by Richard Lehfeldt, Graham "Rusty" Mathews and Steven Wellner, Dickstein Shapiro LLP

If there was a window for comprehensive energy legislation in the 111th Congress, it has all but shut in the 112th. The new governing principles on the Hill–spend no money, and if you do anything, do it incrementally–don't bode well for the large-scale policy initiatives and public investments in domestic energy infrastructure that global competitors are making as they emerge from their own recessions. What can the federal government do in 2011 to advance the nation's energy priorities given the political and financial constraints?

On the legislative side, the answer –if not the execution–is simple: targeted, no- or low-cost, incremental bills featuring legislative compromises that advance the policy goals of both parties. With the ongoing turmoil in the Middle East and the looming increase in gas prices this summer, energy issues likely will be front and center on Congress' agenda again. And given the makeup of the new Congress, the legislative agenda on energy will focus primarily on increasing supply of everything from oil and gas to renewables; an agenda focused solely on one or the other is unlikely to draw the necessary bipartisan support.

The magnitude of the energy problems facing the country and stakeholders' respective solutions present opportunities for compromise–if not consensus–that could advance the national interest by both providing near-term contributions to energy security and keeping the United States competitive in the estimated $1.7 trillion global clean energy market. There are possible deals to be made on various issues if the parties are willing to take the hard votes to make those deals happen. Here are a few possible examples:

• President Barack Obama announced in his State of the Union address the goals of putting 1 million electric and flex-fuel vehicles on the road by 2015 and generating 80 percent of the nation's electricity from clean energy sources by 2035. In exchange for Republican support on these initiatives, the Obama administration could expedite and expand its oil- and gas-leasing process.
• Republicans might agree to pass a national clean energy standard, i.e., a standard expanded to include nuclear power and clean coal, in return for a two-year moratorium on the Environmental Protection Agency's (EPA's) proposed greenhouse gas rules.
• Congress could improve efforts to stimulate the development of alternative fuels by (1) supporting biofuels and liquids from coal with carbon capture and sequestration, (2) creating incentives for cofiring biomass in existing coal-fired generators, and (3) authorizing government procurement processes (particularly the Department of Defense) to create long-term off-take agreements for alternative fuels, which would improve dramatically the ability of bio-refineries to obtain funding backed by federal loan guarantees.

Furthermore, there might be standalone initiatives, such as a new round of energy tax credit extensions to increase the manufacture of renewable energy technologies and components, to accelerate alternative fuel production and to promote greater energy efficiency. These opportunities should be seized as available and not be held up in hopes of omnibus legislation.

The greatest untapped resource for new energy policy, however, is not new legislation, but old: namely, the mountains of existing statutory authority already on the books. With major new initiatives unlikely to come from Congress, federal agencies are likely to fill the void as the EPA's greenhouse gas regulatory efforts amply demonstrate. Congress has spilled gallons of legislative ink on energy-related issues during the past 20 years. Industry should not underestimate the untapped authority held by federal agencies to advance energy policy without additional legislative authorizations and actively should pursue new policy initiatives before those agencies.

For example, the Federal Energy Regulatory Commission (FERC) has approved efforts to overhaul dramatically how transmission costs for remotely located renewable projects are allocated in much of the country, even as federal appellate courts have scaled back its authority and efforts to take a more direct hand in national transmission planning and construction. Meanwhile, even as it deals with the aftermath of the Deepwater Horizon accident, the Bureau of Ocean Energy Management, Regulation and Enforcement actively is pursuing efforts to streamline environmental reviews for offshore wind projects. Congress isn't the only game in town.

The political benefits of bipartisanship were demonstrated clearly during the lame-duck session of the 111th Congress. If the new Congress and Obama administration were once again able to meet each other half way on a modest set of energy policy goals, the results, coupled with the creative application of existing statutory authorities, could contribute enormously to U.S. energy security and global competitiveness.

Authors

Richard Lehfeldt is a partner in Dickstein Shapiro LLP's energy practice. Reach him at lehfeldtr@dicksteinshapiro.com or 202-420-2215.

Rusty Mathews is a senior legislative advisor in Dickstein Shapiro LLP's government law and strategy group. Reach him at mathewsg@dicksteinshapiro.com or 202-420-4780.

Steven Wellner is an associate in Dickstein Shapiro LLP's energy practice. Reach him at wellners@dicksteinshapiro.com or 202-420-3468.