History in the Balance: Energy Bills Passed By The House on August 4, 2007



The House of Representatives passed two new energy bills, HR 3221 and HR 2776, which could be of historical importance -- changing world directions on energy more than all previous energy bills put together. HR 2776 is the part of the new energy legislation which deals with taxes and tax incentives; it includes new tax incentives for plug-in hybrid cars, solar, wind and biofuels, among others. It pays for them by closing some of the new tax loopholes and tax breaks given to the oil industry in the energy bill of 2005, written largely in the dark by Cheney's inner circle.

The Senate Finance Committee previously proposed a bill similar to 2776 (from what I hear, second-hand), which was defeated on the Senate floor after very intense lobbying by the oil companies. The President of Exxon has since spoken out very strongly against that proposal -- for example, in almost a full page in the Financial Times. During the evening news this week, an advertisement from Exxon played over and over again urging people to write Congress to demand protection of the 2005 tax breaks.

I am fuzzy about what to expect in conference committee, which is supposed to reconcile House and Senate bills and get approval of both houses to send a bill to the White House. But some people I know believe that 2776 will be sent to the President -- who will face a major test of character and foresight. Which advisors will he listen to, in the end -- the ones who advocate national security or the ones who advocate the interests of the oil industry? We do not yet know. But we do know that it will have a major impact on the future of the US and the world, and even more on the 2008 election. History is really in the balance here.



2b. WELCOME TO THE YEAR 2007 -- before the rubber met the road
2c. THE RUBBER MEETS THE ROAD: Senate action and new IEEE talk

2d. HOUSE DEBATES ON AUGUST 4, 2007: HR 3221


At this writing, I do not really know precisely what is in the two new bills. To find out, go to:

Watching the debate on CSPAN, I could see that many amendments were passed on HR 3221 yesterday; thus I am not surprised to see that several versions exist at Thomas, and I do not know whether final versions are posted yet. I will have to study that web site more closely to know.

2a. BACKGROUND: EVENTS IN 2005 AND 2006 LEADING UP TO IT ................................................
In his State of the Union speech in January 2006, Bush made a major commitment to work to reduce America's "addiction to oil." There was strong support for bipartisan efforts towards this end, led in part by IAGS (www.iags.org.) Bush promised to cut our DEPENDENCE on gasoline in half over a couple of decades. Former Admiral James Woolsey (former head of CIA and current head of the Defense Science Board) played a major role in promoting this cause, warning people in Washington that our oil dependency on the Middle East is the primary cause of bad events and trends which could lead to far worse in the future. Woolsey and I actually gave back-to-back  talks on the Senate side about oil problems and how to solve them, about two weeks before that speech. On the same day, on the House side, Gaffney (of the Washington Times) and I did the same, under sponsorship of the House Republican leadership; about 200 people from Rayburn attended, and we were told to expect some of these words in the State of the Union speech.

At that time, the effort was almost entirely bipartisan -- if anything, originating more on the Republican side. Woolsey spoke of a coalition of neoconservatives (worried about national security first and foremost), greens and evangelists. See http://www.setamericafree.org/ . IAGS and IEEE had jointly set up a lunch event at Rayburn on energy security earlier in 2005, which, among other things, resulted in my having a chance to present the oil challenges to a more select group of Congressional leaders (almost all Republican) in the September 2005 leadership conference arranged by Congressman Inglis (R-SC).  To be honest -- I was probably a lot clearer and on-target in the September meeting than in January, because the meeting was more emotionally supportive in some way, and because I was really working hard to make the right points. (All these talks are posted at www.werbos.com/energy.htm.) For example, in September, I spent enough time on my "methanol option spreadsheet" to explain why companies who make money distributing liquid fuels would actually double their revenues and profits under that scenario.

The day after the Bush speech, the press gave extensive interviews to Bush and to Woolsey, where "cellulosic ethanol" was the most prominent theme. Cellulosic ethanol was only PART of the larger strategy I was proposing for cars, and I "diluted my message" by warning people that car fuel security is not enough by itself for energy security. I did at least mention the importance of 24-hour electricity, daytime electricity, and the intelligent grid. But still, this was major progress. Woolsey's words were what really made it to the White House.

