Senate Gearing Up to Raise Fuel Economy Standards

WASHINGTON – As motorists face near record gasoline prices, the Senate took up an energy bill Tuesday that would raise auto fuel economy standards for the first time in nearly 20 years and make oil industry price gouging a federal crime.

Democratic leaders in both the Senate and House said they want broad energy legislation passed before the July 4th congressional recess, hoping to dampen growing voter anger over paying well above $3 a gallon at gasoline pumps across the country.

The Senate bill calls on automakers to boost their fuel economy to a fleet average of 35 miles per gallon by 2020, about a 40 percent increase over what new cars and the less fuel efficient SUVs and pickup trucks are required to attain today. The auto standard of 27.5 mpg was last increased 18 years ago. SUVS and small trucks must achieve a fleet average of 22.2 mpg.

Majority Leader Harry Reid, D-Nev., said Tuesday the bill would help reduce the country's reliance on oil — an addiction that consumes more than 21 million barrels a day, nearly two-thirds of it imported.

Reid has called the auto fuel efficiency measure, known as CAFE, the most contentious issue in the energy package.

Executives of General Motors, Ford and Chrysler called on Senate leaders last week arguing that the Senate bill's requirements may not be achievable. Sen. Carl Levin, D-Mich., is working on a more modest fuel economy proposal that he says automakers believe they can meet.

"The handwriting has been on the wall for a long time," said Sen. Dianne Feinstein, D-Calif., a long time advocate for more stringent auto fuel economy requirements. She said numerous studies have shown manufacturers can meet CAFE increases more stringent than those being considered by the Senate.

The Senate bill, which faces numerous hurdles to overcome over the next two weeks, also would sharply ramp up the use of ethanol as a substitute for gasoline, requiring production of 36 billion gallons of ethanol a year by 2022, five times today's production.

While the additional ethanol initially would come from corn, eventually nearly two-thirds of it is expected to be produced from prairie grasses, wood chips and other cellulosic sources.

Many of the bill's provisions have bipartisan support, but Republicans want more, especially more domestic production of oil, natural gas and coal as well as expansion of nuclear power.

The Democratic bill "doesn't do anything to address expanding domestic (energy) production, and it won't do a single solitary thing to reduce gas prices," said Minority Leader Mitch McConnell, R-Ky.

But Sen. Maria Cantwell, D-Wash., said a price gouging provision she has been advocating may reduce the prospects of future price spikes.

It would give the Federal Trade Commission broader authority to investigate possible wholesale oil market manipulation — from the legitimacy of refinery shutdowns to whether gasoline is being exported to limit domestic supplies.

For the first time, it would be a federal crime to charge "unconscionably excessive" prices for petroleum products at the wholesale or retail level. Critics of the provisions, including the Bush administration, said the measure amounts to price regulation and could lead to supply shortages.

The oil industry has repeatedly argued that many investigations have failed to uncover price fixing by oil companies. "If there is no manipulation, there should be no fear of a strong federal statute," Cantwell countered at a news conference Tuesday.

Sen. Larry Craig, R-Idaho, called the price gouging provision "a feel-good vote" that he probably would support. "But does it bring gas prices down? Probably not," he said.

Craig said he supports much of the bill, including the increase in auto fuel economy requirements, but he called it "a domestic green energy bill" that doesn't address the need for more domestic energy production.

He said Republicans — along with support from some Democrats — will renew the drive to open new areas of coastal waters, especially the Eastern Gulf of Mexico and central Atlantic region, to oil and gas development. One proposal to give states an ability to get out from under a federal ban on offshore oil and gas development has bipartisan support, but is strongly opposed by a number of senators from coastal states.

Another highly contentious issue senators will debate is whether to require utilities to use more renewable fuels to produce electricity.

Sen. Jeff Bingaman, D-N.M., intends to propose a national requirement that 15 percent of a utility's power come from renewables such as wind and solar power. Such a requirement is strongly opposed by utilities in the Southeast, where there are few resources of wind power and heavy reliance on coal.

Sen. Pete Domenici, R-N.M., plans to offer an alternative that would broaden the requirement and let utilities meet the standard by expanding their use of nuclear power, hydropower or clean coal technology.

Meanwhile, senators from coal producing states argue that coal, the country's most abundant fuel, is being given short shift. They plan to press for new requirements and subsidies for the production of liquefied coal as a diesel-like motor fuel, a measure environmentalists strongly oppose, arguing such use of coal would increase the release of carbon dioxide, the leading greenhouse gas linked to global warming.