Senate Energy Bill Stalls

Major energy legislation stripped of controversial tax provisions could be considered by the Senate as soon as today, with approval putting higher automobile fuel-economy standards within reach in the session's waning days.

Democratic leaders are scaling back the bill because they failed this morning to overcome a largely Republican filibuster over provisions that would increase taxes on major oil companies. The bill stalled, 59-40 -- one vote shy of 60 needed to proceed.

Immediately afterward, Senate Majority Leader Harry Reid (D-Nev.) said he would strip the bill's tax title, leaving intact a 40 percent increase in corporate average fuel economy (CAFE) standards and provisions to massively expand biofuels production.

Across the Capitol, House Speaker Nancy Pelosi (D-Calif.) said she planned to bring the scaled-back measure before the House within days if the Senate approves it. The House last week already approved a more expansive version of the bill.

Reid said he was disappointed by this morning's vote but added that the bill without energy tax provisions is still an important measure. "What we are going to wind up with is still historic. The first increase of fuel efficiency standards in 32 years, and we have increased them significantly," he said.

Senate Minority Leader Mitch McConnell (R-Ky.) predicted the stripped down measure would pass with "broad, bipartisan" support. "The bill with the changes that the majority leader has indicated we're going to make could be signed by the president and be something that we could all be proud of," McConnell said.

But the White House, while supporting higher vehicle mileage, is seeking changes to the CAFE language.

The oil taxes were part of a larger $21.8 billion tax provision that would have expanded a host of renewable energy and conservation tax incentives for several years. The oil tax provisions had also prompted a White House veto threat.

Senate Democrats had earlier jettisoned a renewable electricity mandate in order to corral votes. Reid said he wants to revive the tax title and the renewable electricity mandate next year.

Industry victory

Renewable-energy industry officials and environmentalists call multi-year extensions of renewable energy tax credits essential to attracting increased investment in wind, solar and other alternative energy sources.

Environmentalists said they were disappointed that the renewable electricity measures had been stripped but said they still support the measure due to the agreement to raise CAFE standards to an average of 35 miles per gallon by 2020.

"It is extremely important and we need to do that, and then we need to do a whole other set of things for a clean energy future," said Anna Aurilio of the group Environment America.

Elimination of the oil taxes is a major victory for the industry. Democrats have long argued that oil industry incentives should be rolled back amid record profits in recent years and high prices.

But Democratic leaders, despite taking control of Congress with the 2006 elections, have failed in repeated attempts to scale back industry tax and royalty incentives. Many Republicans have joined some Democrats from oil and gas producing states in arguing these efforts could stymie spending on domestic exploration.

Supporters of repealing tax incentives call these allegations inaccurate and say higher tax revenues from oil companies are needed to help fund federal renewable energy and conservation incentives.

Cutting the tax provisions also likely means casting aside a provision to extend Secure Rural Schools payments to timber counties through 2011 and increase the capital gains deduction of timber assets from 15 percent to 60 percent.

Pelosi said that even though the tax package will be jettisoned, lawmakers will include provisions to offset the costs associated with raising CAFE standards, which is estimated to be roughly $2 billion.

The bill is also likely to retain a host of building and appliance efficiency measures that have support across the aisle.

EPA jurisdiction

The Senate this morning also put to rest, for now, the debate over U.S. EPA's authority to deal with vehicle emissions.

Key senators reached a verbal agreement that in setting its greenhouse gas regulations the agency should meet the fuel efficiency standards laid out in the bill, but they also left untouched the issue of state authority.

Minutes before the energy bill vote, Sen. Carl Levin (D-Mich.) asked two sponsors of CAFE provisions to clarify whether they believed that the intent of the legislation was for EPA to regulate greenhouse gas emissions in a way that is "consistent with the direction of Congress in this 35 mpg in 2020 legislation."

Both Senate Commerce Committee Chairman Dan Inouye (D-Hawaii) and Sen. Dianne Feinstein (D-Calif.) -- the lead author of the CAFE language -- agreed with Levin that federal regulations should be consistent.

"We have worked hard to come together on this legislation directing [the National Highway Traffic Safety Administration] to issue new fuel economy regulations to reach an industry fleet wide level of 35 mpg by 2020, and it is our intent in the bill before us that all federal regulations in this area be consistent with our 35 mpg by 2020 language," Feinstein said.

The exchange, however, did not address what is the key issue for environmentalists and many lawmakers in this debate -- the authority of California and more than a dozen other states to set their own greenhouse gas emissions regulations that would exceed federal standards.

Levin yesterday pushed for inclusion of a provision in the Senate bill that that would ensure any potential U.S. EPA greenhouse gas emissions rules are consistent with fuel economy standards issued by the Transportation Department. The language did not make it into the energy bill that the Senate voted on today.

Environmentalists have fought against any such changes, fearing that any effort to specifically reign in EPA authority in this area would also be used to limit the ability of states to move ahead with their own regulations.

Meanwhile, Pelosi indicated to reporters this morning that efforts to tweak the Senate language in the way sought by Levin could run into substantial opposition. "It would be a serious undermining of the CAFE standard," she said.

The White House has included the EPA jurisdiction issue as one of the reasons why it opposes the energy legislation, although Pelosi was skeptical that President Bush would veto the bill just over that item. "I can't imagine that the president would veto a bill on that, but they are making it an issue," she said.

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