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The Situation: Tuesday, October 25

Editor's Note: The Situation Report is a running log of dispatches, quotes, links and behind-the-scenes notes filed by the correspondents and producers of CNN's Washington Bureau. Watch "The Situation Room" with Wolf Blitzer on CNN 3 p.m. ET to 6 p.m. ET weekdays.

Plame neighbor interviewed

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_{Posted: 5:48 p.m. ET
From Kelli Arena, CNN America Bureau}

A neighbor of Valerie Plame was interviewed by FBI agents Monday night for the second time.

The agents asked Marc Lefkowitz whether he knew about Plame's work at the CIA before her identity was leaked in a July 2003 newspaper column. Lefkowitz told agents he did not, according to his wife Elise Lefkowitz.

Plame is married to former ambassador Joe Wilson, and they live in Washington.

The neighbors said this is the second time FBI agents have asked them whether they were aware of Plame's CIA work. They said the first interview took place several months ago.

FBI agents are working on the investigation into who leaked Plame's name to the press under the supervision of Patrick Fitzgerald. Fitzgerald is the special prosecutor in charge of the case.

The Morning Grind

_{Posted: 9:20 a.m. ET
From Mark Preston, CNN Political Unit}

Oil slick

With the oil industry set to report high 3rd quarter earnings, House Republicans today will insist that these companies reinvest part of their profits into infrastructure to help lower energy costs, as the GOP seeks political cover on the eve of an expensive home heating season.

House Speaker Dennis Hastert (R-Illinois) will urge the oil companies to boost "domestic refinery capacity" as well as warn oil executives that Republicans will not tolerate "price gouging."

"They need to do more to inform the American people about what they are doing to bring down the cost of oil and natural gas," Hastert is expected to say at a mid-afternoon news conference, according to a preview of his remarks obtained by CNN's The Morning Grind. "When are new refineries going to be built? When is the Alaska pipeline deal going to be signed? Are they doing everything they can to make sure consumers get a fair deal on energy costs?

"In short, these companies need to invest in America's energy infrastructure and resources," Hastert will state.

Hastert is not the only political party leader talking about energy today. Potential 2008 White House candidate, Sen. Hillary Clinton (D-New York) is delivering a major address on the subject this morning to the Cleantech Venture Forum.

In the House, Republican leaders are also considering holding hearings on the rising cost of home heating fuel and gasoline. High profile hearings could help the GOP distance itself from an industry that is considered a strong Republican ally, as we head into the 2006 elections.

"The American people think that the recent increases in energy prices have more to do with price gouging than changes in market conditions," said David Winston, a Republican pollster. Winston said he surveyed 1,000 registered voters in mid October, and the poll revealed that 59 percent of the American public believes that oil companies are engaging in price gouging, while 33 percent fault damage caused by the recent hurricanes for the high energy costs.

Democrats, who have been crafting their own energy policy, dismissed the Republican effort as "too little to late" and charged that it is a political ploy.

"There has been plenty of time for Republicans to hold oversight hearings and bring oil executives before Congress," said Rebecca Kirszner, a spokesman for Senate Minority Leader Harry Reid (D-Nevada). "Now, as we get closer to election season, we see them start posturing. Democrats have a real plan for energy independence and to stop price gouging."

Even as Congressional Republicans keep busy with their legislative plan, there is nervous anticipation about whether federal prosecutor Patrick J. Fitzgerald will indict Deputy Chief of Staff Karl Rove and Chief of Staff to the Vice President I. Lewis (Scooter) Libby this week for their alleged roles in revealing the identity of a C.I.A agent. The New York Times reports in today's edition that Libby "first learned" of Valerie Wilson's identity from Cheney. The paper states that notes taken by Libby "for the first time place Mr. Cheney in the middle of an effort by the White House to learn about Ms. Wilson's husband, Joseph C. Wilson IV, who was questioning the administration's handling of intelligence about Iraq's nuclear program to justify the war."

Citing "lawyers involved in the case," the Times writes that this new information seems "to differ from Mr. Libby's testimony to a federal grand jury that he initially learned about the C.I.A. officer, Valerie Wilson, from journalists."

As for Rove, a close ally of the White House adviser tells the Grind that the ongoing investigation has not distracted him from his day-to-day duties of counseling President Bush on issues. He is "still on top of key stuff," said the Rove ally, who spoke on the condition of anonymity. The ally noted that conservative activists blame White House Chief of Staff Andy Card -- not Rove -- for the decision to nominate Harriet Miers to the U.S. Supreme Court. Critics in both political parties are panning Miers, and some Republicans are quietly suggesting that she will withdraw her nomination before the Senate Judiciary Committee holds its first hearing.

Republicans will get some good news today, when Maryland Lt. Gov. Michael Steele announces his intention to seek the Republican nomination to replace retiring Sen. Paul Sarbanes (D-Maryland). Steele, an African-American, gives the GOP a high profile minority candidate in 2006. Meanwhile, Democrats will have to contend with an internal fight in the Ohio Senate race. Paul Hackett, a veteran of the Iraq War, announced Monday that he would seek the Democratic nomination to challenge Sen. Mike DeWine (R-Ohio) next year. The rub? Rep. Sherrod Brown (D-Ohio) has already declared his intention to seek the Democratic nomination, setting up what could turn into a divisive primary battle.