One week after the Bush speech, I was horrified to hear that a major coalition had formed very quickly to "bring our man back to sanity and punish those who confused him" -- including some powerful forces WITHIN the administration. To be a proper scientist, I should cite exact sources and details, but there are times when even scientists have to respect certain kinds of confidentiality rules. Let me say that the initial drive to replace Rumsfeld in 2006 was not just motivated by the Iraq war, and that the struggle between national security forces and oil forces was personally quite scary to me for many months. But by the end of the year, I was breathing easier (and cautious). Rumsfeld did go, in the end (more because of new concerns involving Iraq), but Bush took a firm stand on the side of national security. The main theme which the "anti" coalition projected then was that "Bush's goal of partial energy independence is utterly impossible, and we need to keep people from wasting energy on trying to achieve the impossible." There were those who compared Cheney to Palpatine of Star Wars, especially after Halliburton moved its headquarters to Dubai.

A variety of new bills were introduced in the House and the Senate which included cellulosic ethanol, but went well beyond it, to provide more of the effective comprehensive strategy we need to solve the enormous challenges we are facing on energy for the coming few decades. I cite the most recent of those bills at www.werbos.com/oil.pdf. The bills were very substantially bipartisan. IAGS probably deserves greater credit than any other single organization to creating effective and useful action here, above and beyond the general flurry of interest everywhere caused by higher gas prices. IAGS worked hard to draw ideas for things that would work, and things that could get passed, from many sources, including IEEE and us among others.

In November 2006, our friends in the House leadership were no longer in the leadership, but the bipartisan approach paid off. Nancy Pelosi -- the new leader of the House -- also had a kind of moral leadership for all Democrats in Congress, and quickly arranged a meeting with Bush to try to promote bipartisan unity and progress in general. In that pivotal meeting, she and Bush agreed that they would focus on trying to work together, and would focus on the four big issues where  they could agree on new goals and new directions. Energy was at the top of the list. Pelosi made a major "hundred days" kind of commitment to have a major new energy bill out by summer 2007, to make a quantum shift in US energy policy, putting us firmly on course towards energy security. It reminded me of the old metaphor of earth as a big spaceship piloted by monkeys, heading straight for an asteroid (while the monkeys engage in all manner of monkey business on the bridge and pay little attention to the bigger picture on the screen above) ; Pelosi and Bush agreed together that they would pull together on the controls, hard and quick enough to move the ship onto a course where it can survive.

2b. WELCOME TO THE YEAR 2007 -- before the rubber met the road

There were two main elements to my strategy for how to minimize our dependence on gasoline: (1) maximize our ability to use ALTERNATIVE LIQUID FUELS, by accelerating the arrival of "GEM" (gasoline/ethanol/methanol) fuel-flexible cars and trucks and all that goes with them; (2) maximize our ability to use electricity (and improve underlying efficiency) by accelerating the arrival of plug-in hybrid cars (PHEV). The rational strategy is to push both themes as hard as possible, and let consumers and producers actually determine the mix of fuels. No one really knows which fuel WILL or SHOULD win in the end; the news keeps changing -- but we do know that gasoline is on an upwards price path, enough to pose a major risk to the entire world.

There is nothing anti-oil about the real goals here. I started getting involved more actively on energy in 2003, after a discussion with a prominent guy from Kuwait. We agreed: the earth is on track towards becoming a place where big hungry rats start fighting over the last piece of cheese (oil); I wouldn't want to become one of those hungry rats, but I wouldn't want to be the cheese either. But in Washington lobby wars, it's hard for people to see the bigger picture when they are paid to fight to the death for the latest tax break.

I had hoped that wiser people in the oil industry, like the chief economists, would see the enormous benefits to them of GEM fuel flexibility. But I never really had the kind of access to them (lately) that would let me discuss the complex tradeoffs in any detail. I started out pushing GEM flexibility harder than I pushed PHEVs, because I hoped the oil folks would see the benefits, and also because GEM flexibility could be achieved very quickly and inexpensively. But the oil lobbyists clearly did not see... the industry dragged its feet...

and technical discussions moved ahead all over the world, outside of Washington. Those discussions were extremely important, but too complex to summarize here. The net upshot: even though GEM flexibility would be cheaper, easier, and more beneficial to the oil industry, a more radical break actually became more feasible politically. Hybrids and plug-ins DID start to attract powerful support, not least of it in the electric utility industry and in IEEE. (And Japan and China and ....). More important, new batteries started to emerge which really change the game.

IEEE-USA, responding an outcry of near-unanimous support, decided to issue a white paper on PHEVs. It took time, and very extensive review. To make sure of the numbers and conclusions, we sent it out for additional reviews above and beyond the IEEEUSA requirements (which are strict enough by themselves). Several IEEE technical societies had extensive chances to update the paper. And, even while it was in draft, IEEE-USA had extensive contacts with key Congressional staff working on the new "Pelosi" bill, in various committees; these staffers were very eager to make sure the new bill would be rooted in technical reality, and have a real impact.

