The House Energy and Commerce Committee began markup of the American Clean Energy and Security Act of 2009 (H.R. 2454) on Monday and Tuesday this week, spending hours wrangling over the first of several hundred amendments proposed for the 946-page bill.

The legislation (PDF) introduced by House Democrats Rep. Henry Waxman, chair of the House Energy and Commerce Committee, and Edward J. Markey, chair of the House Energy and Environment Subcommittee and Select Committee on Global Warming, has been touted as a “comprehensive” energy policy because it seeks to establish, among other things, a carbon emissions reduction goal, a cap-and-trade program, and a federal renewable energy standard.

Waxman is pressing the 59-member (36 Democrats and 23 Republicans) committee to pass the bill before Congress leaves Washington for a week-long Memorial Day recess; that schedule sees the bill being sent to the full House for a floor vote later this year. Committee Democrats—several conservative ones, and many from districts with strong ties to industry—have already spent weeks reaching consensus on the major energy bill.

But on Monday it was apparent that the committee’s debate on the bill—which Waxman called “contentious” in his opening statement (PDF)—would be heated and lengthy. Waxman, Markey, and several other Democrats lauded the bill as a mutual solution to the economy, energy security, and a cleaner environment. Committee Republicans pounded a single concern: That the economic toll of the legislation would be tens of billions of dollars per year, and it would challenge the competitiveness of U.S. businesses.

Waxman addressed that concern in his opening statement, saying that it was a “false choice” to assume there was a fundamental conflict between economic growth and clean energy. “We have faced these same doomsday predictions before. When we debated the Clean Air Act, opponents said it would destroy our economy. We passed the law, cleaned our air, and grew our economy. Our economy soared over 200% at the same time our pollution was cut by more than half. When we debated the 1990 Amendments to the Clean Air Act, industry lobbyists said the bill would cost more than a $100 billion per year. Even in 1990 dollars, that’s more than the costs of the energy legislation we are debating today.”

Ranking member Joe Barton (R-Texas) said that his party was planning to offer an alternative energy bill that did not include a cap-and-trade system, drafting about 400 amendments (PDF) that would limit the measure’s economic effects.

On Tuesday, meanwhile, the committee spent almost two hours discussing an amendment, sponsored by Reps. John Dingell (D-Mich.), Jay Inslee (D-Wash), and Bart Gordon (D-Tenn.), that proposed to create a federal loan program to finance innovative clean-energy technologies. The panel approved it by a 51-6 vote.

Rep. Bart Stupak (D-Mich.) commented that at the rate the committee was deliberating the amendments, it would take “33 days and eight hours” to finish the legislation. The congressman withdrew an amendment he had offered.

The Most Litigious Issue: Cap and Trade

The committee has yet to deal with larger, more litigious issues, such as the cap-and-trade plan.

Under a compromise reached recently with House Democrats, the most recent version of the Waxman-Markey bill mandates a greenhouse gas emission reduction of 17% by 2020 from 2005 levels. It proposes that more than 57% of allowances be freely distributed, with about 36.7% going to the electricity sector, 12.3% for energy-intensive industries, 6.5% for local natural gas distribution companies, and 1.8% for oil refiners. Only about 5% of allowances will be given for free to merchant coal generators and certain generators with long-term power purchase agreements (Sec. 783 of the draft bill). President Obama had called for a 100% auction of allowances in his final budget proposal.

The Environmental Protection Agency (EPA) on Tuesday posted an updated analysis (PDF) that concluded that if 30% of the emissions permits are given free to local electric distribution companies, allowance prices would see a slight increase “because it will lessen somewhat the incentive for consumers to conserve electricity.” But the EPA said the allowance price increase “will be overpowered” because of the less-aggressive emission caps and use of domestic and international offsets.”

Republican amendments include proposals that would entirely put a stop to the cap-and-trade program if national employment reached 10%, or if China and India didn’t establish similar plans. Not all Democrats are on board with the draft bill, as it exists. A compromise remains to be reached.

Support for Bill Varies

The bill has aroused reactions of equal measure from a broad and diverse range of constituencies, including business unions, elected officials, and environmental groups. Support (PDF) for the bill was offered in writing by major power companies affiliated with the Clean Energy Group, including Exelon Corp., FPL Group, Constellation, and Entergy, as well as several environmental and government groups.

Other groups—industry and environmental—delivered sharp critiques to the bill. The U.S. Chamber of Commerce last week said that the debate had left the nation with two “terrible” options: “(1) expensive, complicated, regulation-heavy, domestic-only legislation like [H.R. 2454], or (2) an ‘even worse’ set of mandatory CO2 controls on everyone and everything through existing Clean Air Act programs. The rigid ideology exhibited over the last twenty years of the climate change debate has not only clearly divided the nation but it has failed miserably to produce any results,” the three million–member business group said. “Congress should stop, take a breath, and consider sensible policy alternatives that increase our energy security, promotes a strong economy, and contributes to a global reduction in emissions.”

The American Public Power Association (APPA) and a contingent of other groups urged Waxman and Markey in a letter, meanwhile, to reconsider the proposed allocation of greenhouse gas emission allowances directly to owners of unregulated merchant generation units. “Because these generators are not owned by a regulated utility, the state commissions would have no way to ensure that consumers would receive the benefits of these free allowances. Moreover, there is no pressure from competition from other countries—merchant generators are not ‘trade-exposed’ since they don’t compete in overseas markets. Finally, any electric sector allowances given to generators would not be available to help soften the impact of pricing carbon on consumers, through their LDCs,” it said in a letter dated May 18 (PDF).

The APPA stressed that the arguments made by generators to support their request for allowances could not be substantiated. “These companies say they need allowances to cover their ‘net compliance costs,’ but there is no commercial technology available to remove CO2 emissions from an existing generator. Free allowances won’t help to keep generators with high carbon emissions in operation—even if that were desirable. If carbon prices are too high, the company could simply retire its generator and keep the value of the allowance stream for its shareholders—as sort of a ‘golden parachute.’”

Environmental groups Greenpeace, Friends of the Earth, and Public Citizens, meanwhile reported that they could not support the bill in its “flawed” form. Greenpeace Executive Director Phil Radford went to far as to state on Friday that the bill had been “undermined by the lobbying of industries more concerned with profits than the plight of our planet,” calling on President Obama to produce a bill “based on science.”

Sources: House Energy and Commerce Committee, E&E News, EPA, U.S. Chamber of Commerce, APPA, Greenpeace International, Friends of the Earth, Public Citizens