Senate OKs big hike in fuel rule

WASHINGTON -- In a bitter defeat for Michigan automakers and lawmakers, the U.S. Senate on Thursday voted to hike fuel economy requirements 40 percent by 2020.

The measure, which requires automakers to increase fuel economy to a fleet average of 35 miles per gallon for passenger cars and light trucks combined, was added to a broad energy bill the Senate approved late Thursday despite weeks of heavy lobbying from automakers.

Automakers said if the new rules become law it would cost them billions of dollars and force them to dramatically alter their vehicle lineups. The Chrysler Group has said the bill could bankrupt the company.

Environmentalists say better gas mileage is necessary to reduce U.S. consumption of foreign oil and mitigate global warming.

The Senate's 65-27 vote shortly before midnight Thursday on the eleventh-hour compromise legislation was another sign of Detroit automakers' diminishing clout on Capitol Hill.

The bill also includes new laws against energy price-gouging and a requirement for huge increases in the production of ethanol.

The measure now awaits action by the House, which is expected to take it up next week. But attempts to combine the two bills and send legislation to President Bush probably won't be possible until later this year.

The compromise Thursday night eliminated 4 percent annual increases between 2021 and 2030 that were in the energy bill's earlier drafts. The current requirement is an average of 27.5 mpg for cars and 22.2 mpg for SUVs and small trucks.

Since fuel economy requirements were first set in 1975 after the Arab oil embargo, the standard for cars was raised only once, from 13 mpg to 27.5 mpg by 1985.

Sen. Dianne Feinstein, D-Calif., was "speechless" when told during a news conference the compromise had passed by voice vote. "We should crack open some California champagne," she said.

Sen. Tom Carper, D-Del., quoted a Home Depot commercial, noting that Congress would give automakers some money for advanced research. "You can do it, we can help," Carper said.

It was a stinging defeat for Michigan Sen. Carl Levin, D-Detroit, who had worked countless hours to craft a proposal that automakers reluctantly supported. It would have required automakers to reach 36 mpg by 2022 for cars and 30 mpg for trucks by 2025.

Levin not giving up

In an interview, Levin said he was disappointed, especially in colleagues he thought would have supported his legislation.

"We're not going to give up," Levin said.

In the end, Levin said his bill was doomed by growing concern about global warming -- "totally understandable."

But, he added, that issue "politically made it difficult for some of my colleagues who we were counting on."

Levin noted that oil companies had defeated a $32 billion tax bill that would have shifted taxes to oil companies and offered incentives for alternative energy.

"It meant that big oil with huge profits does nothing, but our auto industry with their nonprofits took a hit."

Sen. Debbie Stabenow, D-Lansing, joined Levin in criticizing the bill. "We need a plan that stretches the industry, not breaks it, and the current bill misses the mark," she said.

Bio fuel provision weaker

The bill dramatically weakened an earlier provision to require that 50 percent of automobiles produced by 2015 be able to operate on bio fuels or be flexible fuel vehicles. Instead, it leaves a final decision to federal regulators.

It creates a controversial trading scheme that would allow automakers to buy and sell fuel economy credits. It eventually would require fuel economy standards for medium and heavy duty trucks.

The bill also exempts luxury automakers that sell fewer than 60,000 vehicles annually in the United States, such as Ferrari and Lamborghini, from having to meet the new standards.

But the legislation provides a bonanza to farmers and the ethanol industry. It requires ethanol production to grow to at least 36 billion gallons a year by 2022, a sevenfold increase of the amount of ethanol processed last year.

Now, debate will turn to the House, where U.S. Rep. John Dingell, D-Dearborn, an auto industry ally, will face a difficult effort to craft a more "realistic" bill, yet one that environmentalists and liberals will support.

"It's clear that the political movement to increase our nation's fuel economy, and decrease our oil dependence, has shifted out of neutral and into drive," said U.S. Rep. Ed Markey, head of the House select global warming committee.