In May, 2007, IAGS arranged a new talk for me at Rayburn, on how to become independent of gasoline. The slides are posted at www.werbos.com/oil.pdf, ALONG WITH text and sources. This time, I had the sense to listen more to the guidance of Anne Korin of IAGS. And I focused hard on a key pie chart '' "best near-term opportunity to zero out our need for gasoline." I really think they understood what this was, and how real the opportunity is, RELATIVELY near-term. But later I realized ... if any oil people were in the room, this could have seemed very terrifying to them. This time -- they couldn't tell themselves it is just airy-fairy fantasy or the President's bad dream. It showed zero gasoline, and it showed exactly how, with credible near-term technology described in as much detail as I had time for.. with citations for more. Theses slides pointed towards specific new bills before Congress which would create tax incentives for PHEVs, promote GEM fule flexibility and more.


Many of us were very concerned, however – for all the talk about hybrids and PHEVs, the EXISTING incentives for hybrid cars were about to expire, with othing to replace them. It seemed that energy policy would quietly o BACKWARDS, in the absence of very effective new action. The cynics would say – perhaps the hybrid incentives in the 2005 bill were intended mainly just to get the bill passed, in the expectation that they would expire soon enough, leaving only permanent new tax breaks for the oil industry.


2c. THE RUBBER MEETS THE ROAD: Senate action and new IEEE talk

About a month ago, the press reported how the Senate was planning to pass three new energy bills – really just one new energy initiative requiring action out of three different committees. One would raise CAFÉ fuel economy standards. One would expose the oil industry to all kinds of lawsuits, like those which have hit the tobacco industry. And one was a small tax incentive bill, similar to HR 2776, which would have redirected a small share of the 2005 tax breaks from oil to car companies and renewables.


I was stunned to hear that the oil companies put all their energy into fighting the third measure. After the tobacco company story… and considering how the whole world believes CAFÉ standards drive oil use… why would they practically ignore the other two, and focus on the small tax bill instead? And how in the world did they get car company lobbyists to join them in fighting a reallocation of tax breaks to their own industry, when the other bills were on the table?


Two hypotheses come to mind. Could it be that oil company LOBBYISTS are like those cats who love to bring dead birds to the master’s doorstep, because they see their OWN jobs as depending on it? Could it be that they gave priority to the tax issues, and pressured headquarters to do likewise, because that’s what they spend their lives selling? Or could it be that the oil industry really is afraid of that zero gasoline scenario? Afraid of open competition on the fuel market? At any rate, it was a great downer for me when I read that the oil company representatives in Congress had voted down the tax bill. It was even more of a downer when the press repeated uncritically the filtered version of the story: “They were going to add $30 billion in new taxes on the oil industry to pay for this.” (In the small print in the Financial Times, it said over ten years… but not on TV.) It didn’t mention the fact that it all came from closing unintended new loopholes that were added “in the dark” when the 2005 energy bill was snuck through.


And so… on July 10, 2007, when IEEE asked me to speak again at Rayburn, as one of three main speakers at a major new event on PHEVs (jointly sponsored by the American Society for Mechnical Engineers, the Set America Free Coalition, and several IEEE societies)… I tried to be a bit more careful here. It’s harder for people to understand when you talk about competition and mixed portfolios (the true story in rational policy) than it is when you talk about electricity versus oil – but I did my best to try to be balanced, within the limited time. My slides for July 10 are posted not only at www.werbos.com, but also at the IEEE-USA web site, which says more about this very successful event – standing room only, attended both from Senate and House side. I cited many sources – especially the IEEE White Paper of PHEVs, which contains numbers essentially the same as on my pie chart.


2d. HOUSE DEBATES ON AUGUST 4, 2007: HR 3221

On Friday, I watched the evening news (BBC, NBC and ABC), and heard nothing about energy. I was worried about the legislation on plug-in hybrids, and checked with google news search. I am glad I did.


On google news, on Friday, it reported a big mess in the House – a sheer carnival, which I am surprised they didn’t report. (From the one year I was in Britain – I am sure THEIR tabloids would have been all full of the entertainment.) The carnival was all about sore feelings about a small amendment to another bill, where Hoyer (Democratic leadership) apologized for the indecorous behavior of one of his colleagues, and offered to take a new vote – but the Republicans decided to make an issue out of it instead, aiming to get maximum press out of the cause. As a result of the carnival, there was no debate or vote on three or four crucial bills before the Congressional recess; there would be an unusual special session this weekend.


