We could've had this discussion back in June.

It was then that the House passed two energy bills—after weeks of partisan bickering—that wouldn't have any significant long-term impacts on energy supplies or prices.

In late June, the House passed HR 6052, which would provide transit agencies with grants to expand services and subsidize fares. They also passed HR 402-19, which would authorize federal regulators to take "emergency steps" to tighten oversight of oil futures trading.

Neither of those bills has been voted on by the Senate.

Of course, around the time those two less-than-meaningful bills were passed, Congress was also debating other, more meaningful policies, like extending the investment tax credit and production tax credit, opening up the strategic petroleum reserve, and allowing offshore drilling.

None of those measures ever came to fruition.

Then, in late July, these issues came up again, right as Congress was scheduled to begin its five-week recess.

Here are a few bills that were discussed in the two weeks before their vacation, as provided by Reuters:

• REIN IN MARKET SPECULATORS. Senate Democrats were blocked from getting a final vote on legislation to curb excessive speculation in energy markets. The bill would have imposed tough position limits on speculators, restricting the number of oil futures contracts they can control. A similar House bill was voted on, but failed. It sought to rein in speculators trading energy and agricultural commodities.
• LOW INCOME HOME ENERGY ASSISTANCE PROGRAM. The Senate bill would have doubled to $5.1 billion a federal program that helps senior citizens and poor families pay their summer cooling and winter heating bills.
• TAPPING THE STRATEGIC PETROLEUM RESERVE. The House bill would have sold 70 million barrels of oil from the U.S. emergency crude stockpile, which supporters said would have put more supplies on the market and lowered prices.
• ENERGY TAX CREDITS. The House bill would have extended renewable tax credits for producing electricity through wind power and installing solar energy equipment
• DRILL NOW OR LOSE IT. This House bill would have required oil companies to diligently develop their existing federal leases or return them to the government and require yearly leases in the National Petroleum Reserve in Alaska.

None of those measures were passed, either.

Many other bills have been proposed and were either never debated, passed by only the House or the Senate, or vetoed.

Will We Have an Energy Bill in 2008?

Well, there's hope.

Before their vacation, a group of five Republican and five Democratic senators, called the Gang of 10, composed a comprehensive energy bill. After initial resistance from both sides, the ideas in the bill are now gaining traction.

In fact, three more senators from each party have joined the effort.

Basically, the proposal is something that any rational person could've come up with months ago. Here's a very brief rundown:

Certain areas of the Outer Continental Shelf will be open to drilling and boosting nuclear power, while incentives for wind, solar, energy efficiency, and other renewables will be extended by eliminating $84 billion worth of tax breaks enjoyed by the oil and gas industries.

But there are issues, as usual. I have my own view of the resistance this plan will face, but Business Week does a very nice job:

As the compromise gains momentum, it is creating dilemmas for both parties. There are plenty of reasons to be against it. For one, John McCain's choice for running mate, Alaska Governor Sarah Palin, is a strong advocate of opening up new areas like the Arctic National Wildlife Refuge to the oil and gas industry. Polls also show that Republicans are getting a major boost by blaming Democrats for blocking increases in oil and gas supplies, so why would they give up their best campaign issue? "One man knows we must now drill more in America and rescue our family budgets: ... McCain," says one ad for the GOP Presidential candidate, which accuses Democratic rival Barack Obama of standing in the way.

A compromise with the Democrats would "cut the knees off of Senator McCain," Rush Limbaugh recently charged on his radio show. In addition, oil and gas companies are leaning heavily on their GOP friends to oppose the plan. "Opening up a very, very minor area [to drilling] and punishing the industry while doing it makes absolutely no sense," says Charles T. Drevna, president of the National Petrochemical & Refiners Assn. For their part, Democrats fear losing support among core constituents if they vote to drill.

But despite the possible opposition, the fact remains that our nation is facing severe energy problems. And consumers (read voters) are growing increasingly hostile with rising energy costs, both for transportation and the home.

An Energy Bill Prediction & Financial Implications

My view is that the presidential election is too contentious for any significant legislation to pass. The GOP will filibuster anything that looks like it has a shot to avoid taking stump issues away from their candidate.

And even if a comprehensive bill was passed, President Bush has said he will veto any bill that repeals taxes for the oil and gas industry.

So here's how I see it.

As I told Wealth Daily readers the other day, discussion over energy legislation, specifically regarding the solar energy investment tax credit, has reached a fever pitch.

Consumers who want lower prices at the pump think that opening up new drilling would immediately and significantly reduce prices. For that to happen, offshore drilling would have to instantly add new oil to the world markets, which it won't. Though it probably would have a negligible, short-term psychological effect on prices.

The other side of the coin is job loss and the destruction of vital industries. Not extending the renewable energy tax credits would lead to $19 billion in lost investment and over 115,000 lost jobs.

No politician wants to be responsible for that.

Not only that, I've heard from numerous CEOs, association heads, and politicians that renewing the tax credits is a priority and they won't be made to expire. Plus, Congress generally passes meaningful energy and tax legislation at the end of the year and wraps up unfinished business.

That said, I think we'll at least see an extension of the tax credits, even it's done late in the year and buried in a piece of unrelated legislation.

To be prepared, it's worth picking up some of the solar stocks that have taken a beating lately, and ride them on the way back up.

I like solar installers as the first play here. They're the ones that have the most to lose if the credits aren't extended, and their stock performance lately certainly reflects that.

When it's passed, I'd want to be in Clear Skies Solar (OTCBB: CSKH) and Akeena Solar (NASDAQ: AKNS).

I'd also look for some bargain bin solar stocks that have a solid history of performance, and could break out on positive tax credit news. Take a look at SunPower (NASDAQ: SPWR), Suntech (NYSE: STP), and the sleeper, Evergreen Solar (NASDAQ: ESLR).

My service, Alternative Energy Speculator, has already positioned a group of savvy investors to reap hefty profits when this deal goes down.

But this one event certainly isn't the only way we're making money. I've recommended three stocks to my readers in the past three weeks. They're each up, and they're poised for much more.

Check out how I'm navigating investors through these troubled waters.

Call it like you see it,

Nick

PS. It seems with all the market madness lately that the discussion about carbon markets has come to a standstill. But there's no doubt they will have an impact on the energy markets of the future. To stay on top of things, I'm heading to the U.S. Carbon Finance Forum in a few weeks. Feel free to check it out for yourself.