Senate unveils energy bill, doubts on passage

WASHINGTON (Reuters) - Senate Democrats unveiled a slimmed down bill on Tuesday aimed at reforming offshore drilling, as doubts grew that Congress would be able to pass any substantial energy legislation this year.

The Senate bill, which Democrats were still refining, would require oil companies to cover all oil spill costs by removing the $75 million cap on liability relating to economic losses.

The measure would apply retroactively to the April 20 BP oil well disaster in the Gulf of Mexico, which prompted the legislation.

Other provisions in the legislation would provide rebates for purchasing vehicles that run on alternative fuels and making existing homes more efficient, as well as incentives to promote electric vehicles.

The estimated $15 billion cost of the bill for clean energy initiatives would be paid for, according to Democratic aides, by raising the Oil Spill Liability Trust Fund fee. While a draft of the bill said the fee would rise to 49 cents per barrel of oil, from 8 cents, an aide said that figure was still being reviewed.

In remarks to reporters, Senate Majority Leader Harry Reid said he would bring the legislation to the floor in the coming days. But its fate was uncertain as Reid said he also wanted to pass at least two other bills before a month-long recess set to begin August 6.

Democratic aides would not say whether they will allow amendments to the measure. If not, Republicans might put up procedural roadblocks to quick passage.

Admitting last week they did not have the votes to pass broad climate change legislation, Senate Democrats opted to concentrate their efforts on passing a scaled back bill before the August recess.

"This bill does not address every issue of importance to our nation's energy challenges, and we have to continue to work to find bipartisan agreement on a comprehensive bill to help reduce pollution and deal with the very real threat that global warming poses," Reid said.

U.S. President Barack Obama on Tuesday restated his pledge to work for a bill combating global warming, but few believe there is time to achieve that this year.

"If we've learned anything from the tragedy in the Gulf, it's that our current energy policy is unsustainable," Obama told reporters after meeting with congressional leaders.

Obama's comments were likely seen as a nod to the international community and environmentalists, who are counting on U.S. action to help advance U.N. talks to form an international pact to curb greenhouse gas emissions.

But the White House indicated on Tuesday that climate provisions could be added back into a bill once negotiators from the Senate and the House of Representatives hammer out differences between their respective versions during "conference" talks.

The House bill, passed last year, includes climate provisions to cut greenhouse gas emissions.

White House spokesman Robert Gibbs, when asked whether the administration would seek to do a separate climate bill later after getting a narrow energy-focused bill first, said: "No, I think the process is you get an energy bill through the Senate then you can conference that legislation with the House."

Some green groups slammed the Senate's failure to include tough climate control provisions in the energy bill.

"There's no doubt that big oil, big coal, their army of lobbyists and their partners in Congress are cheering the obstruction that blocked Senate action on clean energy and climate legislation," a coalition of environmental groups, including the Sierra Club, said in statement.

In a separate statement, the Sierra Club emphasized it strongly supports other aspects of the bills Democratic leaders in the House and Senate are advancing "to respond to the BP disaster, reduce oil dependence and create clean energy jobs." It added it was "essential" Congress make further progress later this year on moving the U.S. off carbon-polluting oil consumption.

The main lobby for the oil industry called the Senate bill a job killer because of provisions to raise the liability cap for companies involved in oil spills.

"This would cut domestic production, kill American jobs, slow economic growth and cost billions in federal oil and natural gas revenues," the American Petroleum Institute said in a statement.

In the House of Representatives, Democrats are preparing to vote on a tough bill Friday that would clamp down on offshore oil and gas drillers.

In addition to eliminating the oil spill liability cap, the bill would impose tough new safety rules and ban BP from getting new offshore oil exploration leases for up to seven years for its role in the Gulf oil spill.

Any differences between the House and Senate bills would have to be reconciled, which could prove difficult with the looming August recess and November elections.

Some Republicans fear that Democrats could use a possible post-election session to ram an energy and climate control bill through Congress.

(Writing by Ayesha Rascoe, additional reporting by Tom Doggett and Jeff Mason; Editing by Russell Blinch, Marguerita Choy and Sofina Mirza-Reid)