(Updates with lawmaker, industry comments)

By Ian Talley

Of DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- As Democrats and GOP leaders excoriate each other's energy policies as key tenets of their election-year strategies, a bipartisan group of lawmakers may be charting a solution that could attract the majorities needed to push their energy proposal into law.

The proposal, which the politicians expect could be brought to the floor in September, appeals to both parties by taxing Big Oil and funneling those funds into alternative and renewable fuels - but opens up major portions of the Outer Continental Shelf currently closed to exploration.

Party leaders may have difficulty whipping members into line to support their presidential candidates' policy positions after lawmakers come back from the August recess, where they'll likely receive an earful from voters angry at Congress for not passing any legislation to cut record oil prices.

"Nothing gets done in this body without 60 votes, and you don't get 60 votes without a true bi-partisan effort," said Saxby Chambliss, R-Ga., who along with Kent Conrad, D-N.D., led the "Gang of Ten" Senators - five Democrats and five Republicans - who formed the proposal.

"It hopefully does break down some of the barriers around here," said Sen. John Thune, R-S.D.

Conrad said a number of Senators had already expressed interest in the proposal.

The campaign office for presidential candidate Sen. Barack Obama, D-Ill., posted a statement that stopped short of an endorsement but praised the proposal as "a good faith effort" and "an important step in the process of reducing our dangerous dependence on foreign oil." Although Obama said he remained " skeptical" that new offshore drilling will bring down gas prices in the short term, his comments opened the door toward working with the group, saying he welcomed "the establishment of a process that will allow us to make future drilling decisions based on science and fact."

While Senate Majority Leader Harry Reid, D-Nev., said he didn't agree with all of the provisions in the proposal, he said, "I am hopeful this plan can begin to break the current legislative stalemate on the Senate floor."

He later told reporters the package stood little chance of passing, indicating the comprehensive energy bill was unlikely to be voted into law in the run-up to November elections.

Specifically, the proposal would open up sections of the OCS 50 miles off the shores of Maryland, Virginia, North Carolina, South Carolina and Georgia and off Florida's west coast in the Gulf of Mexico.

All of those states except Florida would be able to opt for leasing of the acreage off their coasts, and revenue from the leases from 50 to 100 miles out would be shared between the federal and state governments. Revenue from leases beyond 100 miles would be federal funds.

The proposal would fund a conversion of the nation's petroleum-guzzling vehicles to 85% non-oil fuel sources such as batteries and alternative fuels within 20 years, contributing $15 billion for research and development and helping auto manufacturers retool their plants. It would offer a $7,500 tax credit to purchase advanced vehicles.

It also would extend renewable energy and efficiency tax credits through 2012, some of which expire at the end of this year.

To pay for the $84 billion proposal - and give Democrats another lure for support - besides leasing and royalty revenues, the gang offers to repeal a manufacturing tax credit to oil companies and require oil firms that haven't paid royalty fees from faulty 1998-1999 leases in the Gulf of Mexico to ante up the billions lawmakers believed is owed the government.

Karen Matusic, a spokeswoman for the Washington-based American Petroleum Institute, said while the group commended the bipartisan effort to expand production, "we remain concerned some proposals in this broad energy plan would impede efforts to maximize U.S. energy supplies."

It immediately drew the ire of Florida Republican Sen. Mel Martinez: "The proposal would eliminate Florida's 2006 Gulf protections and give Floridians absolutely no voice in determining where exploration could occur," the Senator said in a statement.

In the House, another bipartisan group of legislators has offered a similar proposal and has said they would work with their Senate colleagues to gather support.

-By Ian Talley, Dow Jones Newswires; 202-862-9285; ian.talley@dowjones.com

(Stephen Powers and Corey Boles in Washington contributed to this report.)

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  (END) Dow Jones Newswires
  08-01-08 1623ET
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