Special interests from outside of Iowa continue their effort to deceive Iowans about what was at stake with a resolution considered last week by the U.S. Senate. Senator Grassley voted for a resolution sponsored by Senator Lisa Murkowski to stop actions by the EPA that exceed the intent of the 1990 Clean Air Act (which Grassley voted for), hurt the national economy, and disproportionately would harm Iowa's economy and families. The Murkowski resolution was supported by the American Farm Bureau, the Iowa Soybean Association, the Iowa Cattlemen's Association, Citizens Against Government Waste, the National Taxpayers Union, and the National Federation of Independent Businesses.
In a new attack made today, the outside group makes a bogus claim that the Murkowski resolution would overturn fuel efficiency standards and increase America's oil dependence. The Murkowski resolution in no way affects the National Highway Traffic Safety Administration's authority to set fuel efficiency standards.
In the Senate, Grassley has led countless efforts to extend and expand renewable energy production and use. He authored the first-ever wind energy tax credit, which helped to launch the industry as it exists today. He has extended the ethanol tax incentive and successfully established tax incentives for biodiesel and biomass.
Grassley-authored tax incentives in recent energy and tax bills that became law created new policies for conservation and energy-efficient appliances, vehicles and home improvements. Grassley has fought since last summer to extend the biodiesel tax credit, which Democratic congressional leaders let expire on December 31, 2009. As a result of uncertainty about the credit and the lapse in the credit, an estimated 29,000 jobs nationwide were lost last year, 18,000 jobs have been lost this year, and the remaining 5,000 are in jeopardy. Last year, there were biodiesel-related jobs in 44 states, including Iowa.
The Kerry-Lieberman cap-and-trade legislation pending in the Senate, which the outside group attacking Grassley supports, would mean higher energy prices for consumers and, in fact, a boon to Wall Street by creating a carbon trading market that could rival oil as one of the largest commodity markets. In addition, BP and other oil companies were involved in writing the legislation supported by the outside group attacking Grassley. News clips describing their involvement are below for your reference.
Grassley said, "My fight is for jobs in Iowa and against job-killing policies that benefit special interests at the expense of middle America. I work for homegrown, clean-burning, alternative energy that makes America more energy independent and creates jobs and opportunities in Iowa and throughout the country, and my record proves it."
Environment and Energy Daily May 4, 2010
After the spill, judging Big Oil's place at Senate table
Darren Samuelsohn, E&E reporter
Authors of the Senate climate bill didn't hide their courtship of Big Oil when crafting an industry-friendly proposal to curb greenhouse gas emissions. Sen. Lindsey Graham (R-S.C.) claimed giving the industry access to more domestic offshore drilling would help reduce U.S. dependence on foreign sources of oil, all the while appealing to swing-vote senators. Sen. John Kerry (D-Mass.) boasted that he had sewn up endorsements from three of the country's major oil companies, with their representatives headed to the press conference where the bill would finally be unveiled. But then came the Gulf Coast spill, with oil behemoth BP PLC culpable for an estimated 200,000 gallons of crude flowing every day into the Gulf of Mexico. Now, the very perception that major oil companies are tied to the Senate climate proposal is under fire. And the sponsors themselves are being challenged to rewrite their bill and to play down the public role of the industry if the measure has any chance of becoming law. "The American public has never much liked Big Oil," said Anna Aurilio, director of Environment America's Washington, D.C., office. "The last two weeks have made that perception probably even worse." Environmentalists hope the BP spill turns into a game changer that will help propel the climate legislation's passage much like the Exxon Valdez oil spill led to the 1990 Clean Air Act amendments. But they insist that the authors must first abandon language that allows for an expansion of offshore drilling and revenue-sharing incentives for states -- replacing them with provisions that prevent future oil spills. "If I was the bill's sponsor, I'd take out offshore drilling provisions and put in new safeguards for oil rigs, and get the oil companies to appear at that press conference," said Dan Weiss, a senior fellow at the left-leaning Center for American Progress. In writing their bill's drilling provisions, Kerry, Graham and Sen. Joe Lieberman (I-Conn.) had their sights on about a half-dozen potential votes, including Sens. Mary Landrieu (D-La.), Jim Webb (D-Va.), Mark Warner (D-Va.), Mark