Every newspaper in the country is reporting about the "Gang of 10" -- Republican and Democratic Senators working to gain support for a grand compromise. If enacted, it allows some offshore oil drilling in the Gulf of Mexico and perhaps off the Atlantic Coast, subsidizes nuclear power and coal-to-liquid and funds ethanol research. It renews the expiring solar and wind tax credits.

And it includes a $7,500 tax credit for new plug-in cars and $2,500 for conversions existing cars plus $7.5B for automakers to retool plants for plug-in cars and $7.5 billion for battery R&D. Inclusion of these provisions demonstrates the almost-unanimous Congressional support for plug-in vehicles as a near-term solution, and should send further signals to automakers that they'll get support in DC this fall or next year.

The compromise aims to fuel 85% of US cars off gasoline by 2020 -- which sounds a lot like proposals from Andy Grove and others that have been seen as unrealistic. (There are some subtleties in the provisions: the 85% goal is a "sense of the Senate" resolution; the $7,500 credit also applies to fuel-cell cars; and many environmentalists are dubious about the tradeoffs. Read details below.)

POLITICS: The Senate just went into recess without any progress on energy legislation but will return in September for a short pre-election session. Democrats (all from states that voted Repubican in 2004) include Mary L. Landrieu (Louisiana), Kent Conrad (North Dakota), Blanche Lincoln (Arkansas) Mark Pryor (Arkansas),Ben Nelson (Nebraska), and Republicans Saxby Chambliss (Georgia), Johnny Isakson (Georgia), Lindsey Graham (South Carolina), Bob Corker (Tennessee) and John Thune (South Dakota). Senator Obama said he was open to compromise, McCain said the country needed "all of the above," and more drilling sooner, and the White House said it would consider the measure.

SAN FRANCISCO CHRONICLE: Senators craft bipartisan energy bill by
Zachary Coile, Chronicle Washington
Bureau
http://www.sfgate.com/­cgi-bin/­article.cgi?f=/­c/­a/­2008/­08/­02/­MNEA123KET.DTL

Lawmakers could be waking up to the fact that the election-year blame game between the two parties hasn't eased the pain Americans are feeling from $4-a-gallon gas prices. That's why the "Gang of 10" senators - a group of five Democrats and five Republicans - is pushing what they describe as a middle course between the Republicans' insistence on more drilling and Democrats' demands for more renewables and efficiency measures.

The group's effort was modeled on the "Gang of 14," a group of seven Democrats and seven Republicans who defused a bitter dispute in the Senate in 2005 over the confirmation of President Bush's judicial nominees. Chambliss reached out last month to North Dakota Democratic Sen. Kent Conrad, whom he had worked with on the recent farm bill, to form a similar group to plot a compromise on energy.

Their plan includes several of the Democrats' top energy priorities, including stripping oil companies of at least $30 billion in tax breaks. The bill would use some of that money to renew expiring tax credits for wind and solar projects through 2012. It also would give consumers a $7,500 tax credit to buy an electric or fuel-cell vehicle, and a $2,500 credit to retrofit their current vehicles into plug-in hybrids.

The bill would provide $7.5 billion in research money to boost electric vehicles, mostly to improve the batteries that store electricity. U.S. automakers would be big winners, receiving $7.5 billion in government money to retool their auto lines to crank out more electric cars.

The ethanol industry would also benefit, with $2.5 billion in new research money to create more efficient biofuels as well as loan guarantees for building new ethanol pipelines and tax breaks for biofuel, electric and hydrogen refueling stations. The bill would speed up the processing of permits to build new nuclear power plants and offer up to $10 billion in loans for new coal-to-liquid plants, as long as they captured their carbon emissions.

"We believe that it's critically important that any plan be balanced, that it include serious conservation measures as well as additional production incentives," Conrad said.

