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WRAPUP 4-Kerry unveils US climate bill, Obama supports it

* Republican Graham says spill makes support difficult

* Gulf oil leak makes drilling provisions a hard sell

* White House again signals support for the bill

(Adds Kerry, Lieberman interview quotes, details)

By Richard Cowan and Timothy Gardner

WASHINGTON, May 12 (Reuters) - U.S. Senator John Kerry ratcheted up the fight to pass legislation to combat global warming on Wednesday, unveiling a bill as the Gulf of Mexico oil disaster complicates the measure’s already difficult prospects this year.

Kerry, a Democrat, and Senator Joseph Lieberman, an independent, took the wraps off their bill as two important deadlines loom.

Congressional elections are less than six months away and with Democrats facing losses, June or July could be the last chance for them to pass a climate bill this year, before the political atmosphere gets too overheated.

Then there’s the U.S. Environmental Protection Agency, which stands ready to put regulations into effect in January that would reduce carbon dioxide pollution from power plants and factories if Congress fails to act.

“If we got into the floor in June or July, I’d be very happy,” Kerry told reporters.

Foreign capitals will be watching Congress and the EPA closely, as the fate of an international pact to battle global warming hangs largely on Washington’s actions.

A Republican supporter of the U.S. climate legislation, which aims to cut planet-warming domestic emissions by a modest 17 percent in the next decade, was conspicuously absent on Wednesday.

Republican Senator Lindsey Graham, who worked with the two senators on the bill, did not attend the ceremony to unveil it. He reiterated in a statement that this is not the time to press on a climate bill because of the massive oil leak and talk of moving ahead on immigration reform.

Nevertheless, Graham voiced support for the bill’s concepts.

“Speaking for myself, I believe he’ll (Graham will) vote for this bill,” Lieberman told a small group of reporters after the ceremony.

“If we get to 59 (votes), he’ll be 60 without hesitation, that’s my view,” Lieberman said referring to the 60 votes needed in the Senate to overcome procedural hurdles.

Flanking Kerry and Lieberman when they presented their climate plan were heads of electric utilities and other large industries.

Kerry and Lieberman are banking that a strong lobbying effort by the business community will propel undecided senators to back the effort.

“Many of them are Republicans and many of them represent a significant component of the Republican base,” Kerry said.

The Senate’s Republican leader, Senator Mitch McConnell, dismissed the Kerry-Lieberman effort as “little more than a job-killing national energy tax.” He said it would raise the price of electricity and gasoline.

The bill still has provisions to encourage offshore drilling but would allow U.S. states to prohibit offshore oil activity within 75 miles (121 km) of their coasts. It also allows coastal states to reap some revenues from drilling.

But that may not be enough to win drilling opponents from coastal states as concerns mounts over the gushing oil well.

Kerry disputed that, saying, “I felt that in the end that our colleagues, ones most concerned (about offshore drilling) came away assured. There are protections they don’t have now.

If the bill does advance, a fight over offshore drilling is expected to spill onto the floor of the full Senate. “This part of the bill would be written on the floor,” Lieberman said. “We’re making a proposal here, but there would be extensive floor debate.”

President Barack Obama welcomed a new U.S. climate bill, saying he hoped to pass it this year as the oil spill in the Gulf of Mexico underlined the need for energy reform.

“The challenges we face -- underscored by the immense tragedy in the Gulf of Mexico -- are reason to redouble our efforts to reform our nation’s energy policies,” Obama said in a statement. [ID:nN12244039]

But it is unclear if Obama is willing put the same kind of political capital behind the climate bill as he did for healthcare legislation earlier this year.

Without a big White House push, the bill faces slim chances this year with an already clogged congressional schedule that includes dealing with financial reform and a Supreme court nomination.


The bill includes provisions for boosting nuclear power and offshore drilling in order to help win votes from states where the economies depend on energy production. Earlier versions of the legislation relied more on boosting alternative energy.

“The Gulf of Mexico spill has turned offshore drilling -- an issue that once greased the wheels of the grand bargain -- into a political toxin,” said Kevin Book, analyst at ClearView Energy Partners.

Many utilities with big investments in low-carbon nuclear power, natural gas, or wind and solar power hope to benefit from a crackdown on greenhouse gases.

Utilities such as FPL Group FPL.N, Duke Energy DUK.N and Exelon EXC.N have lobbied alongside environmental groups for the climate bill as has General Electric GE.N, a manufacturer of clean coal and natural gas systems for power plants and wind turbines.

The legislation would establish what has become known as a cap and trade system for reducing carbon pollution by electric utilities and factories.

Starting in 2013, electric power utilities would have to obtain pollution permits, initially provided for free by the government and then changing to full auctions by 2030, according to Senate aides.

The permits could be traded on a regulated market. The government would hand out the permits to utility companies based on a formula of 75 percent related to their emissions and 25 percent on their deliveries.

That is a revision from a previously considered 50-50 formula that coal-fired utilities complained was unfair. But the formula could bring a backlash from environmentalists.

“Those ratios of allowances do nothing to ameliorate global warming. Industry is getting exactly what it wants” with the legislation at the expense of the environment, said William Snape, senior counsel for the Center for Biological Diversity. (Additional reporting by Jeff Mason; editing by Russell Blinch and Cynthia Osterman)