Begich (D-Alaska), Lisa Murkowski (R-Alaska) and Byron Dorgan (D-N.D.). But they also have been wrestling with coastal state Democrats who want nothing to do with any additions to offshore drilling, arguments that have been echoed of late by Senate Democratic leadership following the Gulf Coast spill. "This terrible event will, undoubtedly, require us to re-examine how we extract our nation's offshore energy resources and will have to be taken into consideration with any legislation that proposes to open new areas to development," Senate Majority Leader Harry Reid (D-Nev.) said Friday. "The offshore drilling issue is being reconsidered by many at this point," Sen. Dick Durbin (D-Ill.) told reporters yesterday. Durbin, the Senate majority whip, said safety issues would be paramount if Democrats move ahead. "There's a lot to be learned by members and perhaps new standards when it comes to offshore drilling," he said. "I don't think we're going to eliminate offshore drilling in the future, but any future drilling is going to be held to much higher safety standards." For now, sponsors of the Senate proposal are holding onto the compromises they have reached with the oil industry, even in light of the Gulf Coast spill.
After all, perhaps their biggest deal with Big Oil does not even have to do with drilling. Instead, it places the oil companies into a separate regulatory system for curbing their emissions that is outside the trading plan for power plants and major manufacturers -- a major change from the House-passed bill. Kerry spokesman Whitney Smith did not respond directly to questions on the role that the oil companies would play in the climate legislation going forward. She said that Kerry is working with the White House, U.S. EPA and other senators to monitor the Gulf Coast spill and also remains focused on "passing a bill that will lead us to a day when most of America's energy is clean, and that will only happen if we put a price on carbon." Graham, who bolted the negotiations last month over Democratic leadership's decision to place immigration on this year's agenda, said Friday that he saw no reason to change the offshore provisions, even in light of the Gulf Coast spill. "We've had problems with car design, but you don't stop driving," he told home state newspaper, The Greenville News. "The Challenger accident was heartbreaking but we went back to space. The biggest beneficiaries of this proposal to stop drilling would be overseas oil interests, OPEC and regimes that don't like us very much." Kerry never named the oil companies he expected at the April 26 press conference to roll out the climate bill, an event that was indefinitely postponed because of Graham's sudden departure from the climate negotiation. But a Shell spokesman said that the company's CEO, Marvin Odum, was planning to attend. And both BP and ConocoPhillips -- regular visitors in the senators' office during closed-door talks with Shell on the climate bill -- were also expected at the press conference. ConocoPhillips spokeswoman Nancy Turner acknowledged yesterday her company's ongoing role in the negotiations but said it was "premature" to comment on the Kerry-Graham-Lieberman proposal because the legislation still had not been released. Officials at BP and Shell did not respond to requests for comment. Other business officials said they would welcome the oil industry's continued participation at the bargaining table. Preston Chiaro, group executive for technology and innovation at Rio Tinto, the nation's largest diversified mining company, said yesterday that the language that Kerry, Graham and Lieberman negotiated for transportation fuels was "one of the attractions of their bill." "I think the oil companies have such a deep and vested interest in climate change, they can't help but play a part," Chiaro said. "I don't know how you can't have the oil and petrochemical industry be an essential part of the dialogue," added Ralph Izzo, chairman of the board, president and CEO at New Jersey's Public Service Enterprise Group Inc., or PSEG. Conservatives questioned efforts to push out the oil industry at a time when it is focused on the Gulf Coast cleanup. "Demonizing oil companies is maybe good politics for Democrats, but it doesn't make for good policy," said Dana Perino, former White House spokeswoman for President George W. Bush. "All of us have to get the production from somewhere. We either have to make it from our own resources or get it from overseas. I'm not an oil company basher. If you want to solve this problem, you've got to have them at the table." Entering the climate debate, industry attorney Scott Segal said the major integrated oil companies "needed at least two things in climate legislation in order to be fully supportive." The first was some type of "linked fee" that kept the industry's greenhouse gas emissions outside of the cap faced by other industries. The second entailed proposals to help facilitate oil and gas exploration and