Bills Target Fuel Regulation Costs

by : Anthony Fontanelle

Lawmakers are debating whether to force automakers to spend billions in raising vehicle fuel efficiency. Amid the chaos, there are increasing calls to offer the companies financial support to help them do it.

Michigan Sen. Debbie Stabenow, D-Lansing, and John Kerry, D-Mass, are expected to propose legislation that would allow automakers to issue up to $12 billion in tax-free, private activity bonds. The bonds will be used to pay for facilities to eventually develop alternative vehicles as well as their components.

Stabenow's legislation is the latest in a series of proposals designed to help the auto industry clear technology impediments. Under the legislation, the U.S. Treasury would spend up to $1.5 billion to subsidize bonds to finance the cost of retrofitting auto factories built before 1981. The bonds would be capped at $4 billion per automaker and could be issued between 2008 and 2013. The proposal comes as the General Motors Corp. and the Ford Motor Co. are in the process of closing over 25 plants as they cut capacity and production cost in the wake of declining sales.

U.S. Rep. Mike Rogers, R-Brighton, introduced a proposal in February to offer up to $20 billion in federally supported loan guarantees to auto manufacturers and suppliers to slash the expense of obtaining capital. This week, the House Energy and Commerce committee is considering a package of six energy efficiency bills, including two that would help automakers with costs. There is also lots of action behind the scenes as Republicans and Democrats plan competing fuel economy mandates.

One of the bills expected to pass the committee creates a grant program to support development of flexible fuel vehicles by U.S. automakers. Another would create an advanced battery loan guarantee program and a grant program to help convert facilities to build plug-in hybrid vehicles. A separate grant program would support plug-in hybrids. The committee has not said how much money these programs would offer.

The action follows the Senate's approval last week of an energy bill that raises the Corporate Average Fuel Economy (CAFE) standards 40 percent by 2020 to 35 miles per gallon for cars and trucks combined. Automakers have said that it will cost billions to meet the mandate. The Senate bill offers grants, loan guarantees and funding to support research into hybrids, advanced diesel and battery technologies, and biofuels.

House Speaker Nancy Pelosi, D-Calif., and Rep. Ed Markey, D-Mass., the chairman of the House select committee on global warming, are on the center stage. Markey may seek to propose a fuel economy amendment in mid-July when the full House takes up the package of energy bills. His bill calls for increasing CAFÉ standards to 35 mpg, as well, but by 2018.

In the meantime, U.S. Rep John Dingell, D-Dearborn, the chairman of the House Energy and Commerce committee, and Fred Upton, R-St. Joseph, are working on a draft fuel economy mandate, Upton said in an interview.

Upton has been meeting frequently with automakers to tackle the issue. Dingell called the CEOs of GM, Ford and the Chrysler Group on Friday to emphasize the importance of working with Congress to pass a realistic increase. Meanwhile, Dingell said last Wednesday that climate change legislation this fall should include increases in vehicle efficiency. The legislation will "require a reduction in U.S. greenhouse gas emissions of between 60 and perhaps as much 80 percent by 2050."

could not put to a halt the intensifying pressure inside the Congress and the auto industry. Joe Barton of Texas, committee's ranking Republican, said that he and others had prepared amendments to deal with fuel economy regulations in a "more responsible way" than the Senate.