* Plan opposed by conservative groups, Koch Industries
* Chemical companies, farm groups also wary-Menendez
* Menendez says will "tailor" rule and try again
* Extension of wind, renewable tax credits also defeated
By Roberta Rampton
WASHINGTON, March 13 A bipartisan proposal
to provide tax incentives for natural gas vehicles was defeated
in a Senate vote on Tuesday, but a key backer of the bill said
it will be revised and reintroduced to address concerns from
The five-year plan, to be financed by fees charged to users
of the fuel, was designed to spur purchases of long-haul trucks
and commercial vehicles that can run on cheap and abundant U.S.
natural gas. It would also help defray the costs of building
pumps and other infrastructure for fueling.
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.
As gasoline prices spike to new highs for this time of year,
President Barack Obama had promoted the concept as part of a
long-term plan to reduce prices at the pump, a top issue ahead
of November elections.
The amendment to the Senate's highway bill needed 60 votes
to pass, but was rejected in a 51-47 vote after conservative
groups panned it as an unnecessary subsidy, and after some
senators worried the bill could raise costs for the chemical and
"I think we have to do a little work with those two
industries," Senator Robert Menendez, a cosponsor of the bill,
told Reuters after the vote.
"If we got them to the right point, I think we could
actually pass this bill," he said, noting the vote would have
passed if only a simple majority were required.
The 60-vote threshold was part of a deal to allow the vote
to be attached to a the highway funding package.
The defeat was disappointing for companies that make natural
gas engines, but is "not a death knell" for the industry, said
Jonathan Burke, vice president of global market development at
engine maker Westport Innovations.
The industry "can do its business in the absence of these
incentives," Burke said.
EXPORT RESTRICTIONS KEY
Menendez said the "commonsense" plan to displace some fuel
used in the trucking industry with natural gas would help pave
the way for reduced dependence on foreign oil, and could help
reduce gasoline prices.
Bountiful U.S. production has brought domestic natural gas
prices to 10-year lows. Cheaper natural gas has fueled a
resurgence in the U.S. chemical sector and also helped tamp down
fertilizer prices for farmers.
Menendez said some senators told him after the vote that
they worried about supporting a plan that could raise costs for
Using natural gas in transportation could lead to a 5
percent increase in demand for U.S. natural gas, Menendez
But some natural gas drillers are seeking to reduce
production, while other companies have applied for permits to
export their surplus to countries such as Japan and China, where
prices are higher. Under both of those scenarios, natural gas
prices could also rise, Menendez said.
Restricting exports from oil and gas drilled on federal
lands or in federal waters could help reassure those sectors
that their costs won't rise, and lead to support for the bill
next time it comes for a vote, Menendez said.
"When we're looking at these challenges we have
domestically, we've got to be thinking: if you're going to drill
it in America, and it's on federal land and water, you should
keep it in America," he said.
CONSERVATIVE GROUPS PAN PLAN
Conservative groups including the Heritage Foundation, Club
for Growth, Americans for Tax Reform 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.
James Inhofe, a conservative senator who supports natural
gas vehicles but voted against the plan, said he would soon
introduce a new bill that would reduce environmental emissions
regulations for the vehicles as an incentive for their use.
TAX BREAKS FOR WIND ALSO DEFEATED
The Senate was slated to vote on as many as 22 amendments to
the bill on Tuesday as it tried to wrap up work on the highway
funding package, which expires March 31.
The House of Representatives 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.
A Senate proposal to extend tax breaks for wind, solar and
advanced biofuels also failed to garner enough support to be
attached to the bill, 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.