production, including on the outer continental shelf. "Both of those proposals seem to be highly questionable at this point," Segal said. "Even if [Kerry] can broker a careful preliminary deal on oil-related issues, it is hard to see how they could keep senators representing vastly different viewpoints from offering ill-considered amendments that would disrupt the entire process." But Segal said he still expected the major oil companies to remain engaged in the climate bill negotiations. "I think every energy company -- from oil and refining to utilities to renewables -- wants to remain constructive and engaged in the process of developing sensible climate change policies," Segal said. "However, no one has control over major external influences like accidents or oil spills that can change political perceptions. The best approach is to keep putting one foot in front of the other, and not to try to guess the final outcome when there is so much uncertainty." Kerry, Lieberman Work To Keep Together Fragile Coalition Thursday, May 13, 2010/Congress Daily by Darren Goode, with Amy Harder contributing Stakeholders began poring over a 987-page draft climate and energy strategy Sens. John Kerry, D-Mass., and Joe Lieberman, D-Conn., unveiled Wednesday.
The two senators -- moving without Republican partners -- have assembled an array of business, industry, military, religious and environmental groups pledging to help sell the plan. "I think we're in very good shape with this bill," Kerry said. "I think it's a very strong bill ... given all the entities [that] support it. I think you need to let our colleagues digest it a little bit." The two were joined at the unveiling by top officials at Duke Energy, Edison Electric Institute, Honeywell, Florida Power and Light, Environmental Defense Fund, Nuclear Energy Institute and Dow Chemical. For more energy and environment articles as well as blogs, videos and related materials, see the National Journal Group's expanded energy and environment page. Others unable to make it -- including General Electric and Shell, BP and ConocoPhillips --support the effort, Kerry said. T. Boone Pickens, the largest shareholder in Clean Energy, a company that provides vehicular natural gas, will join the senators at an event next week. Others like the American Petroleum Institute, U.S. Chamber of Commerce and Air Transport Association are staying neutral for now. Some -- like the American Trucking Associations and some environmental groups -- quickly issued statements opposing the draft. The Midwestern Climate Coalition -- a group of 14 Midwestern electric utilities -- released a statement saying it is waiting on a full cost analysis. Economic analyses by EPA and the Energy Information Administration are expected in about a month. Some of those flanking Kerry and Lieberman at the rollout also want changes. "It needs some work," said Jim Rogers, CEO of Duke Energy. He said the bill's formula of distributing emission allocations to electric utilities based three-quarters on historic emissions and one quarter on retail sales is "a move in the right direction" from the 50-50 split in a bill the House passed last year. Sen. Sherrod Brown, D-Ohio -- part of a climate group of Midwest Democrats -- said there are "a lot of things I like about it," but it is not strong enough to help manufacturers or on instituting a border tax against countries that do not comparably reduce their greenhouse gases. "I don't want presidential discretion; I want the president to have to respond to countries to make sure those countries don't undercut environmental rules" and cause an outsourcing of U.S. jobs, Brown said. "We want every pressure point on other countries to do what we all should be doing." Most senators said they are reviewing the draft -- including Kerry and Lieberman's former Republican partner, South Carolina Sen. Lindsey Graham. He has said the effort should be paused in the wake of the Gulf of Mexico oil spill and immigration reform. "It's just a bad environment right now, no matter how worthy the merits of the bill," said Graham. "We've got a big, heavy schedule," said Senate Finance Chairman Max Baucus, adding, "Sen. Graham's absence makes the bill ... a steeper climb. ... The oil spill is not helpful. So we'll see." Since Graham left in late April, Kerry and Lieberman added language giving conditional veto power to states that could be affected by a spill originating from drilling occurring off another state's coastline. But drilling opponents -- who have been using the spill as ammunition -- might not be convinced. "The bill is a far better bill than it was, but I just have to be sure exactly what the veto protection gives us," Sen. Frank Lautenberg, D-N.J., said. EEI President Tom Kuhn said the group is "supporting the bill moving forward and basically there's still a 1,000-page bill you've got to look at." "That's good; they got the best deal they've gotten so far, they oughta be on board," Graham said of EEI. Others want more.
