Senate Energy Bill Drops Utility Rules, Keeps Most of Tax Package

Senate leaders are planning to introduce a slimmed-down package of energy legislation, eliminating a minimum requirement for utilities' use of renewable resources but only slightly altering the tax provisions that have drawn fire from congressional Republicans and the White House.

The retooled version of the energy bill still includes higher motor fuel efficiency standards, tougher appliance efficiency standards and a mandate for vastly expanded use of ethanol and other biofuels. Democratic leaders said that those elements would be enough to assure passage in Congress and that the size of the tax package, virtually unchanged at about $21.5 billion over 10 years, was modest and needed to pay for other parts of the bill.

Late yesterday afternoon, however, Pete V. Domenici (N.M.), ranking Republican on the Senate Energy and Natural Resources Committee, went to the Senate floor to deliver an impassioned plea that Democrats drop most of the tax package, warning that President Bush would veto the bill otherwise.

In an earlier statement, Domenici said "increasing taxes on domestic oil and natural gas production is the wrong thing to do right now. History tells us that these efforts lead to higher prices and make it tougher to meet increased demand."

Some Republicans who favor most of what is in the bill were being swayed by Domenici and the White House, some congressional aides said.

Separately, Domenici introduced an amendment to put the biofuels mandate in the farm bill, a move that many lawmakers have said would undermine support for the energy bill. Under that mandate, motor fuel refiners would be required to increase the use of subsidized biofuels about fivefold from current levels, with about one-third of it coming from corn-based ethanol and the rest coming from biofuels using other feedstocks.

Senate Majority Leader Harry M. Reid (D-Nev.) said yesterday that "as far as I'm concerned, it might just as well be accepted." The energy bill is expected to pass before the farm bill, and it still contains the biofuels provision, which might make Domenici's amendment moot.

Domenici's criticism of the energy bill's tax package echoed criticism issued last week by the White House and the oil industry. "At a time of tight supply and demand, the legislation under consideration would do absolutely nothing to bring to the marketplace one more gallon of gasoline or diesel or one more cubic foot of natural gas," said Red Cavaney, president of the American Petroleum Institute. "In fact, the opposite may be true."

But other analysts, including some Republicans, said the tax portion of the energy bill, which would raise about $13.5 billion by trimming tax breaks and depreciation allowances for the biggest oil firms, would make little difference to oil companies. The tax revenue raised from those companies is equivalent to only about 1 percent of the annual profits of the five biggest oil and gas firms, liberal lobbying groups said.

There were some changes being negotiated in the tax package, however. Senate negotiators lifted the cap the House proposed for the production tax credit for wind-power projects, but it trimmed the extension of that provision to two years from four in the House proposal.

Senate negotiators also dropped a proposal that would have required renewable energy projects financed with federal "clean energy bonds" to pay employees prevailing wages or more, as is required for federal projects under the Davis-Bacon Act. Republicans and the White House had opposed that requirement.