Battle brewing over emissions standards

A powerhouse battle between auto, oil and other major industries is brewing over a low-carbon requirement for fuels. The push could add complications for Democratic leaders in an already challenging Senate climate and energy debate.

Sen. Debbie Stabenow (D-Mich.) may try to add the low-carbon requirement to an energy and climate package expected on the Senate floor as early as next week at the urging of the top three U.S. automakers and the United Auto Workers.

“It’s just something we’ve been given,” Stabenow said last week.

But sources knowledgeable about the discussions say auto companies and the autoworkers are actively helping Stabenow draft and push a mandate.

The low-carbon fuels standard idea is not a new one. Sens. Ron Wyden (D-Ore.) and Lamar Alexander (Tenn.) — the third-ranking Senate Republican — have touted it in recent years. President Obama also introduced a bill when he was a U.S. senator, pushing the idea on the presidential campaign trail as well. It was originally part of a House climate and energy package, but was yanked before the bill was given final approval.

But the auto industry has stepped up the effort, due in part over concern with a bill, introduced Thursday by four Democrats, designed to eliminate foreign-oil dependence over the next 20 years.

The foreign oil bill cuts dependency in part by strengthening Obama administration fuel efficiency standards beyond the roughly 4 percent annual increases toward the existing goal of just over 35 miles per gallon by 2016. “Our country can do better,” according to a June 14 outline Sen. Jeff Merkley (D-Ore.) put together and was the basis for the bill.

Merkley wants the administration to “use their existing authority to maximize oil savings as they set these standards.” Fuel efficiency increases of between 6 to 7 percent annually “would be a challenging but reasonable goal,” according to Merkley. His bill is co-sponsored by Sens. Tom Carper (D-Del.), Tom Udall (D-N.M.) and Michael Bennet (D-Colo.).

Sen. Richard Lugar (R-Ind.) has also introduced a plan — backed by centrist Republican Sens. Lindsey Graham (S.C.) and Lisa Murkowski (Alaska) — that sets long-term 4 percent annual increases in fuel efficiency standards and requires first-time standards for medium- and heavy-duty trucks to come into effect in 2017 and increase every four years.

A low-carbon fuels standard would be part of a larger three-section package from Stabenow and Sen. Carl Levin (D-Mich.) to establish a strategy to address the transportation sector in the broader Senate plan that would not be too onerous to their state’s auto industry. The package would also codify federal authority to enact fuel efficiency standards beyond the existing authority that runs out in 2017 and provide federal dollars for advanced vehicle technologies.

But the oil industry and others are fighting back over setting carbon restrictions on fuels. The Consumer Energy Alliance — in TV, radio and print ads in four Midwestern states starting Tuesday — will argue that this is too much, on top of renewable fuel mandates fuel providers are already facing.

The roughly $1 million campaign by the coalition — which includes the five biggest U.S. oil companies, the U.S. Chamber of Commerce, major airlines represented by the Air Transport Association and manufacturing and other energy-intensive groups especially prominent in the Midwest — will run in Michigan, Ohio, Indiana and Minnesota.

Senate Democratic legislative aides discussed the validity of a low-carbon fuel standard Friday afternoon and there was a diversity of opinion expressed, said one knowledgeable source.

Senate Republican leadership aides and the Alliance of Auto Manufacturers also discussed the idea in separate meetings Friday. The alliance represents 11 vehicle manufacturers, including Ford, General Motors, Chrysler and eight major foreign-owned companies.

The auto companies are arguing that they are meeting product requirements by adhering to fuel efficiency limits and that fuel suppliers need to do more to help limit vehicle greenhouse gas emissions. “I think the products have been addressed,” said one auto industry source.

Senate Majority Leader Harry Reid (D-Nev.) is amenable to having a low-carbon fuel standard but may want to avoid infighting between Democrats and elect to drop both that and tougher fuel efficiency language from an already politically and substantively complicated broader debate.

Several draft low-carbon fuel standards are circulating, and the most updated details are unclear.

Stabenow may be using as a base a variation of draft industry language first written to be considered as part of 2007 energy legislation that increased federal fuel efficiency standards and later a 2009 energy bill passed in the Senate Energy and Natural Resources Committee.

That incarnation — which was still circulating recently — would establish a standard in 2017 amounting to the “lowest feasible” annual average lifecycle carbon intensity. The standard would incrementally lower the carbon content in fuels thereafter. The Environmental Protection Agency — with help from the Energy Department — would set the standard, which would affect refiners and all other non-retail fuel suppliers.

There would also be a trading program that allows fuel providers to earn and trade emission credits, similar to a cap-and-trade program being considered for at least the electric utility industry, according to at least one of the drafts.