David Hawkins, climate director at the Natural Resources Defense Council, echoed others in citing concern over how the measure affects the Clean Air Act, including trumping EPA's ability to use climate change to determine the listing of criteria pollutants and how climate change emissions here affect other countries. "We think those need to be looked at a little more surgically than they are," Hawkins said. NRDC also opposes incentives for nuclear energy and expanded offshore drilling -- two crucial to support from many senators. Despite these misgivings, NRDC is one of several environmental groups running advertisements to ride on the momentum of Wednesday's unveiling. A 30-second NRDC ad that began running on national cable TV Wednesday references the Gulf spill and a recent West Virginia coal mine accidents to highlight how the bill would help alternative energy sources. Environmental Defense Fund is also running radio and TV ads this week. "We're going to do a full-court press, said Fred Krupp, president of EDF. "This is our chance." Rogers -- whose company is the nation's third-largest consumer of coal -- said he will try to help shore up support from more than a dozen coal-state senators. "The way I would say it is, during the [House] bill, and I think it will be true over the next several months, is the doorman at my hotel recognizes me quicker than my dog at home," Rogers said. "So I think I'll be here a lot working on this." REVIEW & OUTLOOK JUNE 7, 2010, WSJ Obama's Oil Crisis Politics Democrats want to change the subject from the Gulf spill to cap and tax. BP approves. Not too many weeks ago it looked as if President Obama's cap-and-tax program for energy was dead for this year. But with the political and media left whacking the President for his handling of the worst spill in U.S. history, Democrats have suddenly decided that this is one more crisis that shouldn't go to waste. Consult Mr. Obama's remarks last Wednesday about "the future we must seize" at Pittsburgh's Carnegie Mellon. "The time has come, once and for all, for this nation to fully embrace a clean energy future," he said. "I want you to know, the votes may not be there now, but I intend to find them in the coming months." Nancy Pelosi forced House Democrats to walk the cap-and-tax plank last July, and the White House now plans a summer push in the Senate, where Midwest and coal-state Democrats are still leery of imposing huge new energy costs on their constituents. But Democrats won't stop merely because cap and tax is unpopular and destructive. ObamaCare was too. As with health care, the strategy is to ram the thing through by any means necessary. Amid a revolt against government excess, and a rising liberal panic about November losses, Democrats understand that the political window for their green ambitions is closing. Without any policy concessions to the public mood, they've simply decided that they haven't done enough to convince voters how great their plans are. Wednesday's speech was a preview of this new rhetorical campaign: The Gulf crisis will replace the artist formerly known as the climate bill. "The next generation will not be held hostage to energy sources from the last century," Mr. Obama said, throwing in some banalities about GOP narrow-mindedness and dependence on foreign oil at no extra charge. BP will play the political foil, like the insurer WellPoint did during the health-care debate. As policy, this is a non sequitor. Cap and trade will do little or nothing to end U.S. oil dependence. It will merely make a globally traded commodity more expensive domestically. Oil consumption will naturally decline somewhat, but the reality is that there isn't a viable oil substitute--especially for the transportation that accounts for about 70% of U.S. consumption. Electric cars are years if not decades away from commercial viability, while ethanol isn't energy-dense enough to get a jet off the tarmac. Maybe hot air balloons? Mr. Obama conceded as much in March when he bid for Republican support for a carbon tax by expanding offshore drilling. "Given our energy needs, in order to sustain economic growth and produce jobs, and to keep our businesses competitive," he said, "we are going to need to harness traditional sources of fuel even as we ramp up production of new sources of renewable, homegrown