Senate's $14B Tax Package Would Boost Renewables, Hurt Big Oil

Senate Democrats yesterday unveiled an energy tax plan that would boost incentives for renewable power and motor fuels while repealing several oil industry tax breaks.

Senate Finance Committee Chairman Max Baucus (D-Mont.) plans to mark up the package Tuesday and quickly attach it to a sprawling energy bill still on the Senate floor.

The Baucus mark would provide $13.7 billion over a decade in incentives for wind and solar power, biofuels, coal projects that control carbon, and energy efficient homes and buildings.

The money is offset with $14.6 billion over 10 years in taxes that would come mostly from the pockets of oil companies. A central piece would repeal major oil companies' eligibility for a deduction applied to domestic manufacturing, which the Joint Committee on Taxation estimates would bring in over $9 billion.

The House moved to repeal this incentive for "big oil" earlier this year. Democrats say major oil companies do not need incentives at a time of high prices and profits. But the oil industry says ending incentives works against the goal of boosting "energy security" by raising business costs in the United States.

Other major provisions in the tax bill include a two-year extension of the production tax credit for wind power projects -- a substantially shorter extension than the wind industry has been seeking. But Baucus, in a prepared statement yesterday, suggested it may be lengthened. "I'm working with my colleagues to extend some provisions, such as the clean energy production tax credit, even further when the Finance Committee votes," Baucus said.

Other aspects of the bill include a new 30 percent investment tax credit for residential wind energy projects, and extensions through 2010 of tax credits for solar and fuel cell installations.

The plan also aims to boost biofuels and hybrid cars. It would extend tax credits for hybrids and provide $2,500 credits for plug-in hybrids. Other provisions include 50-cent-per-gallon credits for cellulosic ethanol producers with a production capacity of up to 60 million gallons and an extension -- through 2012 -- of 30 percent credits to cover the cost of installing E85 ethanol pumps at gas stations.

Baucus' plan also includes around $1.5 billion to boost so-called clean coal projects. This includes additional tax credits for coal-based power projects that sequester at least 70 percent of carbon dioxide emissions. It modifies the gasification credits program to include coal-to-liquid fuels plants that sequester at least 70 percent of their carbon emissions as well.

Levin floats alternative CAFE plan

Sen. Carl Levin (D-Mich.) yesterday released his long-discussed corporate average fuel economy (CAFE) amendment to the Senate energy bill.

Levin's plan would lower the overall CAFE mandate for manufacturers to levels he has described as "achievable" and enact a series of incentives for automakers to develop advanced vehicle technologies.

The proposal would set CAFE standards of 36 miles per gallon for passenger cars by 2022 and 30 mpg for light trucks by 2025. The bill also authorizes the National Highway Traffic Safety Administration to set the new attribute-based standards that would take into account a vehicle's size.

The current language in the Senate bill calls for a 35 mpg standard for both cars and light trucks by 2020 -- a proposal that would lead to an overall more fuel efficient fleet but described as unachievable by U.S. automakers.

Levin's proposal mandates that each manufacturer produce 50 percent advanced technology vehicles by 2015. It would also extend various credits for flex-fuel vehicles.

But the legislation also authorizes a slew of new research dollars for technologies such as hybrids, plug-in hybrids, diesels, biofuel and hydrogen vehicles.

Proponents of the alternative proposal yesterday pitched the plan as a bipartisan measure that would increase vehicle efficiency without dramatically harming auto manufacturers.

"Our proposal is aggressive but achievable," Sen. Kit Bond (R-Mo.) said yesterday in introducing the plan. "It will bend industry but not break them."

Still, proponents of the original Senate language have said in recent days that they believe they have the votes to stave off any proposal to alter their CAFE plan.

"Any CAFE vote in this congress or other congresses will always be close, but I think it shades on the side of supporting what the Commerce Committee has done," said Sen. Byron Dorgan (D-N.D.).

A vote on the amendment will not take place until next week.

Renewables mandate remains unsettled

Lawmakers debating the Senate energy bill still have not determined how they will address Senate Energy and Natural Resources Committee Chairman Jeff Bingaman's (D-N.M.) proposed renewable power mandate. His proposed amendment would require utilities to provide 15 percent of their power from renewable sources by 2020.

The Senate yesterday turned back Sen. Pete Domenici's (R-N.M.) competing proposal for a "clean" energy standard that would include nuclear, clean coal and efficiency as well as renewables (E&ENews PM, June 14). Domenici is the energy panel's top GOP member.

But Bingaman's plan appears short of the 60 votes needed to break a threatened filibuster, according to a Domenici aide and other sources, and the two sides are negotiating over a potential compromise.

Dorgan, who backs the Bingaman plan, told E&E Daily he is hopeful it can succeed but acknowledged the hurdles before the renewable proposal. "If they intend to filibuster that provision, it is a pretty big task for us to win that, but we still hope we can," he said.

"If it has to be changed some, perhaps it will be changed, but I would hope we would have a vote on it and be able to get to 60 votes for the 15 percent," he added.

Virginia offshore drilling plan defeated

Also yesterday, lawmakers turned back Sen. John Warner's (R-Va.) amendment that would have allowed natural gas drilling off Virginia's coast and provided the state a share of the revenues. The vote was 43-44.

Warner argued that greater domestic production is needed due to increasing demand and elevated prices in recent years. Opponents warned of environmental harms and said the plan would be a step toward unraveling offshore leasing bans that cover the Atlantic and Pacific coasts.

No more amendment votes are scheduled until Tuesday. Senate Majority Leader Harry Reid (D-Nev.) has said he wants action on the energy bill completed next week.

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