The Senate Thursday night passed by an overwhelming majority an energy bill that raises the fuel economy standard, increases the standard for production of renewable fuels and establishes higher energy efficiency standards.

By 86-8, the Democrat-crafted slimmer energy bill (HR 6) easily cleared the Senate after Democratic leaders agreed to scrap the controversial $21.8 billion tax package that Senate Republicans and President Bush opposed. Senate Majority Leader Harry Reid (D-NV) removed the contentious tax title after Republicans early Thursday had blocked — for the second time — Democrats’ efforts to bring the bill (with tax package) to the floor. The tax part of the bill drew strong objections because it would have been funded by repealing existing oil and natural gas tax breaks.

Immediately following the vote, the White House late Thursday said “if this legislation makes it to the president’s desk, he will sign it into law.” The bill now heads back to the House, which is expected to vote on it in the next few days.

The legislation will reduce the amount of fuel consumed by cars and trucks by raising the corporate average fuel economy (CAFE) standard to 35 miles per gallon by 2020, will increase the production of renewable fuels to 36 billion gallons by 2022 from the current level of nine billion, and will promote greater energy efficiency for consumer appliances and the federal government.

“It’s been three decades since we improved vehicle fuel efficiency standards and passing CAFE alone is a big step forward for our country,” said Sen. Jeff Bingaman (D-NM), chairman of the Senate Energy and Natural Resources Committee. “The RFS [renewable fuels standard] isn’t perfect, but it certainly moves us in the right direction towards increasing our use of biofuels in this nation. [And] the energy efficiency standards for appliances, commercial and residential construction, and federal government operation are also very significant.”

The legislation — minus the tax package — was a major victory for the energy industry, Senate Republicans and President Bush. The Republicans also forced Democrats to scrap another hotly disputed provision that would have required utilities to generate at least 15% of their electricity from renewable sources by 2020 (see Daily GPI, Dec. 14; Dec. 13; Dec. 10).

Sen. Pete Domenici of New Mexico, the ranking Republican on the Senate Energy and Natural Resources Committee, led the charge in the Senate against the $21.8 billion tax package and the renewable electricity standard (RES). “While the process to pass this bill was not easy, I am pleased that we have avoided provisions that would have increased costs for consumers,” he said.

The American Petroleum Institute, which represents major producers, applauded the Senate for doing “the right thing by removing a tax title that would have threatened U.S. energy production and jobs.”

While “there are provisions promoting energy efficiency in the legislation that will enhance our nation’s energy security…we remain concerned by the unrealistic biofuels mandate,” the producer group said.

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