energy." He noted only days before the BP rig exploded that "It turns out, by the way, that oil rigs today generally don't cause spills." Er, about those spills. Even if Mr. Obama's current drilling moratorium is extended ad infinitum, the U.S. will simply import more from Canada and Mexico (the main sources of "foreign oil") as well as the rest of the world, most of it with more lenient environmental regulations. At any rate, the emphasis of the Senate bill rolled out last month by John Kerry and Joe Lieberman is on emissions from coal-fired electricity. Utilities will mostly fuel-switch to natural gas, which is produced by . . . drilling. As for the idea that cap and tax is the best way to punish BP and Big Oil, it'd be more convincing if Kerry-Lieberman hadn't been written in concert with ConocoPhillips, Royal Dutch Shell and--bad-timing department--BP. "Ironically, we've been working very closely with some of these oil companies in the last months," Mr. Kerry said in early May. The Senator from Nantucket added that "they've acted in good faith and they've worked hard with us to try to find a way to get us to a solution that meets all of our needs." Lobbyists for the three oil majors were regular visitors to Mr. Kerry's closed-door negotiations. Democrats have also co-opted other should-be opponents, and not only in the oil industry. Corporate cap-and-tax enthusiasts include Duke Energy and most of the other utilities, as well as Honeywell, DuPont and other large corporations on the Business Roundtable. General Electric CEO Jeff Immelt captured this mentality best, as he so often does. "National policy--including an effective price on carbon and a strong, nationwide clean energy standard--is needed to drive increased investment, which in turn creates new technologies and jobs," he wrote in endorsing Kerry-Lieberman. Like the medical-industrial complex, these businesses will soon come to rue their concessions for a seat at the table and some momentary corporate welfare. But everyone else should understand the stakes. Democrats know this is their last opportunity to control another huge chunk of the economy. Facing diminished majorities next year if not an outright loss of power on Capitol Hill, liberals are going to make one more bloody-minded charge to do for energy what they've already done for health care.
CLIMATE: Groups, companies start lining up -- both for and against -- Senate bill (04/23/2010) Darren Samuelsohn, E&E senior reporter Call it the worst-kept secret in Washington. Officially, Sens. John Kerry (D-Mass.), Joe Lieberman (I-Conn.) and Lindsey Graham (R-S.C.) have yet to issue any notice of their press conference Monday to unveil legislation to cap greenhouse gases and expand domestic oil, gas and nuclear power production. But interests ranging from oil, gas and electric utilities to a major religious organization are confirming they will be in attendance at the 11 a.m. EDT event in the Senate's historic Kennedy Caucus Room, the site of hearings on the sinking of the Titanic, the Teapot Dome scandal, the Vietnam War and Watergate. Kerry yesterday said he expected three big oil companies to be at the press conference. He did not name the companies, though he has been working closely over the past few months with Shell Oil Co., BP America and ConocoPhillips. So far, only Shell CEO Marvin Odum has confirmed he will be coming. "Shell believes that comprehensive energy and climate legislation is essential to meeting our growing demand for energy and that a national framework will help keep down the cost of doing business and provide the regulatory certainty that companies need when making investment decisions," spokesman Bill Tanner said. "We are hopeful that any forthcoming legislation will resolve those concerns while reducing emissions." Sources on and off Capitol Hill said they expected ConocoPhillips CEO Jim Mulva to attend, while BP's participation was uncertain because of the company's ongoing response to the Deepwater Horizon oil-drilling rig, which sank yesterday in the Gulf of Mexico. Officials for both companies did not respond today to requests for comment about the Senate legislation. General Electric Co. is also expected at the event, though spokesman Peter O'Toole said he was not sure yet if CEO Jeff Immelt would make it or another company representative.
