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Narrow Senate Energy Bill Moving Ahead

The Senate is expected to introduce next week a narrow energy bill focusing on oil spill issues and not taking up any broad climate initiatives.



) -- Reports coming down the steps of Capitol Hill on Thursday indicated that Senate Majority Leader Harry Reid will bring a Gulf of Mexico oil spill bill to the Senate floor next week, which would serve as the replacement for a more comprehensive climate bill.

The bill is not expected to include a carbon cap-and-trade system or renewable energy standards, but it would be a boon to stocks focused on converting truck and van fleets to natural gas. It's not comprehensive climate legislation, but it's a start. FBR Capital Markets described the Senate plan to pursue a narrow energy bill as a "punt."

It's been stocks like

Clean Energy Fuels

(CLNE) - Get Clean Energy Fuels Corp. Report


Westport Innovations

(WPRT) - Get Westport Fuel Systems, Inc. Report

that have risen and fallen the most on the back and forth in the legislative fight, and both stocks spiked on Thursday afternoon, with Clean Energy Fuels shares rising 7% and Westport Innovations shares rising 5% as the reports from the Capitol were leaked.

Fuel Systems Solutions


, which has built its natural gas vehicle business in Europe and is just getting started in the U.S., was up more than 6% on Thursday afternoon.

>>Green Stock Winners: Clean Energy Fuels

The natural gas vehicle conversion incentives will be included in a bill that focuses on the Gulf of Mexico oil spill, according to a note from FBR Capital Markets analyst Benjamin Salisbury, who was on the Hill on Thursday.

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The FBR analyst wrote that among big ticket items to be left out of the bill would be carbon cap-and-trade, a federal renewable electricity standard, and renewable and climate mandates for coal companies.

Coal stocks were rising all day Thursday as part of the market rally on strong earnings, with the largest gains of over 7% from

Arch Coal

(ACI) - Get Albertsons Cos. Inc. Report


Patriot Coal



Alpha Natural Resources



Rail operator

Union Pacific


reported a big spike in revenue, with its energy freight, including coal, up 17%.

The Senate decision to focus on a scaled down and politically popular legislative attack on the oil and gas sector is not a surprise, given the lack of time to get legislation enacted. If the Senate passes the bill next week, the House would have to pass an identical bill or come up with its own version to be reconciled with the Senate. Following the August recess, Congress is scheduled to return for a month in September before adjourning for the November elections. However, some of the ideas left out of the narrow energy legislation that the Senate is trying to expedite -- such as tax incentives for renewable energy or new tax revenue generation from oil and gas -- could be on the table again later in the year, the FBR Capital report indicated.

The issue of oil spill cap liabilities is expected to be a focus of the Senate bill. FBR Capital believes that the key issues for oil and gas companies will be a raising or elimination of the oil spill liabilities cap as previously introduced by Senator Robert Menendez (D-N.J.), increasing environmental reviews and rig-operation inspectors, creating a spill-response program, funding water-quality restoration, and reforming the liability of vessel owners and operators for damages.

Late on Wednesday, the big oil companies announced the creation of a $1 billion joint venture that would operate as a Gulf of Mexico rapid oil spill response company, to be coordinated by

Exxon Mobil

(XOM) - Get Exxon Mobil Corporation Report


>>Big Oil to Spend $1 Billion on Oil Spill Response

Oil stocks moved up on Thursday as part of the broad markets rally, with BP oil spill partner

Anadarko Petroleum

(APC) - Get Anadarko Petroleum Corporation Report

, leading the way with a gain of close to 4% on Thursday afternoon. The integrated oil majors were all gaining on Thursday, led by

Royal Dutch Shell




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, both up more than 3%.


(BP) - Get BP p.l.c. Sponsored ADR Report

was flat in trading on Thursday.

A few of the big oil drilling stocks,




Diamond Offshore

(DO) - Get Diamond Offshore Drilling, Inc. Report

, were down on Thursday, but the slide in trading was related to earnings from the companies and not the legislative outlook.

-- Written by Eric Rosenbaum from New York.


>>Big Oil to Spend $1 Billion on Oil Spill Response

>>Green Stock Winners: Clean Energy Fuels

>>Why George Soros is Buying Westport Innovations

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