Senators unveil energy deal

WASHINGTON – In a possible breakthrough on energy, a bipartisan group of senators unveiled a compromise Friday that would preserve the oil drilling ban off the West Coast while easing restrictions on exploration off the East Coast and in the Gulf of Mexico.

Their proposal would also provide billions of dollars for an Apollo-like project to greatly expand the availability of vehicles powered by alternative fuels.

In unveiling the ambitious plan, 10 senators – five Democrats and five Republicans who call themselves the Gang of 10 – hope to break a partisan standoff that sent lawmakers home on their monthlong summer recess Friday without action on major legislation to address high gasoline prices.

However, the proposal’s prospects appear a long shot for this year, with time running out on the congressional session. And in a politically charged election year, parties are stepping up attacks to highlight differences on issues such as energy policy.

Included are proposals to expand drilling in the Gulf to within 50 miles of Florida, help revive the nuclear industry and boost efforts to convert coal into motor vehicle fuel. Shortly after it was announced, the plan drew criticism from Florida’s senators.

The legislation is the first sign of bipartisan progress on an issue that has stirred political anxiety and animosity on Capitol Hill.

Senate Majority Leader Harry Reid, D-Nev., said he was hopeful the compromise plan “can begin to break the current legislative stalemate on the Senate floor.” The proposal would offer a concession to Republicans who have called for increased domestic production by allowing Virginia, the Carolinas and Georgia to grant permits for drilling 50 miles off their shorelines and opening a new area in the Gulf of Mexico, 50 miles off Florida’s coast, to energy exploration.

The senators excluded any effort to lift the long-standing ban on new drilling off the California coast or to open the Arctic National Wildlife Refuge to energy exploration as too contentious and likely to complicate passage of a compromise bill.

In a significant shift, the group’s Republicans agreed to repeal a key oil industry tax break and force oil companies to pay billions of dollars in royalties to the U.S. Treasury for drilling in the Gulf of Mexico.

Democrats have tried to repeal oil industry tax breaks in the past but have been thwarted by a Republican-led Senate filibuster. But a number of Republicans are finding it hard to defend the oil industry tax breaks while oil companies record profits.

An estimated $30 billion that would be paid by the oil companies over 10 years would help fund initiatives such as $7.5 billion to help U.S. automakers expand the production of alternative fuel vehicles. Funding would also be provided for tax credits to encourage consumers to buy more fuel-efficient cars and extend tax credits to promote energy efficiency and development of cleaner energy sources such as solar and wind power.

In a statement, Illinois Sen. Barack Obama, the presumptive Democratic presidential nominee, welcomed the proposal, saying it includes measures he has advocated such as repealing oil industry tax breaks. But Obama said he remains skeptical that new offshore drilling “would bring down gas prices in the short term or significantly reduce our oil dependence in the long term.”

Republican presidential candidate Sen. John McCain, of Arizona, has called for lifting the offshore drilling ban. In a statement, his campaign said the country needs an “ ‘all of the above’ approach” and chided Obama for opposing expansion of offshore drilling.

White House spokeswoman Dana Perino said the Bush administration would take a look at the legislation.