"We've advocated action for climate for years, and if these three senators have put a lot of nose to the grindstone on this issue, we want to be there," O'Toole said. Like other companies, O'Toole added that GE was not ready to endorse the legislation. "We want to hear what's inside of it, and we want to get to work," he said.
Kerry yesterday said he also expects Duke Energy CEO Jim Rogers at the press conference, though company spokesman Tom Williams today wouldn't confirm that. "We'll talk about it Monday," he said.
Kerry, Graham and Lieberman are expecting a diverse range of speakers. For example, Roberta Combs, president and CEO of the Christian Coalition of America, founded by televangelist Pat Robertson, will be there, said spokeswoman Michele Combs. Sources say they also expect retired four-star Navy Adm. William Fallon.
Several environmentalists refused to comment when asked if they plan to speak at the press conference, explaining that they were waiting to take a closer look at the details of the bill, including language that would pre-empt U.S. EPA from regulating for greenhouse gases. But one group won't be there. Greenpeace Executive Director Phil Radford issued a pre-emptive statement today challenging the legislation's emission limits, Clean Air Act pre-emption and subsidies for "dirty technology" like nuclear power, offshore oil and gas drilling, and coal-fired power plants. "Although we appreciate the Senate's efforts to reduce global warming pollution, it's clear that polluter lobbyists have succeeded in hijacking this climate policy initiative and undermined the ambitious action necessary," Radford said. Support from a wide range of interests is critical to notching 60 votes. "If we don't get enough businesspeople on board selling this thing, why would a senator jump into a controversial debate this close to the election?" Graham said yesterday. "It'd have to be such good business and energy policy that it makes sense, and I think both parties would benefit if we could pull this off." President Obama yesterday also weighed in on the bill during remarks at an Earth Day reception at the White House. "I think we all understand that the task ahead is daunting, that the work ahead will not be easy and it's not going to happen overnight," Obama said. "It's going to take your leadership. It's going to take all of your ideas. And it will take all of us coming together in the spirit of Earth Day -- not only on Earth Day but every day -- to make the dream of a clean energy economy and a clean world a reality." He added, "I'm confident, though, that we can do it." CLIMATE: Senate trio hopes to hit pay dirt with carbon 'fee' on transportation fuels (03/03/2010) Darren Samuelsohn, E&E senior reporter Key senators are weighing a request from Big Oil to levy a carbon fee on the industry rather than wrap it into a sweeping cap-and-trade system that covers most of the U.S. economy. If accepted, the approach -- supported by ConocoPhillips, BP America and Exxon Mobil Corp. -- could rearrange the politics of the Senate climate debate and potentially open up votes that may not be there otherwise. "It gets you a solution to the carbon problem that doesn't destroy that part of the economy," Sen. Lindsey Graham (R-S.C.), a lead co-author of the Senate legislation, said yesterday. "Once you have oil people saying, 'We can live with this, this was our idea,' then hopefully everybody else begins to look at this thing anew. That's the hope." Sen. Mary Landrieu (D-La.) said yesterday she has been in talks for several months with Graham and Sens. John Kerry (D-Mass.) and Joe Lieberman (I-Conn.) on a proposal that sets up a "linked-carbon fee" on transportation fuels, with revenues raised going back to consumers to help them deal with higher gas prices. The idea, Landrieu said, comes in response to refiners' complaints that the House-passed climate bill short-changed the industry of the emissions allowances they would need in deference to other, better-connected industries like coal and manufacturing. Graham found fault in the House bill too, which forced the industry into an upstream cap-and-trade system covering both the emissions from the refining process itself and the emissions from the products it sold. "It really increases gas prices dramatically more than consumers can bear," Graham said. "The goal is to price carbon on the transportation side in a way that'd allow alternative vehicles to become more attractive to the consumer, and to manufacturers." Senate aides say Kerry, Graham and Lieberman have taken Big Oil's ideas and run with them. No decisions have been made, but they are considering separating the industry from a cap-and-trade plan that covers electric utilities and manufacturers. Instead, transportation fuels would face a carbon fee, with the price linked to the compliance requirements for other industries. New revenue would be geared toward transportation projects, reducing fuel consumption and lowering domestic reliance on foreign oil. The Highway Trust Fund is also a potential recipient of the carbon tax revenue. "The whole concept is transportation money goes back into transportation projects," said a Senate aide close to the process. Kerry said he plans to release details in the coming days to senators and interest groups on the overall energy and climate plan -- an approach that appears to have some early support from oil-state Democrats and the party's leadership. "The issue about equalizing the costs of people who put emissions in the air is what the game plan should be," said Sen. Mark Begich (D-Alaska). "Maybe the sector approach is the right start," said Senate Majority Whip Dick Durbin (D-Ill.). "I'm open to anything that moves us toward pricing carbon and reducing greenhouse gas emissions."
