Senate leaders ponder gas tax

WASHINGTON – Leading voices in the Senate are considering a new tax on gasoline as part of an effort to win Republican and oil industry support for the energy and climate bill now idling in Congress.

The tax, which according to early estimates would be in the range of 15 cents a gallon, was conceived with the input of several oil companies, including Shell, BP and ConocoPhillips, and is being championed by Republican Sen. Lindsey Graham of South Carolina.

It is shaping up as a critical but controversial piece in the efforts by Graham, Sen. Joe Lieberman, I-Conn., and Sen. John Kerry, D-Mass., to write a climate bill that moderate Republicans could support. Along those lines, the bill will also include an expansion of offshore oil drilling and major new incentives for nuclear power plant construction.

Environmental groups have long advocated gasoline taxes to reduce fossil fuel consumption; the oil industry has spent heavily in recent years to fight taxes that the industry says would harm consumers.

In this case, though, several oil companies are floating the tax plan because it figures to cost them far less than other climate proposals, including a climate bill the House passed last year.

The Senate climate bill’s sponsors also appear to want the revenue raised from the tax to fund a variety of programs that would reduce industrial emissions, including helping manufacturers reduce energy use or boost wind and solar power installations by electric utilities.

But the tax has encountered stiff behind-the-scenes resistance from some Democrats, who fear the political specter of increasing gasoline prices. And no other Republicans have publicly announced support for the framework legislation that Graham and the others are circulating on Capitol Hill. Attracting significant Republican support for a bill featuring a tax increase would run counter to historical political trends and to the anti-tax outrage percolating among the tea party activists in the GOP base.

Some industry analysts and environmentalists question how much a tax will actually reduce emissions from gasoline use.

Proponents call the tax approach under consideration a “linked fee,” because it links the extra price on gasoline to the average cost of greenhouse gas emissions permits created through a so-called “cap-and-trade” system for electric utilities. That system would set a declining limit on emissions from power plants and force utilities to buy permits, on a trading market, to cover the heat-trapping gases they release into the air.

Drafters of the Senate bill say that no matter how they structure emissions limits, opponents will deride them as a tax.

They say they’re crafting the “linked fee” approach in a manner that will be different than a straight tax and a more effective, transparent way to reduce emissions from gasoline use.

As negotiations build toward a scheduled unveiling of the bill next week, it’s still unclear whether major oil companies and their trade group, the American Petroleum Institute, will endorse the legislation. Climate bill proponents say such backing would be a major coup.

“Getting major oil companies to truly and aggressively support a specific bill mandating greenhouse gas emissions limits and a carbon price would be a significant political accomplishment,” said Paul W. Bledsoe, a former Clinton administration official now with the Bipartisan National Commission on Energy Policy.