U.S. renewables could get compromise plan

A bipartisan group of U.S. senators is moving to boost financing for renewables in the U.S., but the proposed bill would open up portions of the Gulf of Mexico for domestic oil drilling that are currently closed to exploration.

Saxby Chambliss, a Republican from Georgia, and Kent Conrad, a Democrat from North Dakota, led the "Gang of 10" senators, including five Democrats and five Republicans, who are pushing for the plan.

"We believe that it is critically important that any plan be balanced," said Conrad at a press conference in Washington, D.C. "That it include serious conservation measures as well as serious additional production measures and a means to improve the energy security of the country."

Called the New Energy Reform Act of 2008, the $84 billion package would be funded from leasing and royalty revenues from the new drilling, as well as a repeal of a manufacturing tax credit to oil companies.

The bill would also require oil firms to pay royalty fees that the lawmakers said is owed to the government from previous Gulf of Mexico leases. The cash would be used to move vehicles to non-petroleum based fuels, and for conservation and energy efficiency programs.

"The goal — to get 85 percent of our cars and trucks off of petroleum-based fuels in the next 20 years," said Conrad.

The New Era legislation is targeting $20 billion to get vehicles off of oil, with $7.5 billion to go toward research and development, and another $7.5 billion to help U.S. automakers and parts makers re-tool and re-equip to produce alternative fuel vehicles.

Consumers can expect to see tax credits of up to $7,500 per vehicle to under the plan, and up to $2,500 to retrofit existing vehicles with advanced alternative fuel engines.

Presumptive Democratic presidential nominee Barack Obama, who is not an official supporter of the bill, said the proposal is "an important step" in the process of reducing the country's dependence on foreign oil, but he aired some reservations about the bill.

"Like all compromises, it also includes steps that I haven't always supported," said Obama in a statement. "I remain skeptical that new offshore drilling will bring down gas prices in the short-term or significantly reduce our oil dependence in the long-term, though I do welcome the establishment of a process that will allow us to make future drilling decisions based on science and fact."

In addition to car and truck incentives, the bill would extend renewable energy, carbon mitigation and energy conservation and efficiency tax incentives, including the Production Tax Credit, through 2012.

The Production Tax Credit is set to expire at the end of this year, and is the continued subject of intense lobbying from renewable industry groups.

In June, Fairfield, Conn.based General Electric (NYSE: GE) released a report that argued that the credit generates more federal tax revenue than the cost of the incentive program (see GE fights to keep tax credits alive).

According to GE, wind farms built in 2007, supported by the PTC, carry an estimated net present value to the U.S. Treasury of $250 million.

GE has a big stake in the wind industry as a manufacturer and a financial backer. It's the leading manufacturer of wind turbines in the U.S., and wind makes up 80 percent of GE Energy Financial Services' more than $3 billion global renewable energy portfolio.

For the conservation and energy efficiency side of the New Era bill, it proposes a new consumer tax credit of up to $2,500 to purchase highly fuel efficient vehicles, and to extend and expanding a $2,500 tax credit for hybrid electric vehicles. The bill also hopes to put $500 million into research and development for new materials and other innovations to improve vehicle fuel efficiency, and $2.5 billion into next generation biofuels and infrastructure.

The Gang of 10 expect to bring the bill to the Senate floor in September. Some bipartisan lawmakers in the House are working on a similar proposal and have said they will work with the Senate on drumming up support for the renewable proposals.

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