Industry officials said they too welcome the discussions of a carbon fee as part of the Kerry-Graham-Lieberman effort. "Clearly it softens the reaction and increases the likelihood that a number of people who've been forced to push back will be much more cooperative in the dialogue," said Jack Gerard, president of the American Petroleum Institute. Gerard said that the carbon fee approach would yield net environmental benefits, while giving consumers the most transparent signal they can get about what the costs are from the program. Unlike the House bill's cap-and-trade system, oil companies would pass through the costs with signs at the gas pump letting people know they're paying more because of U.S. efforts to deal with climate change. "The effect is you alter consumer behavior," Gerard said. "If consumers know they have choices between buying a more efficient car, riding a bike or buying an SUV, now they're making an informed choice." Red Cavaney, senior vice president for government affairs at ConocoPhillips, said his company joined with BP in floating a carbon fee for the oil industry during negotiations last year with the U.S. Climate Action Partnership coalition. Their approach also would send the bulk of the revenue back to consumers, but he said opening up the bill means other pricing ideas may take hold. "The more you get into this, the more you find out there are a lot of variations on it," Cavaney said.
"Having some soak time, some education time, will probably develop some better proposals as more people look at this."
ExxonMobil also has weighed in on the carbon fee. The company proposed it in 2008 to Western governors as they worked on a regional climate program, with the fee linked periodically to the average allowance price in the cap-and-trade system. ExxonMobil CEO Rex Tillerson has said a carbon tax has more political backing than many analysts are willing to give it. "They say a carbon tax is too politically sensitive and that it is easier and more expedient to support a cap-and-trade approach because the public will never figure out where it's hitting them," Tillerson told the Economic Club of Washington last October. "They'll just know they hurt somewhere in their pocketbook. I disagree with this assessment. I believe the American people want climate policy to be transparent, honest and effective." Denny Ellerman, a retired energy economist who worked at the Massachusetts Institute of Technology, said the oil industry's general interest in the carbon fee stems in large part from their distaste with buying and selling emission allocations. "Just make it a tax, and we'll pay the tax," Ellerman said. "They know it gets passed on. They know demand is inelastic. They just don't like the sound of having the allowances." Environmental groups say they want to ensure any legislation actually leads to reductions in greenhouse gases from an industrial sector that contributes to about a third of the annual U.S. emission total. "I think it's an interesting idea," said Dan Weiss, a senior fellow at the liberal Center for American Progress. "In general, it's a good concept. If they can get emission reductions from it, great." "The key environmental concern is that transportation fuels need to be covered by the program and within the cap," said Daniel Lashof, deputy director of the Natural Resources Defense Council's climate center. "It doesn't mean it has to be the same [as other industries].
