Landmark Fuel Bill Set for Bush OK - aftermarketNews

Landmark Fuel Bill Set for Bush OK

From The Detroit News and MEMA Industry News

WASHINGTON — President Bush is expected to sign an energy bill this morning that will raise passenger car fuel efficiency standards for the first time in more than two decades, ending an epic battle to require automakers to dramatically improve the fuel economy of the nation’s cars and trucks.

His signature comes after the House voted 314-100 Tuesday to approve a scaled-back energy bill that requires automakers to improve fuel efficiency by 40 percent to a fleet-wide industry average of 35 miles per gallon by 2020.

The energy bill also increases the use of biofuels, largely corn-based ethanol, to 36 billion gallons annually by 2022. It sets new efficiency standards for commercial buildings and appliances and phases out by 2014 the use of traditional incandescent light bulbs in favor of more efficient bulbs.

But still to be determined is whether California and more than 12 other states will be allowed to impose their own more stringent standards that would require a 30 percent reduction in vehicle tailpipe emissions by 2016. Those rules, which would start in 2009, would require an average of 43.7 mpg for passenger cars, which is far above the new federal mandate.

California needs a waiver under the Clean Air Act to put its new rules into place because its proposal would regulate carbon dioxide from tailpipe emissions. In April, the Supreme Court ruled that the Environmental Protection Agency had the right to regulate carbon dioxide as a pollutant. The EPA has said it will make its decision on California’s waiver request by year’s end, but officials said it could come as soon as Friday.

After the Supreme Court ruling, President Bush asked the Department of Transportation, which oversees the National Highway Traffic Safety Administration, and the EPA to come out with a joint resolution to reduce carbon dioxide emissions, but that will now be delayed until early 2008 as the agencies study the impact of the energy bill.

Officials said Tuesday the regulation was still in draft form and being reviewed by the White House and the two agencies.

Challenge for Automakers

The energy bill being signed by the president Wednesday is a fundamental shift for the auto industry, and automakers will now work to figure out how to meet the new fuel mandates.

Chrysler LLC Vice Chairman and President Jim Press said the company applauded the new regulations.

In an interview with the News, he said new Chrysler owner Cerberus Capital Management LP had "brought to us a new and much more progressive perspective on not just being an American company, but being a good American company contributing to society."

Cerberus, the New York-based private equity firm, has agreed to spend billions to improve the fuel efficiency of Chrysler vehicles, Press said.

He said the new bill will require using additional smaller engines, but not necessarily less powerful ones. The company can accomplish that with turbochargers and other technologies such as cylinder deactivation, which reduces fuel use by deactivating some cylinders when less power is needed.

Press said Chrysler is introducing a pair of two-mode gasoline-electric hybrid SUVs next year and has six models that get at least 28 mpg, with more on the way.

Ford Motor Co. praised the action by Congress, as did General Motors Corp. Chairman and CEO Rick Wagoner.

"The new fuel economy standards within the bill set a tough, national target that GM will strive to meet," Wagoner said. "We will focus our engineering and technical resources to attain these standards and we remain hard at work."

Praise from Lawmakers

Congress created the fuel economy program in 1975, ordering automakers to more than double the efficiency of the passenger vehicle fleet from 13 mpg to 27.5 mpg over a decade.

Automakers have repeatedly blocked any increases in fuel economy requirements for passenger cars. In 2006, NHTSA rewrote requirements for light trucks, requiring automakers to average 24 mpg by 2012.

But automakers saw their longtime support crumble this year amid rising concern about soaring gas prices, dependence on imported oil and emissions of greenhouse cases. The automakers also have lost a string of court decisions and decided that this was the best time to strike a deal on an increase — especially with a new president being elected next November.

The bill will for the first time require the largest work trucks to meet efficiency standards — vehicles exempted from regulation when the fuel economy rules were created. The House bill also dropped the so-called "Porsche" exemption for small manufacturers that sell 64,000 vehicles or less in the United States.

The legislation also calls for boosting ethanol production significantly. Next year, the bill requires 9 billion gallons of ethanol be produced, up from 7 billion this year, and the target jumps to 11.1 billion gallons by 2009. The impact of this increase will extend beyond the auto industry, which promotes ethanol as an alternative to gasoline, because ethanol is produced from corn in the United States.

The price of corn has doubled amid growing demand for ethanol and animal feed prices are up about 25 percent this year, in large part due to rising corn prices.

Nonetheless, the bill’s passage was widely applauded. House Speaker Nancy Pelosi, D-CA, called the deal "groundbreaking." She touted the fact that the bill was delivered to the White House Tuesday in a hybrid Toyota Prius.

Rep. John Dingell, D-MI, chairman of the House Energy and Commerce Committee, praised the bill.

"Its core is a series of requirements that will improve the energy efficiency of almost every significant product and tool and appliance that we use, from light bulbs to light trucks," Dingell said. "We are requiring a 40 percent increase in the fuel economy of our motor vehicles, and we are doing it in a way that gives manufacturers the flexibility they need to get the job done, while preserving American jobs."

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