Senate Forges a Compromise Energy Bill

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McCain on a Gulf oil rig. The GOP candidate wants to keep industry tax breaks Mary Altaffer/AP Photo

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On the other hand, members of Congress got an earful during the August recess from voters who want action now. "People are increasingly weary of this endless toxic partisanship. They are hungry for results," says North Dakota's Conrad. And it's not just voters who are frustrated. "The business community has finally come to the point where we think there is blame all around," says Jack N. Gerard, president of the American Chemistry Council, which represents the chemical industry. "There's way too much politics and not enough policy."

Chemical companies are upset that Congress hasn't done anything to increase supplies of natural gas, the industry's feedstock. Wind and solar companies warn that failure to renew their tax credits will devastate their industries. Meanwhile, the narrow escape from Hurricane Gustav, which slammed into the Gulf Coast on Sept. 1, is yet another reminder of the nation's energy vulnerability. With 20% of the country's oil production capacity in the Gulf of Mexico, a catastrophic storm would ratchet up the already sharp pain in Americans' pocketbooks.

This delicate political calculus is forcing some in Washington toward compromise. House Speaker Nancy Pelosi (D-Calif.) has agreed to hold a vote on drilling. In early August, Senator John E. Sununu (R-N.H.) won praise from conservatives for not joining the Gang of 10's plan. But he's in a tight race, and New Hampshire has been hit hard by high energy prices. On Aug. 26, Sununu signed on.

Uphill Battle

If the plan does come up for a vote in the Senate, it will be a key test for both Presidential contenders, forcing them to go on record on a major issue. McCain has yet to get behind the compromise. Lead economics adviser Douglas J. Holtz-Eakin explains that while McCain supports the notion of a bipartisan approach, he doesn't like the repeal of tax breaks for the oil and gas industry. "Senator McCain believes we don't need to be raising taxes," he says.

In contrast, Obama supports the basic framework, along with the general idea of bipartisan compromise. "If I had to reduce the McCain energy platform to a single word, it would be 'drill,' while ours would be 'diversity,'" explains Jason Grumet, Obama's senior adviser on energy. "It's the difference between serious energy policy and slogans."

The proposal still faces an uphill battle. "Both the Left and the Right are quite unhappy with what we came up with," says Conrad. "It's kind of sad that offering solutions to a serious challenge facing the country is seen as being disloyal to one's own party." Even if the political stars do begin to align, Congress doesn't have much time to broker the deal before the Presidential election, and the Bush Administration vows to veto anything that it believes is a tax increase. Meanwhile, falling oil prices could lessen the urgency of the issue for lawmakers. But Washington insiders say real progress has been made toward a compromise that breaks the gridlock on energy. "Whether it happens in this Congress or the next one, it is clear we are close to getting something done," says Gerard.

With Jane Sasseen.
Carey is a senior correspondent for BusinessWeek in Washington.