And so the next day – Saturday – I tuened on CSPAN. The entire debate on both energy bills was televised.


HR 3221 came first. Twenty-odd amendments, discussed before the “committee of the whole.” (I turned the TV on about half-way through them.)


I was very nervous about the amendment to set up a solar industry board and committee under DOE, with flat required dues from all companies doing anything with solar, and very draconian fines for those who work on solar technology and do not pay. A Republican Congressman got up and noted how devastating this could be for small companies and startups trying to get into solar energy, and asked for a definite clarification on the “opt out” option. The proposer said companies could opt out immediately, but I don’t like the guilty look she had on her face as she said this, and I still have some worries. (But who knows at this stage?)


I was amazed when the Republican from Arlington Texas rejected the amendment requiring Congress to buy “green” vehicles, under the same rules that are being introduced for all other US government workers (and beyond). He argued that Congresspeople have special needs for high horsepower, for reasons of security. But are they the only people in the US government facing security issues?


I was also surprised, during the discussion of a minor amendment on wind energy, when one of the supporters from California said that offshore wind – added to onshore – would allow wind to meet 90% of the current US electricity demand.


After initial discussion of amendments, there were electronic votes (recorded votes) for four of the amendments. The amendment requiring 15% renewables in all electric utilities (with energy efficiency allowed to count up to 3 or 4 points of that) passed.


Then my memory becomes a bit fuzzy. I believe that something happened here rather similar to what I know happened later with HR 2776. I believe that the Republican leadership proposed a whole new energy bill which people had about seven minutes to read, to replace HR 3221 in its entirety. Or at least, a vote to “refer HR 3221 back to committee in its entirety.” It was almost a straight party-line vote!!! But the nays had it. And then, in another 15 minutes vote the bill passed.


Immediately after it passed, there was a quick privileged motion from the Republican leadership, asking for an investigation of the carnival incident the day before. That was voted down on straight party lines. And then they went on to HR 2776.




The House allocated an hour of debate on HR2776 – a half hour to each part, led by the gentleman from Washington (Dem) and the gentleman from Pennsylvania (Rep).


The place seemed almost empty for the whole hour. I wondered whether that was a trick of the cameras: I didn’t see 400 people from the TV on the votes for HY 3221, but they did show up immediately for the electric vote. But… it WAS almost empty, as I found out.


The Democrats chose to hold their time for “closing,” their right under House rules. But there were many embarrassing moments when no one wanted to talk on either side, especially when the Republicans had used up more of their time, and no one wanted to speak next. Maybe everyone had made up their minds long before this “debate,” and maybe they saw it as pro forma.


As cynics might expect… a large fraction of the statements was sheer bullshit, of the kind which would make you wonder whether they are ignorant, stupid or evil (with a hidden eye to the oil PAC money, anxiously projecting the thought “Am I doing right by you folks? How am I doing? Will you fund me?”).


Some basically argued: “Don’t you folks have any common sense? If you want more oil and lower gas  prices, you have to HAVE more oil. Since oil comes from the oil industry, we need to give them more money, so we can have more oil. If we want more domestic oil, we have to give it to people producing domestic oil, like the fine people in my district who are endangered…” But in fact, US domestic oil production is going downhill rather quickly now, no matter what we do. (Caveat: I know of technology options that might reverse that for awhile – but they don’t, and it would be irresponsible for me to say much about how at LEAST until the present mess is more under control.) Extra taxbreaks to the oil industry aren’t going to change that. The more promising investment for small amounts of taxpayer money is not in getting more oil, but in getting more competition from other fuels (including electricity). There is no long-term solution in pumping the last US drops at a faster rate, but there is a long-term hope in becoming able to survive without oil at all.


One clever opponent argued: “If you pass HR 2776, I predict that the price of gasoline will go even higher.” He is right. He will be able to quote himself in the future. But of course, if they don’t pass 2776, it will still go higher. It will go higher anyway. What’s at stake is whether the US economy can survive after that happens.


Many opponents repeated the disingenuous stuff about “adding a new tax on the oil industry.” But the Democrats were very precise about which specific loopholes and tax breaks from the 2005 tax bill were being closed. They won THAT part of the debate, hands down, in my view. (By the way, I never argued for removing those tax loopholes in my own talks… though I did express disappointment about what happened to the Senate Bill.) Caveat: it was still unclear whether they were talking about a current estimate of $12 billion total cost for one year, or five, or ten. No one said. No one said what share of Exxon’s profits for 2007 would be affected.

