Clean Energy In the News

WASHINGTON – A proposal requiring utilities to get 15 percent of their power from renewable sources has run out of steam in the Senate, a sacrifice that could move the energy bill closer to passage, Senate leaders said Tuesday.

A Senate vote could happen Thursday, Majority Leader Harry Reid said. The vote may turn on whether Senate leaders can corral enough votes for the bill's $21 billion tax package, which repeals tax breaks granted to oil companies.

The legislation's key provisions include a 40 percent increase in fuel economy standards for cars and light trucks – raising the benchmark from 25 to 35 miles per gallon – and a sharply increased mandate for ethanol use.

Those provisions are considered less controversial than the renewable power mandate, whose demise would be a triumph for some Republicans and utilities such as Southern Co. and Dallas-based Luminant.

Luminant insists that the renewable target is impossible to reach without including nuclear energy. Congress has designated wind and solar power as renewable energy sources but not nuclear or clean-coal technology.

A pared-down energy bill still faces a veto threat from the Bush administration over the higher taxes for oil and gas producers. The House passed its energy bill last week, prompting the White House threat.

The legislation would repeal the manufacturer's tax deduction for the major oil and gas producers and refineries. It would freeze the deduction at 6 percent of domestic income for smaller producers.

Democratic senators say the tax package is needed to raise about $10 billion for clean-energy projects. Facing Republican opposition to the plan, senators have only made "minor changes" to it, said Sen. Max Baucus, chairman of the Finance Committee.

Sen. Kay Bailey Hutchison, R-Texas, has been negotiating to remove the oil and gas tax provisions from the legislation.

Ms. Hutchison contends that higher taxes would "limit supply, increase prices and remove the incentive for refinery construction and expansion," said Matt Mackowiak, her spokesman.

Senators are split on whether Democrats have the votes to pass the bill. Mr. Baucus, D-Mont., said he had more than the necessary 60 votes to move forward. Sen. Jon Kyl, R-Ariz., said, "It will never become law."

Although the bill's embrace of ethanol is popular with many lawmakers, it has provoked opposition in Texas, where livestock interests argue that ethanol production has increased the cost of corn.

Texas' major agricultural associations oppose the proposed increase to 36 billion gallons of ethanol and other biofuels by 2022.

Ms. Hutchison is aiming to negotiate a "safety valve" that would allow the government to suspend the ethanol mandate in the case of sharply increased commodity prices.

Luke Metzger, director of Austin-based Environment Texas, said there were many elements for Texans to like in the energy bill, including the increased fuel economy standards. He said many environmental activists hope the renewable power standard can be revived in future legislation.

"We are certainly disappointed that with massive opposition from just a few utilities, Congress has left unfinished business by not taking on renewable energy, which has so much potential, particularly here in Texas," Mr. Metzger said.

Texas' senators opposed the renewable electricity mandate, arguing that such matters are best left to the states. Texas, which is rich in renewable resources, has its own mandate requiring 5,000 megawatts of power – about 7 percent of total capacity – from renewable sources by 2015.

Other states say they don't have enough wind or solar capacity to meet the federal benchmark, which would have been 15 percent by 2020.

"If Texas can't make 15 percent, how are some of these other states going to make it?" asked David Lynch, vice president of federal advocacy for Luminant.