Energy Policy Act of 2005

The Energy Policy Act of 2005 () is a federal law signed by President George W. Bush on August 8, 2005, at Sandia National Laboratories in Albuquerque, New Mexico. The act, described by proponents as an attempt to combat growing energy problems, changed US energy policy by providing tax incentives and loan guarantees for energy production of various types. The most consequential aspect of the law was to greatly increase ethanol production to be blended with gasoline. The law also repealed the Public Utility Holding Company Act of 1935, effective February 2006.

Provisions General provisions

The act increases the amount of biofuel (usually ethanol) that must be mixed with gasoline sold in the United States to by 2006, by 2009 and by 2012; two years later, the Energy Independence and Security Act of 2007 extended the target to by 2022. Under an amendment in the American Recovery and Reinvestment Act of 2009, Section 406, the Energy Policy Act of 2005 authorizes loan guarantees for innovative technologies that avoid greenhouse gases, which might include advanced nuclear reactor designs, such as pebble bed modular reactors (PBMRs) as well as carbon capture and storage and renewable energy; It seeks to increase coal as an energy source while also reducing air pollution, through authorizing $200 million annually for clean coal initiatives, repealing the current cap on coal leases, allowing the advanced payment of royalties from coal mines and requiring an assessment of coal resources on federal lands that are not national parks; It authorizes tax credits for wind and other alternative energy producers; It adds ocean energy sources, including wave and tidal power for the first time as separately identified, renewable technologies; It authorizes $50 million annually over the life of the law for biomass grants; It includes provisions aimed at making geothermal energy more competitive with fossil fuels in generating electricity; It requires the Department of Energy to: Study and report on existing natural energy resources including wind, solar, waves and tides; Study and report on national benefits of demand response and make a recommendation on achieving specific levels of benefits and encourages time-based pricing and other forms of demand response as a policy decision; Designate National Interest Electric Transmission Corridors where there are significant transmission limitations adversely affecting the public (the Federal Energy Regulatory Commission may authorize federal permits for transmission projects in these regions); Report in one year on how to dispose of high-level nuclear waste; It authorizes the Department of the Interior to grant leases for activity that involves the production, transportation or transmission of energy on the Outer Continental Shelf lands from sources other than gas and oil (Section 388); It requires all public electric utilities to offer net metering on request to their customers; It prohibits the manufacture and importation of mercury-vapor lamp ballasts after January 1, 2008; It provides tax breaks for those making energy conservation improvements to their homes; It provides incentives to companies to drill for oil in the Gulf of Mexico; It exempts oil and gas producers from certain requirements of the Safe Drinking Water Act; It extends the daylight saving time by four to five weeks, depending upon the year (see below); It requires that no drilling for gas or oil may be done in or underneath the Great Lakes; It requires that the Federal Fleet vehicles capable of operating on alternative fuels be operated on these fuels exclusively (Section 701); It sets federal reliability standards regulating the electrical grid (done in response to the 2003 North America blackout);Ken Belsen and Matthew L. Wald, " ’03 Blackout Is Recalled, Amid Lessons Learned", The New York Times, August 13, 2008, found at The New York Times website. Retrieved August 27, 2008.David Freedlander, "It could happen again: On fifth anniversary of blackout, nation still vulnerable", A.M. N.Y., August 12, 2008. See response at Letter to the Editor . Retrieved August 27, 2008.Report, Energy and Commerce Committee, "Blackout 2003: How Did It Happen and Why? Full Committee on Energy and Commerce, September 4, 2003, found at Energy and Commerce Committee website . Retrieved August 27, 2008. It includes nuclear-specific provisions;Congress Passes First Comprehensive Energy Bill in 13 Years, Nuclear Energy Institute, 2005 It extends the Price-Anderson Nuclear Industries Indemnity Act through 2025; It authorizes cost-overrun support of up to $2 billion total for up to six new nuclear power plants; It authorizes production tax credit of up to $125 million total a year, estimated at 1.8 US¢/kWh during the first eight years of operation for the first 6.000 MW of capacity, consistent with renewables; It authorizes loan guarantees of up to 80% of project cost to be repaid within 30 years or 90% of the project's life; It authorizes $2.95 billion for R&D and the building of an advanced hydrogen cogeneration reactor at Idaho National Laboratory; It authorizes 'standby support' for new reactor delays that offset the financial impact of delays beyond the industry's control for the first six reactors, including 100% coverage of the first two plants with up to $500 million each and 50% of the cost of delays for plants three through six with up to $350 million each for; It allows nuclear plant employees and certain contractors to carry firearms; It prohibits the sale, export or transfer of nuclear materials and "sensitive nuclear technology" to any state sponsor of terrorist activities; It updates tax treatment of decommissioning funds; The law exempted fluids used in the natural gas extraction process of hydraulic fracturing (fracking) from protections under the Clean Air Act, Clean Water Act, Safe Drinking Water Act, and CERCLA ("Superfund"). It directs the Secretary of the Interior to complete a programmatic environmental impact statement for a commercial leasing program for oil shale and tar sands resources on public lands with an emphasis on the most geologically prospective lands within each of the states of Colorado, Utah, and Wyoming.

