December 6, 2007 / 3:23 PM / 12 years ago

House passes energy bill but Bush set to veto

WASHINGTON (Reuters) - The U.S. House of Representatives on Thursday passed an energy bill that would boost vehicle fuel economy requirements by 40 percent by 2020, raise ethanol use by five-fold by 2022 and impose $13 billion in new taxes on big energy companies.

Rush hour on the 405 freeway in Los Angeles, October 3, 2007. The House of Representatives on Thursday passed an energy bill that would boost vehicle fuel economy requirements by 40 percent by 2020, raise ethanol use by five-fold by 2022 and impose $13 billion in new taxes on big energy companies. REUTERS/Lucy Nicholson

The centerpiece of the 1,055-page Energy Independence and Security Act is an increase in the Corporate Average Fuel Economy standards to 35 miles per gallon (15 km per liter) by 2020, the first congressional boost in fuel rules since 1975.

The plan — an amalgam of energy priorities driven by House Speaker Nancy Pelosi — passed by 235-181 in a mostly party-line vote.

But it faces resistance in the Senate and the White House says it will reject the measure in its current form.

“Their proposal would raise taxes and increase energy prices for Americans,” the White House said in a statement. “That is a misguided approach and if it made it to the President’s desk, he would veto it.”

Analysts say the bill is unlikely to survive intact, but a stripped-down version could become law if controversial tax and renewable electricity provisions are dropped.

Senate Majority Leader Harry Reid said he wants to call a vote on the bill before Congress adjourns later this month.

But Reid said the bill may have to be modified to survive, suggesting the controversial provisions could be dropped. “If we can’t get it all, we’ll get part of it,” he told reporters.

Senate Republicans and the Bush administration say they will block a final bill if it includes a $21.5 billion tax package and a mandate for utilities to get 15 percent of their power from renewable sources like wind and solar by 2020.

Pelosi called the bill “a historic opportunity” and “a shot heard around the world for energy independence,” with crude oil prices near $90 a barrel and retail gasoline over $3 a gallon.

Democrats claimed the higher vehicle fuel efficiency standard would eventually reduce U.S. oil demand by 1.1 million barrels a day and save families between $700 and $1,000 in yearly fuel costs.

NO ENERGY BILL

Republicans called it a “no energy bill” because it doesn’t open new U.S. acreage to oil and natural gas drilling. They said the bill will do nothing to curb soaring prices for gasoline and home heating fuels.

“The Democratic majority’s remarkably undemocratic process has produced a bill that harms more than it helps and has no chance of being signed into law,” said Rep. Joe Barton, the top Republican on the Energy and Commerce Committee.

The House bill also contains popular provisions to boost use of renewable fuels like ethanol to 36 billion gallons by 2022. Ethanol, blended mostly from corn in the United States, is popular in Midwest states like Iowa.

But to allay anger from livestock growers and food makers, who have seen corn prices nearly double amid an ethanol boom, the bill caps the amount of corn-blended ethanol at 15 billion gallons. The rest — 21 billion gallons — comes from nonfood “cellulosic” sources like switchgrass and wood chips by 2022.

The bill’s tax provision — worth about $21.5 billion over 10 years — would dangle federal tax incentives for homeowners and businesses to buy new solar arrays, wind turbines and hybrid gas-electric cars.

To foot most of the bill, the House bill repeals about $13 billion in tax subsidies extended to big oil and gas producers like Exxon Mobil Corp, ConocoPhillips and Chevron Corp.

The American Petroleum Institute slammed the House bill, saying it “over-promises” the ability of ethanol to cut oil demand and will likely raise the cost of gasoline.

The Sierra Club said the bill was a dramatic move away from the failed energy policies of the past and “will provide billions for clean energy instead of Big Oil’s bottom line.”

Additional reporting by Tom Doggett; editing by Marguerita Choy

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