Renewable Fuel Deal Key to Energy Bill

By H. JOSEF HEBERT

WASHINGTON – Democratic leaders working on an energy bill were trying to forge compromises Monday to increase the use of renewable fuels both in cars and by electric utilities after reaching a deal earlier that would raise vehicle fuel economy by 40 percent.

But they also faced another thorny issue: how to cover up to $3 million a year in lost revenue if motorists buy less gas because of the more fuel efficient cars and SUVs, meaning less revenue for highway upkeep and construction.

Congressional rules require any revenue losses from new legislation to be offset with new revenues, so lawmakers will have to craft a tax package to deal with the shortfall.

Meanwhile, the White House expressed concern over the renewable fuels and auto efficiency provisions and at the hint of new taxes as part of the energy package.

"It appears Congress may intend to produce a bill the president cannot sign," Allan Hubbard, director of the president’s National Economic Council, wrote House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid. He urged them to work with the administration to pass a bill acceptable to the White House.

With motorists irate about $3-plus gasoline and record high winter heating bills, House and Senate Democratic leaders hoped to pass their energy bill before departing for the Christmas recess.

They took a giant step toward that by reaching a compromise with Rep. John Dingell, D-Mich., chairman of the Energy and Commerce Committee and a staunch protector of the auto industry, late last Friday on requiring automakers to boost the average fuel economy to 35 miles per gallon by 2020.

It would be the first increase in the federal vehicle fuel standard in 32 years.

But it won’t become law unless agreements on the other thorny issues are worked out. The plan is for a House vote on the compromise bill on Thursday with the Senate taking up the energy package perhaps the following week.

Among the most contentious matter concerns how much renewable fuel – wind, solar power or biofuels – utilities should use to produce their power.

Pelosi, D-Calif., is described as adamant in wanting to include a requirement – already passed once by the House – for utilities to produce 15 percent of their electricity from renewable energy sources.

Environmentalists have lobbied aggressively for the provision, calling it key to future growth of solar, wind and other renewable technologies. But opponents argue utilities in the Southeast and parts of the Midwest wouldn’t be able to meet the requirement without raising the price of electricity.

"For all of us in the Southeast, that’s a mandatory rate increase, and would produce a lot of difficulty," Senate Republican leader Mitch McConnell of Kentucky said Monday, adding that if the electricity mandate and tax provisions were excluded "it could be smoother sailing."

The mandate has been strongly opposed by the Edison Electric Institute, which represents investor-owned utilities, and the Southern Co., the Atlanta-based energy company which has utilities across much of the Southeast.

Hubbard in his letter called the renewable standard for electricity "unfair …overly prescriptive" by excluding "many low-carbon technologies." While he did not mention a specific technology, some Republicans have argued that nuclear energy, the source of 20 percent of U.S. electricity and emits no carbon, should be included under such a mandate.

Supporters of the renewable fuel mandate say there’s enough flexibility for utilities to avoid large electric price increases. The proposal includes the ability to purchase credits if renewable fuels are not available and allows efficiency programs as a partial substitute.

"We think (the opponents) overstate the cost and understate the benefits," said Marchant Wentworth, a lobbyist for the Union of Concerned Scientists.

Democrats also were still trying to work out the details of a mandate to use more ethanol as a motor fuel.

Some lawmakers argue the Senate proposal, which Pelosi favored as recently as last week, may be going too far. It would require the annual use of 36 billion gallons of ethanol by 2022, a sevenfold increase.

All these outstanding issues, remain "under discussion," said Rep. Edward Markey, D-Mass., who has been closely involved in the auto fuel economy issue and is working with Pelosi on the overall energy package.

Markey said he’s confident there are the votes in the House to pass the bill even if it includes the renewable fuel electricity requirement.

As for taxes, Pelosi has abandoned the $16 billion in oil industry tax increases and is trying to work out a deal for a smaller tax package that would be designed to satisfy the auto fuel economy offset requirement and, perhaps, tax credits to spur wind and other renewable energy development.

"The tax package is likely to be smaller," said Markey, "but the details are still being worked out."