December 13, 2007 / 5:35 PM / 11 years ago

UPDATE 2-U.S. Senate energy bill to drop oil industry taxes

(Adds White House veto comment, Sen. Reid’s comment, current vehicle fuel standard)

By Tom Doggett

WASHINGTON, Dec 13 (Reuters) - Senate Majority Leader Harry Reid said on Thursday he would scale back the controversial taxes in a broad energy bill aimed at boosting U.S. vehicle fuel efficiency to avoid a White House veto and appease Republicans who were ready to filibuster the measure.

Senate Democrats failed to block a filibuster by mostly Republicans unhappy with the bill’s $13 billion in taxes on big oil and gas companies.

Fifty-nine senators voted to limit debate on the bill, just one short of the 60 lawmakers needed out of the chamber’s 100 members to stop a filibuster.

Forty senators voted against limiting debate. Republican presidential candidate Sen. John McCain was the only senator absent.

Senate Republicans sought a filibuster to force the bill to be modified to satisfy the White House, which threatened to veto the measure, in part, over the taxes it would levy against big energy companies, like Exxon Mobil (XOM.N).

“They are bad taxes for those who want this energy bill,” said Sen. Pete Domenici, the top Republican on the chamber’s Energy Committee. “Bad, because the president will veto them and we will get nothing.”

“The (Bush) administration strongly opposes using the federal tax code to single out specific industries for punitive treatment,” the White House said in a statement released shortly before the Senate vote.

Democrats slammed Republicans and the White House for siding with oil companies, which they said didn’t need any help from the federal government, with oil at high prices and the billions of dollars in record profits earned by the companies.

“With $90-a-barrel oil, why in the world do they need a federal subsidy?” said Assistant Senate Majority Leader Richard Durbin. “The oil companies now are celebrating in their boardrooms.”

Nonetheless, Reid said he would bring back for a vote later on Thursday a modified version of the bill that was expected to remove the oil industry taxes and focus mainly on increasing vehicle fuel efficiency and ethanol use.

“What we’re going to wind up with is still historic. The first increase in (vehicle) fuel efficiency standards in 32 years,” Reid said.

If approved, the measure would go back to the House of Representatives so lawmakers there could vote on the Senate’s changes to the bill and then it would be sent the president.

The White House was cautious over whether Bush’s veto threat would be lifted now that the bill was being altered.

“We’re pleased that they decided to take out the tax title because that was one of the ones that the president said he would veto the bill over,” said White House Press Secretary Dana Perino. “We’ll have to see the final bill. But things look promising.”

The revised bill was also expected to drop an extension of a federal tax credit for producing electricity from wind power and a tax credit for installing solar panels in commercial buildings. Also expected to be jettisoned from the measure was a tax credit for buying plug-in hybrid electric vehicles.

The updated bill would raise fuel efficiency of cars and trucks by 40 percent to an average 35 miles per gallon by 2020, cutting U.S. oil demand by 1.1 million barrels a day.

Passenger cars now must get 27.5 miles a gallon and minivans, SUVs and other light trucks get 22.2 miles a gallon.

Under congressional rules, the legislation would still have to include a way to pay for the estimated $3 billion in federal gasoline tax revenue that would be lost from the improved fuel mileage for U.S. vehicles.

The bill would also boost U.S. production of renewable motor fuels like ethanol by five fold to 36 billion gallons a year by 2022, which is widely supported by lawmakers from farm states as most U.S. ethanol is now made from corn. (Editing by Christian Wiessner)

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