Sen. Reid faces balancing act in trying to craft energy and climate legislation

It is officially crunch time for Democrats who are struggling to craft a far-reaching energy and climate change bill slated for debate on the Senate floor this month.

After weeks of public and private political sales pitches, senators pushing bills that respond to the BP oil spill and boost "clean" energy find their fate in the hands of Majority Leader Harry Reid (D-Nev.).

Reid faces a delicate balancing act as he seeks to appease a spectrum of Democrats — including liberals clinging to the prospect of greenhouse gas limits — while winning over Republican votes he concedes are needed to pass any bill.

Reid spokesman Jim Manley said Friday that Reid would review legislative options presented by staff early in the week and, hopefully, announce a decision by the end of the week.

“The White House and Senate leaders are going to have to make some fundamental decisions about what will be included in their comprehensive energy bill,” said Daniel Weiss, a climate strategist at the Center for American Progress Action Fund.

Key senators involved in the talks have been pushing for the White House to take a more direct role in the negotiations and to provide the necessary additional guidance needed to bridge diverse views over the scope and strategy for a package.

The White House hosted a meeting Thursday involving Senate and Edison Electric Institute staff to talk about a carbon-pricing plan for the utility sector, according to White House, Senate and other knowledgeable sources.

Several Senate offices were there, including aides representing Reid, Sens. John Kerry (D-Mass.), Joe Lieberman (I-Conn.), Jeff Bingaman (D-N.M.) and Olympia Snowe (R-Maine), who is the only Republican engaged at this point.

The same Senate offices met over the weeklong Independence Day congressional break.

The driver of the package will remain a legislative response to the Gulf of Mexico oil spill, including a bipartisan plan recently adopted in the Senate Energy and Natural Resources Committee, which Bingaman chairs. Civil and criminal penalties on illegal industry practices would be raised and more stringent safety requirements for offshore drilling would be included.

The package could also include a plan adopted in the Senate Environment and Public Works Committee to retroactively lift the current $75 million economic liability cap for drillers to include the Gulf spill. A compromise may be raising that cap to $10 billion.

The most aggressive option for putting a price on carbon would focus on the electric utility sector and potentially later on manufacturing and other stationary sources of pollution.

Kerry and Lieberman had been trying for a three-sector carbon pricing approach, but that option does not appear feasible. They had floated the idea of doing a “utility plus” approach — where power plants would be targeted first and followed later by manufacturers and perhaps other stationary sources — but that may be merely one of several options.

A third is a further scaled-back “utility only” option, but even that has its detractors.

“It’s a chance,” said Eileen Claussen, president of the Pew Center on Global Climate Change. “I think it’s still an uphill climb to get to 60.”

Centrist Senate Republicans such as Richard Lugar (Ind.) and Lisa Murkowski (Alaska) have no interest in the idea, while some centrist Democrats in the Midwest have expressed strong reservations about how it would affect their energy-intensive and trade-sensitive businesses.

Bingaman himself recently expressed doubt as to whether a utility-only approach could win 60 votes.

But Democratic leaders also risk alienating the liberal wing of the party if they do not include some carbon-pricing component.

Several underlying questions remain to be answered, including whether a limit on industrial carbon emissions will be part of a base package or allowed to be offered and voted on as an amendment on the floor. Reid has said he only plans to bring something to the floor that he is confident can get 60 votes.

If a carbon pricing plan is not included, Democrats will need to raise additional revenue to ensure legislation addressing the oil spill and boosting energy production does not increase the deficit.

President Barack Obama and several Democrats have floated plans to end various incentives for oil and gas producers, such as write-offs for drilling costs and the industry’s ability to claim a lucrative manufacturing tax break.

The American Petroleum Institute is running television ads in 10 states — including several swing states — arguing that the plans would harm the economy and cost jobs.

Manley said a central part of the package will be a renewable electricity production mandate that aims to boost such alternative sources as solar, wind and geothermal that are blossoming in Reid’s home state of Nevada and elsewhere.

Obama — as part of a broader public speaking tour of late touting the use of economic recovery dollars Democrats pushed through Congress last year — cited Reid’s help in creating new solar and geothermal jobs in his state at a fundraiser for the Nevada Democrat on Thursday.

But a renewable electricity mandate brings along its own set of challenges. Southeastern and some Midwestern lawmakers have been lukewarm to hostile to the idea over concerns that their regions lag behind other parts of the country in producing the main renewable energy sources that would be covered under the mandate. The Atlanta-based Southern Co. has been a leading opponent to a mandate.

To compensate for this, Republicans especially have rallied behind the idea of including all nuclear production as part of a broader “clean energy” mandate, given that nuclear does not emit heat-trapping greenhouse gasses.

A bipartisan energy bill approved last year in the Senate Energy and Natural Resources Committee allowed new nuclear production to count as part of a mandate requiring utilities to purchase 15 percent of their electricity from renewable sources by 2021. It did not include existing nuclear production like in a bill Lugar has introduced.

His bill — which is backed by Sens. Lindsey Graham (R-S.C.) and Murkowski — echoes last year’s Senate Energy panel bill by toughening energy efficiency standards for new buildings, appliances and industrial equipment and also seeks to cut domestic oil consumption in part by raising fuel economy standards for new cars and trucks.

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