The bill is already generating some heavyweight opposition. The oil industry is warning that revoking its tax breaks could slow its production of new energy supplies. Environmentalists support the tax credits for wind, solar and electric vehicles, but strongly oppose the new offshore drilling and coal-to-liquid fuels provisions.

"This is Exxon's drilling agenda wrapped in a veneer of other energy policies," said Anna Aurilio, federal legislative director of the U.S. Public Interest Research Group.

The bill's sponsors are hoping it will be the centerpiece of debate when the Senate returns in September. Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., have called for an energy summit the first week Congress is back.

Reid said the "Gang of 10" bill includes some good ideas, although he does not agree with all of it. But he added, "I am hopeful this plan can begin to break the current legislative stalemate on the Senate floor."

WASHINGTON POST: Obama Says Energy Compromise Is Necessary By Jonathan Weisman http://www.washingtonpost.com/­wp-dyn/­content/­article/­2008/­08/­02/­AR2008080201538.html

Obama said on Saturday that it is time to compromise. The proposal by the Senate's "Gang of 10" has "some of the very aggressive elements that I've outlined in my plan," he said here, including a goal in 20 years of having 85 percent of cars no longer operating on petroleum-based fuels and to provide $7 billion to help the U.S. auto industry retool to build ultra-efficient vehicles.

"What I don't want is for the best to be the enemy of the good here, and if we can come up with a genuine, bipartisan compromise in which I have to accept some things I don't like, or the Democrats have to accept some things that they don't like, in exchange for moving us in the direction of energy independence, then that's something I'm open to," Obama said. "I wanted to send a strong signal that we can't allow partisan bickering or the desire to score political points to get in the way of providing some genuine relief to people who are struggling."

Republicans seized on Obama's shift, accusing the presumptive Democratic nominee of inconstant and politically motivated policy stands. The Republican National Committee sent out a news release noting that on Wednesday in Missouri, Obama declared, "I want to be absolutely clear to everybody about this. If I thought that I could provide you some immediate relief on gas prices by drilling off the shores of California and New Jersey . . . if I thought that by drilling offshore, we could solve our problem, I'd do it."

The drilling issue may offer Obama the strongest reason yet for compromise. New polls suggest that opposition to offshore drilling is easing under the weight of $4-a-gallon gasoline. Obama left open his options Saturday, saying that the Senate compromise's "drilling provisions are about as careful and responsible as you might expect from a drilling agenda," but that he remains skeptical.

"We can't drill our way out of the problem," he said. But, he added, "I also recognize that in the House and the Senate, there are Republicans who have very clear ideas about what they want, and at some point people are going to have to make some decisions. Do we want to keep on arguing, or are we going to get some things done?"

The campaign of Sen. John McCain at once claimed credit for leading Obama to his new position and questioned whether he ultimately would support additional drilling. McCain also opposed expanded offshore drilling until switching his position in June.

It is not clear how far Obama's endorsement will get the Senate compromise. Environmentalists decried the deal as badly slanted toward oil production. Daniel J. Weiss, an energy and environmental expert with the liberal Center for American Progress Action Fund, said most of the drilling provisions are mandatory, while the key energy conservation measures are voluntary. The push to have 85 percent of future cars powered on non-petroleum fuel is merely a nonbinding sense of the Senate resolution. And the compromise does not include a long-sought environmental provision that would mandate that a certain percentage of electricity generation come from renewable energy sources.

"This deal is like swapping your home for somebody's car," Weiss said. "Sure, the car is nice, but is it worth your house?"

http://money.cnn.com/­news/­newsfeeds/­articles/­djf500/­200808011623DOWJONESDJONLINE000859_FORTUNE5.htm UPDATE:As Parties Fight,Group Offers Bipartisan Energy Package By Ian Talley Of DOW JONES NEWSWIRES

WALL STREET JOURNAL: Obama Would Back Offshore Drilling As Part of Bipartisan Energy Package By AMY CHOZICK http://online.wsj.com/­article/­SB121769917863707497.html