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Negotiators Close In on Energy Measure
Bill Raises Ethanol, Efficiency Targets; Fuel Credits for Auto Industry at Issue

By Steven Mufson
Washington Post Staff Writer
Thursday, November 29, 2007

Congressional negotiators are nearing agreement on the components of an energy bill that would boost fuel efficiency standards for vehicles and require vast increases in the use of biofuels, according to congressional aides and lobbyists.

The auto industry and its champion, House Energy and Commerce Committee Chairman John D. Dingell (D-Mich.), have accepted the target of achieving an average of 35 miles a gallon for each carmaker's fleet of new U.S. vehicles by 2020, set in the version of the bill passed by the Senate in June. However, Dingell and the automakers appeared to have won concessions extending fuel efficiency credits for flexible-fuel vehicles and creating separate mileage standards for cars and light trucks.

Yesterday, Dingell was still weighing the details of a compromise Senate proposal and pressing for further concessions. He was scheduled to talk by phone late yesterday with House Speaker Nancy Pelosi (D-Calif.). Aides and lobbyists who agreed to discuss the negotiations spoke on condition of anonymity because the two leaders had not yet conferred.

Efforts to pass energy legislation have been dragging on all year. But there was pressure to complete an agreement by yesterday or today because congressional leaders want to bring the bill to a vote when members return from recess next week, and a few days are needed to hammer out the exact language. Moreover, with oil prices at more than $90 a barrel, many lawmakers feel compelled to take some sort of action on energy.

The two main and most likely features of the final bill are variations of what the Senate adopted. In addition to the 35 mile-per-gallon target for 2020, the Senate bill ramped up the requirement for gasoline makers to use ethanol and other biofuels, to at least 13 billion gallons by 2012 and 36 billion gallons by 2022.

There has been one change in the biofuels measure. While the Senate bill required that at least 3 billion gallons of "advanced biofuels" derived from sources other than corn be used starting in 2016, escalating to 21 billion gallons by 2022, new language would require that the first advanced biofuels be used in 2013. That might ease demand for corn, which has soared in price, and recognize that companies are making progress in using new feedstocks in pilot projects.

Many elements that were in the version of the energy bill passed in August by the House -- such as a requirement for utilities to use minimum amounts of renewable fuels and a rollback of the oil industry's share of a tax break for manufacturers -- seemed unlikely to be included, congressional sources said.

One congressional aide said that Senate Majority Leader Harry Reid (D-Nev.) said he had the 60 votes needed to toughen fuel economy standards and the 60 votes for renewable energy standards for utilities, "but unfortunately they are not the same 60 votes."

The excluded items and other controversial energy issues could be moved to other bills. Sen. Pete V. Domenici (R-N.M.) is still pushing to lift limits on loan guarantees that could benefit nuclear power plants, but that would probably be part of an energy and water appropriations bill.

Though critics of Domenici's efforts said he would undermine government credit reform enacted in the early 1990s, key congressional aides said Reid might go along with his proposal if he needs votes to win passage of renewable portfolio standards in the energy bill or a separate bill later.

Because of concern about the cost of the energy bill, the extension of tax breaks for renewable energy, such as wind and solar, is expected to be left out of it and perhaps inserted in a bill extending a wide variety of tax provisions, congressional negotiators said.

Companies in the wind and solar energy businesses have been lobbying hard for the extension of production tax credits worth about 1.9 cents a kilowatt hour. The credits are set to expire at the end of 2008, but companies said they need an extension to plan new projects.

"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.

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