You can certainly tailor the approach from one sector to another. But it does need to be part of the overall program." To maintain environmental integrity, Lashof suggested the government would purchase and then retire allowances that represent the transportation sector's emissions. "Every sector has to have a responsibility," he added. Pitfalls The move toward a carbon fee on transportation comes with risks. Kerry, Graham and Lieberman are already struggling to sell their approach and avoid use of the term "cap and trade," which opponents quickly dubbed "cap and tax" during the House debate. By opting for a carbon fee, sponsors will be directly exposing senators to the argument that Congress is raising taxes. "Clearly, there's political risk for a strategy that goes to a fee approach," said Tim Profeta, head of the Nicholas Institute for Environmental Policy Solutions at Duke University. "The key is whether this brings any new members to the table and on board. If it doesn't, it doesn't seem to have much political benefit." Majority Whip Durbin acknowledged the political dilemma. "This is not an easy issue," he said. "It's controversial. There's even a dispute in the Senate as to whether there's such a thing as global warming." But Durbin said climate bill proponents can make their case to the public by talking up the measure's importance to U.S. competitiveness. "I just got back from Africa," he said. "China is all over Africa. Opening up companies that are focusing on energy. And we're standing on the sidelines here locked in debate, and we've got to get beyond that or we're going to surrender opportunities for job creation." Politics are not the only sticking point. Sen. David Vitter (R-La.) said he doubts whether there is unanimity among the refining industry on the need for a carbon fee, specifically citing concerns from smaller producers. "Some of those larger companies have thrown up the white flag in this debate a long time ago," he said. "So this is sort of a continuation of that." A key negotiator in the House-passed climate bill also took issue with the push for a carbon fee. Rep. Rick Boucher (D-Va.) said authors of the House bill opted not to give free allocations to petroleum refiners because they would have made windfall profits by passing off the permits' costs to consumers -- unlike the electric utilities that must work through local distribution companies. "There's no regulator in the chamber to stop that from happening, and so rather than them get a windfall profit out of the value of the allowances, we decided to let them go buy them," Boucher said. "They're going to pass through the costs one way or another. We might as well have the money flow to people, rather than see them get it." If the Senate adopts a carbon fee for transportation fuels, Boucher predicted the industry would face essentially the same outcome as lawmakers wrestle over where to disburse the revenue. "A tax would direct the money to the government and then the government in theory could give it out to these deserving entities," he said. "You wind up with the same result as you get with our bill." The refining industry also has other demands. Carbon tax or not, Charles Drevna, president of the National Petrochemical & Refining Association, said he is concerned the climate bill will still drive up costs on domestic industries without the promise of internationally consistent regulations for competitors in India, China and South America. Drevna also said he doubted the revenue raised by a carbon tax would get back to consumers given the other parochial interests that often creep into the legislative process. "It goes back to the ways of creating winners and losers," he said. "Until such a proposal is rock-solid against that, we're very cautious about getting too excited." Refiners also do not want to face any regulatory overlap, and they are calling on the Senate to drop any plans for a renewable fuels standard. They also want credit when it comes to the emission reduction benefits that will come with new fuel economy standards that are supposed to level off the growth in U.S. motor vehicle emissions over the next 25 years, as well as the renewable fuels mandate that significantly increases ethanol use in the country. "In fairness, that should be part of the equation," Gerard said. Here, refiners can expect pushback from environmentalists. Lashof said an emission performance standard for transportation fuels is "an appropriate complementary policy to including transportation sector emissions under an overall cap." NRDC, he added, would oppose any attempt to restrict existing EPA or state authority to set up such a standard. Senators also will need to sort through competing interests as they decide what to do with the revenue. But Ellerman said this is not a bad thing. "I'm actually rather encouraged Congress is confronting this in an open debate," he said. "Do you reduce taxes? Get efficiency gains? Or earmarks toward uses that are under funded? Or for useful social purposes, like Social Security, or to repair bridges and highways. "You name it, there are lots of public needs," Ellerman said.