In the first few paragraphs, see "miles per gallon" mixed up with "miles per hour".


US Senate Panel Likely To OK 35 MPG Fuel Efficiency Bill Tuesday
Dow Jones
May 07, 2007: 01:37 PM EST

WASHINGTON -(Dow Jones)- The U.S. Senate Commerce, Science and Transportation Committee is likely to approve on Tuesday a bill that would increase fuel efficiency standards in combined automaker's passenger car and light truck fleets to 35 miles a gallon by 2019.

Although the legislation has been opposed by both the U.S. and international auto industries - which fear it may be another costly measure that adds to ongoing financial woes - a new amendment offered late last week as well as many of the provisions in the bill may appease the sector's concerns and reflect their lobbying power.

If passed by the panel, it is likely to face debate in the Senate given that some view it as too weak, although the dialog is expected to be more over the details of how Corporate Average Fuel Economy, or CAFE, is reformed rather than if it is reformed. A raft of proposed CAFE bills both in the House of Representatives and the Senate all push for improved efficiency to at least 35 miles per hour.

Higher fuel efficiency is seen as one aspect of a broad energy package that lawmakers are piecing together under the Democrat-controlled Congress as majority leaders seek to reduce U.S. dependency on foreign crude supplies and cut greenhouse gas emissions thought to cause global warming. CAFE reform - along with other energy legislation, is likely to gain political momentum as gasoline prices are expected to hit record highs during the summer driving season.

The committee is scheduled to mark up Sen. Dianne Feinstein's, D-Calif., S. 357, or the Ten-in-Ten bill, which would increase fuel efficiency of the nation's combined fleets of passenger cars and light trucks by 10 miles per hour from 2009 to 2019. The bill is co-sponsored and supported by several key Senate Democrats, including Commerce Committee Chairman Daniel Inouye, D-Hawaii, and Chair of Environment and Public Works Committee, Barbara Boxer, D-Calif.

Current law requires each automaker's fleet must average 27.5 miles a gallon for cars and 22.5 miles a gallon for light trucks for model year 2008.

Competing against alternative versions of varying degrees of stringency and application, under tough lobbying from auto manufacturers and even opposition from the Democrats' own ranks, Feinstein's bill seems to seek to walk a line of compromise between conflicting concerns of CAFE advocates and manufacturers.

Environmentalists and advocates for higher CAFE standards have been pushing for strict 40 miles per gallon reform that wouldn't allow for off-ramps if the annual increase was economically unfeasible to implement. They claim fuel efficiency technology is advanced enough to move ahead at a rapid pace.

Domestic car manufacturers such as the Chrysler unit of DaimlerChrysler AG ( DCX), Ford Motor Co. (F) and General Motors Corp. (GM) worry that re-tooling plants and re-designing their entire fleets may cause further economic trouble for the distressed industry. In the past decade, they've relied prominently on U.S. consumer's desire for heavy and power-hungry sports utility vehicles and have recently suffered a series of billion-dollar losses and job cuts. Foreign car makers such as Toyota Motor Corp. (TM) and Honda Motor Co. (HMC) worry they won't get credit for advances they've made in fuel efficient cars; their fleets are already near-to or surpassing reform targets.

But Feinstein told the Commerce panel at a hearing last week, "Neither American nor foreign manufacturers will be especially advantaged or disadvantaged. Each manufacturer will have to improve the vehicles it makes to meet the standards that the (Administration) sets."

Heeding industry's recommendations, Feinstein's bill would be based on size and weight and give the National Highway Traffic Administration the authority to set the fuel efficiency standards each year for each vehicle class. The standards set would ultimately bring the nationwide average for combined light trucks and passenger cars to 35 miles a gallon by 2019, starting in model year 2010. Although each manufacturer would have to meet a standard determined by the administration, if its fleets don't meet the requirement, it could buy credits from those companies whose fleets were over the required CAFE level.

Michael Stanton, president of the Association of International Automobile Manufacturers, said his members prefer that Congress not to set specific targets, but rather let the Department of Transportation establish rule-making based on the rate of technological advance and economic feasibility. "AIAM unequivocally opposes the adoption of a uniform percentage improvement standards format, or any other similarly discriminatory program," Stanton told the panel last week. "Simply put, such standards represent bad public policy," he said.

Environmentalists and advocates for tougher standards are likely to be disgruntled about an amendment proffered by panel chairman Inouye and ranking member Ted Stevens, R-Alaska, that allows the administration to lower the rate of annual improvement if it deems it economically unfeasible, the off-ramp that industry was seeking. Feinstein was a co-sponsor of the amendment.

The Alliance of Automobile Manufacturers - which has called the target unattainable - also wants the committee to ax the provision that combines the car and light truck CAFE standards, said Alliance President Dave McCurdy. Starting with the 2010 model year, the overall car and truck fleet would face an increase in CAFE requirements of more than 40% by 2019, he said.

"Based on today's 50/50 split between cars and light trucks, achieving this level would require the car fleet to reach nearly 40 miles a gallon and the truck fleet to reach nearly 32 miles a gallon," McCurdy said.