Negotiators Close In on Energy Measure

House Energy Committee Chairman John Dingell was to confer with Speaker Nancy Pelosi yesterday. (By Susan Walsh -- Associated Press)

"If that goes away, you'll see a shrinkage in the size of the industry at time when we need fuel diversity," said Peter C. Duprey, chief executive of Acciona Energy North America, a unit of a big Spanish corporation expanding in the U.S. wind and solar markets.

Despite their self-imposed deadline, congressional negotiators were continuing to bargain yesterday afternoon, with fuel efficiency at center stage.

Key differences remained over the size and duration of the flex-fuel credits, which allow auto companies calculating fuel efficiency to factor in potential savings from vehicles capable of burning E85, which contains 85 percent ethanol, even though only 1 or 2 percent of those vehicles actually use E85. Auto companies want that provision, now set to expire in 2009, extended through 2020, while Senate negotiators wanted to phase it out earlier.

Critics said the flex-fuel vehicle credit is a loophole that could effectively lower mileage standards by as much as 1.2 miles a gallon and add more than 100,000 barrels a day to U.S. gasoline consumption. They argue that automakers can adapt existing vehicles at a cost of just $50 to $100 each.

"This loophole is bad policy and it should be killed, not extended," said David Friedman, a senior analyst at the Union of Concerned Scientists.

Carmakers said the credit is needed to guarantee that the auto fleet is able to consume all the ethanol that will be produced under new requirements in the energy bill. They argue that if all cars used E10 -- fuel containing 10 percent ethanol -- the new biofuel mandate would produce unusable surpluses after 2014.

Dingell is also pressing for a provision that would take the responsibility for regulating tailpipe emissions of carbon dioxide away from the Environmental Protection Agency and give it to the Transportation Department's National Highway Traffic Safety Administration.

Last week, Chrysler circulated a paper arguing that tailpipe emissions were linked to fuel efficiency standards NHTSA oversees. But earlier this year, the Supreme Court said the EPA has the power to regulate carbon dioxide emissions under the Clean Air Act, and congressional sources said it was unlikely that the auto companies would prevail.