Senators sidestep climate hot buttons

The US Senate today upheld tariffs on ethanol imports as it debated $32 billion in clean energy incentives, but avoided votes on the thorniest pending issues - raising automobile fuel standards and mandating renewable power use for utilities.

With US pump prices above $3 a gallon and crude near $70 a barrel, US lawmakers are keen to show that they are acting to take pressure off consumers and get tough on oil companies like ExxonMobil, Reuters reported.

The Senate is slated to vote by week's end on a Democratic rewrite of energy policy that would take $29 billion in tax incentives away from oil companies over a decade.

About $32.1 billion in total would go to attach incentives to cleaner, home-grown energy sources like generating power from windmills and solar cells and turning corn, soybeans and "cellulosic" sources like switchgrass and woodchips into fuel.

But bitter divisions over raising corporate average fuel economy standards for the first time in 30 years have slowed progress.

And Republicans have threatened to filibuster the bill if it includes a Democratic plan to require utilities to get 15% of their power supplies from renewable sources by 2020.

Heavy opposition to a "renewable portfolio standard" remained even after its sponsor, Democrat Jeff Bingaman of New Mexico, weakened its provisions.

Senator Pete Domenici, a New Mexico Republican, said the bill would punish utilities in the US Southeast, who would have to pay a penalty because they do not have enough wind power to meet the target. Domenici said its inclusion puts the entire bill "in serious jeopardy".

Earlier, lawmakers from farm states like Iowa and South Dakota beat back an attempt by East Coast lawmakers to drop a 54 cent per gallon tariff on ethanol imports.

The bill would require 36 billion gallons of ethanol to be used by 2022, with 15 billion gallons coming from corn and the rest from "cellulosic" sources.

Senator Judd Gregg, a New Hampshire Republican, said the tariff blocks imports from coming to the East Coast, which has trouble getting ethanol because the fuel cannot be transported by pipeline from Midwest refineries. The Senate voted 36-56 against dropping the tariff.

Also, White House officials expressed dismay over a proposal by Senate tax-writers to revoke about $13 billion in tax incentives and impose $16 billion in new taxes on oil companies, the burden of which falls mostly on the top five US oil companies.

In order to keep the energy bill "revenue-neutral", Senate tax-writers have proposed recovering most of the funds by scrapping old tax incentives and adding new ones for US supermajors ExxonMobil, ConocoPhillips and Chevron.

Al Hubbard, an economic advisor to President George W. Bush, said the new taxes were "totally inappropriate" and said they unfairly single out the biggest oil companies.

"For some reason right now the Congress wants to tax those five companies," Hubbard told reporters at a briefing.

The tax portion of the bill as written would slap an excise tax of 13% for companies that produce oil and natural gas in the Gulf of Mexico, which would raise about $10.7 billion over a decade.

Hubbard said the new offshore drilling tax is "basically a way of changing the terms" of contracts the federal government signed with oil companies in 1998-1999.

The plan would also repeal reduced tax rates for major integrated oil companies, which could raise $9.4 billion in extra revenue, and drop foreign income tax deductions for companies that produce oil and natural gas overseas - worth $3.2 billion over 10 years.