A Republican from South Carolina started the debate against the bill. Aside from the usual misleading statement about where the money would come from, he did raise a more credible question about where the money would go TO. He said… roughly… that $6 billion of the new $12 billion would go to “green pork,” to state and local projects that did not have to survive even minimal federal audits for being truly green or useful. This was discussed by several later speakers, who reported that it had been debated a lot beforehand in committee as well. The Democrats argued that a lot of the “new action” on energy has been coming from state and local levels. They argued that Republicans were violating their own basic principles, by trusting federal government (and DOE in particular) more than state and local governments. Given that choice, they have a point, but I also found myself agreeing with the Republicans that there is still some reason to worry about hare-brained pork projects; both sides had valid points, and I did not see a basis for firm confidence…


I wondered: if I were in the House, would I have submitted a “Don Quixote” amendment, still closing the loopholes, but canning or changing the $6 billion item, in order to reduce the budget deficit and avoid creating a new dangerous entitlement? Or would I have concluded that we need maximum action now, and accepted the $6 billion, subject to a clear understanding that it will expire?




If I remember correctly, the most interesting part of the debate came AFTER the hour was over! The Republican from Pennsylvania got up and proposed a whole new substitute energy bill. Both sides had only 5 minute for debate. The Democrat from Washington state complained that they would have 7 minutes to read and evaluate about 300 pages, and that the Republicans were asking people to vote for something they hadn’t even read. (Echoes of 2005?) The Republican countered that they had provided some of it in committee, to some folks… but the guy from Washington said “not to me.” (Caveat: I remember people talking… but might be confusing some of it to a very similar debate on a possible replacement to HY 3221.)


The Republicans said – this one is a REAL energy bill, unlike their, which isn’t really about energy at all. Yes, this one includes drilling in Anwar, but it has other great things. It lets us drill for oil and gas beyond 100 miles. It continues tax incentives for wind and hybrids, which are expiring. It supports clean coal, coal to liquids and carbon sequestration. It doesn’t put a new tax on the oil companies, though it does have a modest $1 billion new tax on gasoline and on the use of coal.


The Democrats said in reply that 2776, unlike the Republican Bill, would substantially incentivize plug-in hybrid cars. PHEV mentioned first, with reference to its enormous potentially to finally get the US out of the hole here. But also solar, wind and biomass. They mentioned how the American Wind Association strongly favors the new bill.


All told, it sounds to me as if HR 2776, whatever its strengths and weaknesses, is a big step forwards. The substitute bill would not be. Both are imperfect, almost by definition, but we badly need action now, before it starts to get too late. Of all the issues at stake here, of course, the plug-in hybrids are what matter most, by far. (Though I have to admit that there are possible solar-related projects in California, Arizona, Michigan, Georgia and Alabama that really might become very major factors in global energy, far more promising than anything I know of at DOE.)


At first, during the 15 minute electronic vote on the substitution motion, I became very depressed.  It looked as if the substitution would win, by a vote of 35 to 30 or so.. suggesting that everyone already went home for recess (or at least a long dinner). No plug-in hybrids… and, after the 15 minute clock went to zero, CSPAN then played a rerun of the Republican press event about Friday’s “carnival”… it droned on and on. I would have just turned off the TV, and gone to worst-case R&R (wine and sudoku?), but I wanted to wait for a final debriefing. However… the 15 minute limit was not a real 15 minute limit, it seems. (Probably some definition I do not know in the House rules.) Congresspeople trickled back in, for a total of about 400 votes, and the substitution was defeated. Then the bill passed. And then Hoyer got up and started discussing a list of totally different things. I turned off the TV and still had wine – white wine with sushi and sashimi.


But now… it is only a start. Now come the bigger decisions. Best of luck to us all, that humans may survive after all… we may hope


Copyright PJW, August 5, 2007



“For want of a nail, the shoe was lost,

For want of a shoe, the horse was lost.

For want of a horse, the rider was lost,

For want of the rider, the message was lost.

For want of the message, the battle was lost.

For want of the battle, the war was lost,

And all for the want of a horseshoe nail.”


­Benjamin Franklin, variation of an ancient rhyme whose origins have been lost


Backpropagation -- use of the chain rule for ordered derivatives -- is the new

mathematical tool which can reliably find the nail