Senators pump gas fee into bill

Climate bill supporters are leaning toward exempting big oil companies from a broader cap on greenhouse gases as a way of winning critical support from industry players and key lawmakers.

The three co-authors of the Senate climate bill hope the proposal — backed by several large oil companies — will bring a new set of players to the negotiating table.

They are floating the idea of levying a carbon tax on each gallon of gasoline, which would be passed along to consumers at the pump. The fee would be linked to the market price of carbon emissions bought and traded by utilities and other industries.

“A linked fee to me makes sense,” said Sen. Lindsey Graham (R-S.C.), who’s working with Sens. John Kerry (D-Mass.) and Joe Lieberman (I-Conn.) to craft a climate bill.

Graham stressed that he wasn’t sure “how far the idea would go” but that it is already picking up support from oil-state members.

Sen. Mary Landrieu (D-La.), a vocal opponent of earlier climate bills, has said she’s “open” to the new proposal.

The three senators plan to release the first draft of their revamped climate bill before lawmakers leave for the congressional recess scheduled for the end of the month.

Last week, they presented key pieces of their plan to the American Petroleum Institute, the U.S. Chamber of Commerce and other powerful trade associations.

“The cap-and-trade systems that passed are not going to make it,” said Graham. “The oil companies were basically left out of the system.”

Supporters believe that consumers will opt to lower their fuel consumption if gas prices increase. Oil companies think the bill is fairer because it puts greater impetus to lower emissions on consumers than on producers, which, they argue, are just responding to market forces.

“Producers produce to meet demand; they aren’t deciding how much fuel to use,” said API policy analyst Lou Hayden. “We’d like the policy to be closer to the person who makes the decision.”

Revenues from the tax would be used to fund programs promoting cleaner transportation options like public transit, bike and pedestrian projects and carpooling.

Oil patch lawmakers and refiners think petroleum producers got a bad deal in the climate bill that passed the House in June.

That legislation allocated greenhouse gas allowances of only 2.25 percent to oil companies, a far smaller percentage than was allotted to utilities, manufacturers and other industries.

The bill held refiners responsible not only for refinery emissions but also for consumer emissions from planes, cars, heating and other uses of oil.

“They made the collection point for mobile sources the refinery,” said Texas Democratic Rep. Gene Green, a key player in negotiating the petroleum provisions in the House bill. “It’s easy to pick on oil companies in Congress, but are we going to really saddle them with being tax collectors for the federal government?”

Oil companies have blasted the House version of the bill, recruiting their employees, retirees, vendors and contractors to attend public protests of the bill the companies sponsored over the summer.

BP and ConocoPhillips dropped out of a prominent pro-cap-and-trade industry group last month, saying the legislation supported by the U.S. Climate Action Partnership would disproportionally hurt oil companies.

“House climate legislation and Senate proposals to date have disadvantaged the transportation sector and its consumers, left domestic refineries unfairly penalized versus international competition, and ignored the critical role that natural gas can play in reducing greenhouse gas emissions,” said Jim Mulva, ConocoPhillips chairman and chief executive officer.

Both BP and ConocoPhillips have backed the carbon-fee approach.

But some environmentalists say the fee will not lead to the type of large-scale reductions necessary to slow climate change and spur investment in new technologies. They point to Europe, which, they say, has higher gas costs but has still failed to make big enough reductions in greenhouse gas emissions.

“It just doesn’t cut the muscle when it comes to getting to the goal, which is limiting carbon pollution and driving investment,” said Rep. Jay Inslee (D-Wash.). “At most, it’s a half-measure.”

Inslee also questions the political motives of the oil companies. Traditionally, Congress has been extremely reluctant to pass any type of legislation that could be construed as a gas tax — particularly during an economic downturn.

“It’s easier to kill politically because it’s more an obvious cost,” he said. “It’s a fatter target.”