WASHINGTON (Reuters) - The U.S. Senate on Tuesday rejected a bipartisan proposal to provide tax incentives for natural gas vehicles, a plan seen by some as paving the way for reduced dependence on foreign oil but panned by conservative groups as an unnecessary subsidy.
The amendment to the Senate's highway bill needed 60 votes to pass, but was rejected in a 51-47 vote.
The closely watched vote pitted billionaire T. Boone Pickens, who has been promoting natural gas vehicles since 2008, against Koch Industries, an energy conglomerate that saw the plan as interference in the private sector.
Praised by President Barack Obama and Senate Majority Leader Harry Reid, the five-year plan would spur purchases of long-haul trucks and commercial vehicles that can run on cheap and abundant U.S. natural gas. The subsidies would be paid for from fees charged to users of the fuel.
As gasoline prices spike to new highs for this time of year, Obama has promoted the concept as part of a long-term plan to reduce gasoline prices, a top issue ahead of November elections.
The bill would also have provided tax credits for building pumps and other infrastructure needed for filling more vehicles with the fuel.
"If you vote against this amendment, you cannot go home and tell your constituents that you have done everything you can to reduce (gasoline) prices," said Robert Menendez, a New Jersey Democrat who cosponsored the bill, ahead of the vote.
The Senate was slated to vote on as many as 22 amendments to the highway bill on Tuesday.
A proposal to extend tax breaks for wind, solar and advanced biofuels also failed to garner enough support to pass in a 49-49 vote.
Wind turbine makers such as GE and Denmark's Vestas had been closely watching the vote for signs that the incentive, called the production tax credit, would be extended after it expires at the end of the year.
Conservative groups including the Heritage Foundation, Club for Growth, and the Koch-funded Americans for Prosperity had put senators on notice that they would be tracking who voted for the bill.
The groups have said the natural gas program might not generate enough money to pay for the subsidies and argued the private sector should adopt the vehicles as it sees fit.
"If natural gas vehicles are truly advantageous and economically efficient, then consumers will demand that they be developed without political mandates that exhaust more taxpayer dollars," Koch executive vice-president Richard Fink said on the company's website.
Americans for Tax Reform has said the program has the potential of "skewing the market, inflating natural gas consumption, and potentially driving up the cost of natural gas."
Richard Burr, a Republican from North Carolina who cosponsored the bill, argued the program would not cost taxpayers a dime, and would rather accelerate a shift that is already under way. It has the potential to lower gasoline prices by reducing demand for oil from the Middle East, he said in a speech on Monday.
"I was rated as the seventh-most conservative member of the United States Senate," he said. "This year, I bought a hybrid. I bought a hybrid because I was tired of paying money to people who hate us."
The House has not yet decided on its approach, and last week Speaker John Boehner said he might pursue the Senate's bill once it has passed.
Republican House Leader Eric Cantor last week said he opposed the natural gas plan as "picking winners and losers".
Last year, about 200 House lawmakers signed on to support a similar natural gas vehicle plan in the House, but 20 of them have since withdrawn their support.
Editing by Dale Hudson