Senators consider gasoline tax as part of climate bill


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, which it says would harm consumers.

In this case, though, several oil companies like the tax because it figures to cost them far less than other proposals to reduce greenhouse gas emissions, including provisions in the climate bill the House passed last year.

The Senate bill’s sponsors appear to want the revenue raised from the tax to fund a variety of programs that would lower industrial emissions, including helping manufacturers reduce energy use or boosting 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 as the national average cost of gasoline is expected to crest $3 a gallon this summer.

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.

Sources say the resistance extends to some Obama administration officials. In a statement, White House spokesman Ben Labolt said only that President Obama was “encouraged by the work of Sens. Kerry, Lieberman and Graham to move forward bipartisan, comprehensive energy and climate legislation” and that “we look forward to reviewing the details of the legislation when they are finalized.”

Some industry analysts and environmentalists question how much a tax would do to reduce emissions from gasoline, particularly if the extra cost to motorists is measured in cents, not dollars.

Proponents call the tax approach under consideration a “linked fee,” because it links the extra cost for gasoline to the average cost of greenhouse gas emission 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 emit heat-trapping gases. Under the linked-fee proposal, gasoline taxes would rise in tandem with the prices of industrial emission permits, or fall if the price of permits declines.

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 explicitly endorse the legislation or at least agree not to fund an ad campaign opposing it. Proponents of a climate bill 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.

Other analysts wonder whether increasingly populist Republicans would follow the industry and support the bill.

“It’s not clear that a linked fee creates a path to 60 votes” to overcome Senate procedural hurdles, said Scott Segal, a lobbyist for the Bracewell & Giuliani law firm in Washington who represents utilities and refiners on climate policy.

Unquestionably, Big Oil can be a formidable opponent: The petroleum institute recently spent millions on ads blasting an Obama proposal to end some industry tax breaks. The group is currently neutral on the linked-fee plan. It needs to see details on the full climate bill and an Energy Information Administration analysis of its effects before taking a position, said Lou Hayden, its senior director for federal relations.

If oil companies do back the bill, climate activists will find themselves joining forces with an industry they’ve long demonized. The tax could also put senators who vote for the bill at the mercy of election attacks if gas prices spike before November -- even though the tax would probably not kick in for several years.