Senate approves $14 billion energy tax package

WASHINGTON -- Stung by high gasoline prices, the Senate by a wide margin voted its approval Tuesday of a $14 billion package of tax breaks that supporters said were designed to spur U.S. energy production and hold down prices.

Democrats joined Republicans as senators in a 85-13 vote turned back an attempt by Sen. John McCain, R-Ariz., to strip the energy provision from a corporate tax bill passed later Tuesday by the Senate. McCain called the energy subsidies a "shameless scam" to benefit the oil and gas industries and other energy interests.

Supporters of the tax provisions argued that with gasoline prices soaring beyond $2 a gallon across much of the country, Congress must take action to stimulate domestic energy production.

Lawmakers have acknowledged, however, that most of the tax incentives are aimed at long-term production and would have little impact on high prices for gasoline, natural gas and crude oil this year.

Nevertheless, actions are needed to convince industry "to get back into the business of producing," Sen. Larry Craig, R-Idaho said, as he urged senators to reject McCain's amendment that would have killed the energy package.

The bill includes $9 billion in tax incentives for the oil and gas industry, plus billions more to encourage development of clean coal technology and renewable fuels. It also contains measures aimed at energy conservation and development of renewable energy sources.

The bill would encourage construction of a $20 billion pipeline to carry natural gas from Alaska's North Slope by guaranteeing a price support if the price of gas falls below a certain level and includes other favorable tax treatment for the proposed project.

Also wrapped in the measure were tax breaks for building more energy efficient homes, buying more energy efficient appliances and a tax credit of up to $2,000 for the purchase of increasingly popular gas-electric hybrid automobiles that have hit showrooms.

McCain knocked the tax provisions as "a Christmas tree of goodies" to get profitable energy companies to do what they could do on their own from developing more environmentally friendly use or coal to finding ways to exploit Alaska' huge reserves of natural gas.

The bill's tax breaks for developing coal-bed methane -- a growing source of natural gas from the Rocky Mountain region -- "makes a very profitable industry more profitable," McCain complained.

Sen. Pete Domenici, R-N.M., strongly endorsed the tax provisions, but he acknowledged they represented only a "half loaf" of an energy policy.

Domenici offered a broad, yet slimmed-down energy bill two weeks ago, but it was rejected. He and other Republicans put the tax package into the corporate tax legislation hoping that if it passes, there might be increased incentive for lawmakers to pass the broader legislation.

But that's far from certain.

This is "probably the last chance, our best shot" to get energy legislation this year," Sen. Jim Bunning, R-Ky., said as he pushed for approving the tax measures.

The fate of the energy tax provisions remains uncertain in the House. The tax package mirrors one the Senate approved last year. That one had stirred intense debate between the Senate and House during negotiations on a compromise energy bill last year.

That bill eventually died after failing win approval in the Senate.