Version of the Budget Resolution (H.Con.Res. 99)
On March 28, the House passed H.Con.Res. 99 by a vote of 216-210. For FY2007,
it would allow for additional funding for energy (Function 270) above the President’s
request that “could be used for research, development, and deployment of renewable and
alternative energy.” Section 207 would create a deficit-neutral reserve fund that fulfills
the purposes of H.R. 6 to “facilitate the development of conservation and energy
efficiency technologies, clean domestic renewable energy resources, and alternative fuels
that will reduce our reliance on foreign oil.”
Senate Version of the Budget Resolution (S.Con.Res. 21)
On March 23, the Senate passed S.Con.Res. 21, its version of the budget resolution.
In parallel to the House resolution, Section 307 of S.Con.Res. 21 would create a deficit-
neutral reserve fund that could be used for renewable energy, energy efficiency, and
“responsible development” of oil and natural gas. In addition, Section 332 would create
a deficit-neutral reserve fund for extension through 2015 of certain energy tax incentives,
including the renewable energy electricity production tax credit (PTC), Clean Renewable
Energy Bonds, and provisions for energy efficient buildings, products, and power plants.


Further, Section 338 would create a deficit-neutral reserve fund for manufacturing
initiatives that could include tax and research and development (R&D) measures that
support alternative fuels, automotive and energy technologies, and the infrastructure to
support those technologies.