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Republicans conflicting loyalities to oil industry { May 4 2006 }

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Conflicting Loyalties as Republicans Confront High Gas Prices
By Edmund L. Andrews The New York Times

WASHINGTON Under pressure to deal with high gasoline prices, President George W. Bush and Republican leaders in Congress are struggling to marry a new-found zeal for conservation with their traditional loyalty to big cars and Big Oil.

In one sign of the awkward straddle, the Bush administration proposed on Wednesday to overhaul fuel- economy requirements for cars while also saying that it opposed "perverse incentives for manufacturers to produce smaller and more dangerous vehicles."

In another sign, House Republicans moved to slap oil companies with one hand while trying to help them with the other. Voting 389 to 34, the House approved steep new penalties for oil companies convicted of price gouging.

Republicans then tried, but failed, to rush through a bill long sought by the oil industry that would speed regulatory approval for new refineries.

Republican lawmakers and the Bush administration are circulating proposals for more tax breaks for hybrid cars, more subsidies for renewable fuels and more government-financed research for areas like battery technology.

They also are renewing their wish list for the oil industry - opening the Arctic National Wildlife Reserve for exploration and drilling, as well as millions of additional acres in the Gulf of Mexico and along the Atlantic Coast. The Republicans also are blocking calls for a windfall-profits tax on major oil companies.

The uneasy balancing act already has proven difficult. Conservatives worry that Republicans are interfering too much in the marketplace and embarking on a misguided effort to subsidize favored industries.

"Republicans are capitulating to pressures to do something, even if they would be doing things that make no sense," said Kevin Hassett, a senior economist at the American Enterprise Institute in Washington. "The proper course is to let the remedy for high prices be high prices. If it turns out that biofuels are more economical, then you don't need government subsidies."

Supporters of conservation and alternative fuels - even some within the Republican Party - are unsatisfied. "It isn't enough," said Representative Sherwood Boehlert, Republican of New York, a champion of higher requirements.

For five years Republicans have repeatedly rejected stiffer requirements for cars. In the 2004 presidential election, they ridiculed such ideas as job- losing Democratic proposals.

Now, with gasoline prices above $3 a gallon, or 80 cents a liter, Bush is asking for new authority to "reform" the current requirements - an average of 27.5 miles to the gallon - but only in a way that the White House says would not hurt domestic companies whose greatest strength has been sales of big cars and sport utility vehicles.

The transportation secretary, Norman Mineta, told members of the House Energy and Commerce Committee on Wednesday that Congress should not impose an "arbitrary" standard on its own. Rather, Mineta said, it should let the administration develop "size-based" rules that would impose different requirements on large cars and small cars.

That was good news to the Big Three carmakers in Detroit, whose businesses are heavily concentrated on big SUVs and light trucks.

Mineta refused to say how strict the new mileage requirements might be or even if they would be higher than the current standards. He also predicted that it would take the administration two years to devise new rules, which would apply only to cars produced in 2009 and after.

This week, 10 states sued the administration over a set of new fuel-economy rules for light trucks and sport utility vehicles. The states contend that the rules are too weak and disregard the full environmental benefits of stricter standards.

"If the light-truck standard is any indication, it's hard to believe the administration is serious about upgrading," said Bill Prindle, deputy director of the American Council for an Energy Efficient Economy, a policy research and advocacy group in Washington.

Boehlert, a liberal Republican who is chairman of the House Committee on Science, expressed similar skepticism.

"If we just give the administration authority, we know what will happen," Boehlert told members of the Energy and Commerce Committee on Wednesday. "We would produce a long rule- making and probably tepid results."

But the political pressures created by soaring gasoline prices have shifted the emphasis among Republicans in Congress and the administration. House and Senate Republicans are likely to eliminate or at least cut $2 billion in tax incentives for oil and gas drilling that Congress passed less than a year ago.

Almost any Republican discussion about higher fuel-economy requirements represents a big change in tone, if not substance. In five years, House Republicans have defeated three bills to raise the average fuel efficiency of cars to 33 miles a gallon. In the 2004 campaign, Republicans ridiculed Senator John Kerry, the Democratic presidential candidate, for supporting higher standards, warning they would lead to job losses.

The automobile industry, though it counts many Democrats as powerful supporters, has contributed three times as much money to Republican candidates as to Democrats. Oil and gas producers have close ties to Republicans in general and Bush in particular. The industry's political action committees have given eight times as much money to Republicans as they gave to Democrats in the past 18 months, according to Political Moneyline.

"Their desire to do corporate America's bidding has run squarely up against public outrage over big oil ripping off America," said David Sirota, a Democratic strategist.

Bush and Republican leaders have been more consistent in supporting alternative fuels. The energy bill last year had big new subsidies for ethanol and more than $2 billion in new tax breaks for hybrid cars and alternative fuels.

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