File this one away in your 2008 cabinet. Rarely does Sen. John McCain (R-Arizona) ask his nationwide network of supporters to back candidates "for state office in states other than your own," as he said in a note sent Monday to his Straight Talk America email list. But this isn't any everyday candidate and it certainly isn't any ordinary state.

McCain is asking his supporters to contribute to Rick Quinn's bid to become South Carolina's next state treasurer. That's right. McCain is openly campaigning for a candidate who is seeking office in a state that is a critical early proving ground for any Republican aspirant eyeing a 2008 White House bid.

"I must make an exception for a race coming up in South Carolina," McCain wrote his supporters. "An unusually talented, conservative, reform-oriented young man (Rick Quinn) has just announced his candidacy for South Carolina State Treasurer."

Noting that, "running statewide is very expensive," McCain closes the e-mail appeal by urging his supporters to "consider sending [Quinn] a contribution."

There is a history between the two men. While serving as the state House majority leader in 2000, Quinn supported McCain's presidential bid, and stood with the Senator's wife, Cindy, when the Arizona Senator officially filed his papers for the South Carolina primary.

Quinn told the Grind that it was McCain's 2000 presidential bid and the Arizonan's "approach to public service" that "inspired me to run statewide."

Political Hot Topics

_{Posted: 9:20 a.m. ET
From Stephen Bach, CNN Washington Bureau}

CHENEY TOLD SCOOTER ABOUT VALERIE: I. Lewis Libby Jr., Vice President Dick Cheney's chief of staff, first learned about the C.I.A. officer at the heart of the leak investigation in a conversation with Mr. Cheney weeks before her identity became public in 2003, lawyers involved in the case said Monday. Notes of the previously undisclosed conversation between Mr. Libby and Mr. Cheney on June 12, 2003, appear to differ from Mr. Libby's testimony to a federal grand jury that he initially learned about the C.I.A. officer, Valerie Wilson, from journalists, the lawyers said. New York Times: Cheney Told Aide of C.I.A. Officer, Lawyers Report

PAGES FROM THE REAGAN/CLINTON PLAYBOOK: Rarely has a president confronted as many damaging developments that could all come to a head in this week. A special counsel appears poised to indict one or more administration officials within days. Pressure is building on Bush from within his own party to withdraw the faltering Supreme Court nomination of Harriet Miers. And any day the death toll of U.S. troops in Iraq will pass the symbolically important 2,000 mark. To deal with what they consider the darkest days of the Bush presidency, White House advisers have developed a twofold strategy -- confront head-on problems such as the Iraq death toll, while shifting attention to other areas such as conservative economic policies. Washington Post: Presidents Past Inspire Bush's Damage Control

BUSH WON'T BUDGE ON MIERS PAPERS: President Bush refused on Monday to turn over documents requested by Republicans and Democrats related to Harriet E. Miers's work in the White House, setting up a potential confrontation with the Senate Judiciary Committee over her confirmation to the Supreme Court. "It's a red line I'm not willing to cross," Mr. Bush told reporters after a cabinet meeting, referring to the presidential right of executive privilege. "People can learn about Harriet Miers through hearings. But we are not going to destroy this business about people being able to walk into the Oval Office and say: 'Mr. President, here's my advice to you. Here's what I think is important.'" New York Times: Bush Refuses to Release Nominee's Papers

CONSERVATIVE LEADERS ANNOUNCE WITHDRAWMIERS.ORG: Two longtime leaders of the conservative movement yesterday called for the withdrawal of Harriet Miers' nomination to the Supreme Court. "We expected President Bush to appoint a woman with the opposite judicial philosophy and paper trail of Ruth Bader Ginsburg -- our disappointment is acute," said Phyllis Schlafly, founder and president of the St. Louis-based Eagle Forum. Mrs. Schlafly joined pioneering conservative fundraiser Richard Viguerie and other, lesser-known leaders on the pro-family right yesterday in announcing the formation of a coalition, WithdrawMiers.org. They described it as a "multipronged campaign to urge the withdrawal of Harriet Miers' nomination to the Supreme Court." Washington Times: Leaders on right call for new pick

BERNANKE NAMED NEXT FED CHIEF: Ben Bernanke's confirmation hearing to be the next Federal Reserve chairman may have something for everyone on Capitol Hill: Democrats get an opportunity to criticize President George W. Bush's economic policies and Republicans get an all-but-certain confirmation of the nominee. Democrats praised Bernanke's qualifications yesterday even as they promised an "intense" confirmation process focusing on his policy differences with retiring Fed Chairman Alan Greenspan and on his support for Bush's $1.85 trillion in tax cuts. Republicans predicted Bernanke, 51, who's chairman of Bush's Council of Economic Advisers and a former Federal Reserve governor, will be confirmed well before Greenspan's term ends Jan. 31. Bloomberg News: Bernanke May Face Easy Confirmation After Lawmakers' Posturing

HEARING SET FOR PERKINS REMOVAL REQUEST: A retired judge will decide whether state District Judge Bob Perkins' donations to Democratic organizations make him too biased to hear the criminal case against U.S. Rep. Tom DeLay. Senior Judge C.W. "Bud" Duncan Jr., 81, of Killeen set a 10 a.m. hearing for Nov. 1 in Austin to hear DeLay's motion to remove Perkins from his case. The hearing a week from now was set shortly before DeLay's lawyer, Dick DeGuerin of Houston, filed a motion asking for an expedited hearing on all of DeLay's motions in the case. Houston Chronicle: Hearing is set for request by DeLay to remove judge

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