July 9, 2010 / 9:44 PM / in 7 years

US Senate set for energy, environmental bill debate

* Fate of carbon pollution controls still uncertain

* Oil spill response linked to alternative energy bill

By Richard Cowan

WASHINGTON, July 9 (Reuters) - Democrats in the U.S. Senate aim to debate in late July a bill clamping down on offshore oil drilling practices and fostering more alternative energy use, but no decision has been made on whether to include controversial climate change provisions, aides said on Friday.

As the Gulf of Mexico oil spill entered its 81st day with BP (BP.L) (BP.N) still unable to plug its leaking undersea well, the Senate was planning a two-week debate on an energy and environmental bill that could start as early as July 19.

“Staff spent this week preparing different options,” said Jim Manley, a spokesman for Senate Majority Leader Harry Reid. He said Reid and other senior senators will review those options when Congress returns from a 10-day break next week.

Manley added that steps to encourage the use of cleaner-burning alternative energy sources will be a “core part of the package” being crafted. Legislation responding to the BP oil spill also will be included, he said.

Climate change legislation is a key part of President Barack Obama’s domestic agenda, but it has been opposed by Republicans and some moderate Democrats. Republican leaders have branded the effort a “national energy tax.”

Manley would not comment on whether the bill will include steps to put a price on carbon dioxide pollution as a way of tackling global warming.

Other Senate aides and environmentalists said Democrats had not decided whether to include climate control provisions -- even if they apply only to the heavy-polluting electric utility sector -- because of the difficulty getting enough support.

But a number of moderate Democrats, especially from Midwestern states that would be hit hardest by new controls on coal-burning electric power plants, have withheld their support.

A climate change and alternative energy bill passed the U.S. House of Representatives last year, with minimal Republican support. It mandated a 17 percent reduction in greenhouse gas emissions by 2020, from 2005 levels.

The legislation, however, has stalled in the Senate.

Only a few Republicans in the Senate have indicated they might support such a bill this year and party leaders have branded the effort a “national energy tax.”

Leaving a climate change component out of the massive bill would be a major blow for environmentalists, while the failure to pass a climate bill in Congress this year would deal a further setback to international negotiations for tougher carbon pollution controls.

Without legislation, Obama’s Environmental Protection Agency early next year could go ahead with new regulations on carbon pollution that are already facing legal challenges.

Key elements of the bill the Senate plans to debate include:

* Lifting the cap on oil industry liability in offshore oil spills. Companies involved in disasters like the one in the Gulf of Mexico now have a $75 million cap on payments for economic losses suffered by local businesses and environmental damages. Some senators might seek a $10 billion cap instead of no cap.

* Increasing civil and criminal penalties on industry for illegal practices. Leases for offshore drilling would be limited to companies with good track records.

* Imposing tougher safety controls on offshore drilling. An initiative to encourage oil drilling off the coast of Florida could be dropped.

* Setting a standard that would require utilities to meet 15 percent of their electricity sales through renewable energy sources. Some senators might push for a 20-percent standard.

* Cutting domestic oil consumption by requiring more energy-efficient, less polluting vehicles and eliminating some oil industry subsidies.

Editing by Paul Simao

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