Tax reductions by subject area $4.3 billion for nuclear powerDetailed 2005 breakdown nei.org - PDF, 29kB $2.8 billion for fossil fuel production $2.7 billion to extend the renewable electricity production credit $1.6 billion in tax incentives for investments in "clean coal" facilities $1.3 billion for energy conservation and efficiency $1.3 billion for alternative fuel vehicles and fuels (bioethanol, biomethane, liquified natural gas, propane) $500 million Clean Renewable Energy Bonds (CREBS) for government agencies for renewable energy projects.

Change to daylight saving time

The law amended the Uniform Time Act of 1966 by changing the start and end dates of daylight saving time, beginning in 2007. Clocks were set ahead one hour on the second Sunday of March (March 11, 2007) instead of on the first Sunday of April (April 1, 2007). Clocks were set back one hour on the first Sunday of November (November 4, 2007), rather than on the last Sunday of October (October 28, 2007). This had the net effect of slightly lengthening the duration of daylight saving time.

Lobbyists for this provision included the Sporting Goods Manufacturers Association, the National Association of Convenience Stores, and the National Retinitis Pigmentosa Foundation Fighting Blindness.

Lobbyists against this provision included the U.S. Conference of Catholic Bishops, the United Synagogue of Conservative Judaism, the National Parent-Teacher Association, the Calendaring and Scheduling Consortium, the Edison Electric Institute, and the Air Transport Association. This section of the act is controversial; some have questioned whether daylight saving results in net energy savings.

Commercial building deduction The act created the Energy Efficient Commercial Buildings Tax Deduction, a special financial incentive designed to reduce the initial cost of investing in energy-efficient building systems via an accelerated tax deduction under section §179D of the Internal Revenue Code (IRC) Many building owners are unaware that the [Policy Act of 2005] includes a tax deduction (§179D) for investments in "energy efficient commercial building property" designed to significantly reduce the heating, cooling, water heating and interior lighting cost of new or existing commercial buildings placed into service between January 1, 2006, and December 31, 2013. §179D includes full and partial tax deductions for investments in energy efficient commercial building that are designed to increase the efficiency of energy-consuming functions. Up to $.60 for lighting$, .60 for HVAC and $.60 for building envelope, creating a potential deduction of $1.80 per sq/ft. Interior lighting may also be improved using the Interim Lighting Rule, which provides a simplified process to earn the Deduction, capped at $0.30-$0.60/square foot. Improvements are compared to a baseline of ASHRAE 2001 standards.

To obtain these benefits the facilities/energy division of a business, its tax department, and a firm specializing in EPAct 179D deductions needed to cooperate. IRS mandated software had to be used and an independent 3rd party had to certify the qualification. For municipal buildings, benefits were passed through to the primary designers/architects in an attempt to encourage innovative municipal design.

The Commercial Buildings Tax Deduction expiration date had been extended twice, last by the Energy Improvement and Extension Act of 2008. With this extension, the CBTD could be claimed for qualifying projects completed before January 1, 2014.

Energy management The commercial building tax deductions could be used to improve the payback period of a prospective energy improvement investment. The deductions could be combined by participating in demand response programs where building owners agree to curtail usage at peak times for a premium. The most common qualifying projects were in the area of lighting.

Energy savings Summary of Energy Savings Percentages Provided by IRS Guidance

Percentages permitted under Notice 2006–52 (Effective for property placed in service January 1, 2006 – December 31, 2008) Interior Lighting Systems %, Heating, Cooling, Ventilation, and Hot Water Systems %, Building Envelope %. Percentages permitted under Notice 2008–40 (Effective for property placed in service January 1, 2006 – December 31, 2013) Interior Lighting Systems 20%, Heating, Cooling, Ventilation, and Hot Water Systems 20%, Building Envelope 10%. Percentages permitted under Notice 2012–22 Interior Lighting Systems 25%, Heating, Cooling, Ventilation, and Hot Water Systems 15%, Building Envelope 10%. Effective date of Notice 2012-22 – December 31, 2013; if §179D is extended beyond December 31, 2013, is also effective (except as otherwise provided in an amendment of §179D or the guidance thereunder) during the period of the extension.

Cost estimate The Congressional Budget Office (CBO) review of the conference version of the bill estimated the act would increase direct spending by $2.2 billion over the 2006–2010 period, and by $1.6 billion over the 2006–2015 period. The CBO did not attempt to estimate additional effects on discretionary spending. The CBO and the Joint Committee on Taxation estimated that the legislation would reduce revenues by $7.9 billion over the 2005–2010 period and by $12.3 billion over the 2005–2015 period.

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