By Dina Cappiello, CQ Staff

Congressional negotiators completed a deal late Nov. 30 that will put a comprehensive energy bill on the fast track this week.

However, the bill could face trouble in the Senate, where a key Republican denounced a major element of the deal.

The legislation, which was the subject of intense negotiations over the Thanksgiving recess, would raise fuel economy standards for cars and light trucks and add billions of gallons of ethanol and other alternative fuels to U.S. gasoline tanks.

“A compromise has been reached on automobile fuel efficiency standards, a key provision of the energy legislation being considered by Congress.... I believe the agreement reached today prescribes standards that are both aggressive and attainable,” House Energy and Commerce Chairman John D. Dingell , D-Mich., said in a statement. Dingell and Speaker Nancy Pelosi had been working out final details of the proposal as the week drew to a close.

Pelosi, D-Calif., said in a statement that corporate average fuel economy, or CAFE, was a cornerstone of the legislation, but she said the bill also included language that would require utilities to produce a certain percentage of their electricity from renewable sources.

“This comprehensive package will also include an increase in the Renewable Fuels Standard and a Renewable Electricity Standard, among other key provisions,” Pelosi said.

The electricity provision would require power companies to generate 15 percent from renewables such as solar and wind by 2020, according to a statement by Edward J. Markey , D-Mass. The same mandate was proposed in a House energy bill (HR 3221) passed in August.

The move drew a sharp rebuke from New Mexico’s Pete V. Domenici , the ranking Republican on the Senate Energy and Natural Resources Committee.

“The inclusion of a costly, ineffective Renewable Portfolio Standard (RPS) will make this bill untenable for many in the Senate,” he said in a statement Saturday. “RPS places an unfair burden on states that lack the natural resources to meet a new renewable electricity standard. Consumers that live in such states — many in the South — will undoubtedly be forced to pay substantially higher electricity rates, with no additional renewable electricity to show for it.”

Domenici said it appeared Pelosi “has gone back on her word and chosen to go her own path on the energy bill.”

“At this time, I have instructed my staff to cease their work on the energy bill, since the final bill apparently will not be the product of our bipartisan negotiations,” he said.

A Democratic aide also said a tax package was still being discussed, but it was unclear whether it would be part of the bill or how closely it would resemble the $16.1 billion package included in the original House energy legislation. The measure drew a presidential veto threat and helped block a formal conference because of opposition to increased taxes on the oil and gas industry.

Observers credited the momentum on the bill to a “perfect storm” of events, including high oil and gasoline prices and an upcoming conference on global climate change in Bali, Indonesia, where the legislation would demonstrate the U.S. commitment to reducing fossil-fuel use.

“The planets are aligned for them to pull this off,” said Paul Bledsoe, a spokesman for the nonpartisan National Commission on Energy Policy. “It is difficult for members to vote against fuel economy when oil prices are near $100 a barrel.”

Added Phyllis Cuttino, director of the Pew Charitable Trust Campaign for Fuel Efficiency: “The time to do it is now.”

The bill probably will be sent to the Rules Committee on Tuesday, with floor action in the House as early as Wednesday.

The Senate’s timing was less certain. Other business in that chamber could delay consideration until later in December.

“We don’t know the timing yet,” said Jim Manley, a spokesman for Senate Majority Leader Harry Reid , D-Nev. But “we expect to move as quickly as possible. Hopefully, we will have something that can get through the House and the Senate.”
Senate Model

The basis for the CAFE portion of the agreement is a bill (HR 6) the Senate passed in June that would have raised automakers’ corporate average fuel economy (CAFE) standards to 35 miles per gallon for cars and trucks by 2020 — up from current model-year levels of 27.5 mpg for cars and 22.2 mpg for light trucks, a category that includes sport utility vehicles.

The new bill also is expected to include another major provision of the Senate-passed bill that would require refiners to incorporate billions of gallons of alternative fuels, such as corn-based ethanol, into gasoline over the next 15 years.

Neither of those provisions were part of the energy bill that the House passed in August.

But the deal comes with changes on those two issues, according to staffers and lobbyists familiar with the negotiations, and also includes portions of the House bill, such as the renewable electricity standard.

Language in the compromise would clearly mandate regulators to create separate fuel economy standards for cars and light trucks, under the overall 35 mpg average — something the Senate-passed bill allowed to occur administratively.

The deal also would ensure that the National Highway Traffic Safety Administration (NHTSA) retains the lead on setting fuel-economy standards. NHTSA currently sets the thresholds, but the EPA specifies how vehicles are tested by automakers. The auto industry and some lawmakers were concerned that the EPA could set its own standards if the agency decides to regulate carbon dioxide from tailpipes, as it is expected to later this year.

Another sticking point was the flex-fuel credit — which gives automobile manufacturers leeway on meeting CAFE standards if they make vehicles that use both gasoline and alternative fuels.

Democratic and Republican aides said last week that the bill would slowly phase out the flex-fuel credit over the next decade or later.
Some Republicans Wary

The energy deal started taking shape before the Thanksgiving recess, when Pelosi held meetings with Dingell and Hawaii’s Democratic Sen. Daniel K. Inouye , who chairs the Senate Commerce, Science and Transportation Committee, which has jurisdiction over CAFE issues.

Dingell sent a letter Nov. 13 to Pelosi indicating that a compromise on fuel economy and other provisions was possible, even though the powerful Democrat and auto industry ally initially supported another House CAFE bill (HR 2927) that would have set a 32-35 mpg range.

The sponsors of the House fuel-economy proposal, Baron P. Hill , D-Ind., and Lee Terry , R-Neb., were expected to endorse the compromise bill if it did not change from drafts circulated late last week.

But the lack of a formal conference had some Republicans concerned about whether Pelosi would make eleventh-hour changes.

“From the beginning, I have been concerned that the lack of a formal conference committee would make it impossible to complete work on an energy bill that would contain the right priorities and have the votes to pass the Senate,” Domenici said. “It appears as though my fears have been well founded.”