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Detroit News Washington Bureau

Ethanol mileage credits have become a key sticking point as negotiators from the House and Senate work to craft a 35-mpg energy bill acceptable to both houses of Congress, the White House and U.S. automakers.
U.S. Rep. John Dingell, chairman of the House Energy and Commerce Committee, said late Tuesday that negotiators are making progress, but that a deal remains elusive.

"It's like pushing a wheelbarrow up a hill, but we persist," said Dingell, D-Dearborn.

Dingell wants to make a deal to dramatically raise fuel economy standards as part of a broader energy bill that Democratic leaders want to send to President Bush before the end of the year.

He is trying to hammer out a compromise to the Senate energy bill passed in June that called for raising fuel economy standards to 35 mpg by 2020 for cars and trucks combined. A House bill passed in August did not address fuel economy.

Last week, Dingell's aides made a proposal to the Senate Commerce Committee that went further than a bill in the House, backed by automakers, that would hike fuel economy to between 32 and 35 mpg by 2022.

It was rejected by the Senate staffers, who responded with a proposal Monday that Dingell rejected.

House and Senate staffers adjourned talks Tuesday without a deal and didn't exchange any new formal proposals.

House Speaker Nancy Pelosi wants staff negotiators to reach a deal by the end of the day today so there is time for a legal review before giving a draft deal to House and Senate members when they return from recess on Monday.

Pelosi would like the House to vote next Wednesday, with a Senate vote before members leave for the United Nations Climate Change Conference in Bali.

Pelosi said in a statement late Monday that "we have made significant progress toward completing this package and hope to have a final agreement next week."

A number of sticking points have emerged, but several congressional sources and auto industry lobbyists said the major issue is the fuel economy credit automakers get for making flexible-fuel or dual-fuel vehicles.

The law gives automakers a 1.2-miles-per-gallon credit for building vehicles that can run on gasoline or E-85 ethanol, a mixture of gasoline and ethanol.

The Senate proposal on Monday extended the credit but phased it out quickly and was not enough to satisfy automakers.

Since E-85 is available at only 1,200 of the nation's 180,000 fueling stations, most of 6 million-plus flex-fuel vehicles on the road don't use the fuel but automakers still get to claim the credit.

The credit, which is denounced as a loophole by environmentalists, expires in 2010, but NHTSA can extend it at up to 0.9 mpg through 2014.

A 2002 report to Congress by the National Highway Traffic Safety Administration said the credit had led to a total increase in oil use of more than 700 million gallons since being introduced in 1993.

The Union of Concerned Scientists said the credit could increase gasoline use by as much 10 billion gallons by 2015.

Automakers contend the credits are necessary to spur increased availability of ethanol that will help reduce the country's reliance on foreign oil.

Another issue under consideration is to extend the credit to biodiesel vehicles, which also have helped Detroit's Big Three meet fuel economy requirements.

The Senate Commerce Committee's Monday proposal to the House Energy and Commerce Committee made two changes from the energy bill the Senate passed in June: it would now keep separate standards for cars and light trucks and it would retain a provision sought by the United Auto Workers to keep up to 17,000 small-car production jobs in the United States.

Dingell's aides rejected the Senate proposal Monday. Neither Dingell nor Sen. Carl Levin, D-Detroit, have agreed to the 2020 time frame or the combined 35 mpg standard, officials said.

But the 35 mpg standard seems very likely, since it has become "a bumper sticker we can't avoid," one congressional aide said.

Charles Territo, a spokesman for the Alliance of Automobile Manufacturers, the trade group that represents automakers including Detroit's Big Three and Toyota Motor Corp., said automakers remain hopeful.

Said Territo: "We're cautiously optimistic that a compromise can be reached that we can support."
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