Negotiators Resolve Dispute That Jeopardized Energy Bill

WASHINGTON — House and Senate tax writers resolved a dispute recently that was threatening major energy legislation, opening the way to consideration of a measure intended to stimulate domestic energy production and make the nation's electrical transmission system more dependable.

Under direct prodding from Vice President Dick Cheney, Senator Charles E. Grassley, Republican of Iowa, and Representative Bill Thomas, Republican of California, settled their differences over tax breaks for ethanol, a corn-based gasoline additive, which is crucial to building political support for the overall measure in the House and Senate.

Mr. Grassley, the chairman of the Finance Committee, called the agreement a "big step toward" completing an overall energy measure, though he noted that serious differences still remained over tax breaks for the coal industry and for hybrid cars, as well as the ability of states to win exemptions from new requirements for using ethanol.

But lawmakers and aides said the agreement guaranteed continued tax advantages for users of ethanol and would eventually eliminate a disparity in taxes on the fuel, a chief demand of Mr. Grassley. The measure would also give new tax advantages to biodiesel, another Grassley priority. But he relented on a demand that all the changes be made on the energy bill rather than leaving some to a highway measure next year.

Lawmakers, lobbyists and others said the agreement would eliminate an impasse that had stalled the energy bill, a Republican priority, for more than a month.

"We're almost there," said the House majority leader, Representative Tom DeLay of Texas, who said he would like the House to consider the energy bill by the end of the week. Senate officials said that timetable was not realistic, but that the energy measure could reach the floor of the House and Senate as early as next week.

"Mr. Grassley did give a little to get a breakthrough," said an aide, who said the compromise was similar to one the senator floated earlier.

The fact that some of the tax changes would not be made until next year and the unsettled issue of state exemptions for ethanol were troubling to Senate Democrats who are important to passing the energy measure because a handful of Senate Republicans are dead set against it because of other energy issues.

"We still have a long way to go to ensure that this energy bill is not a step backwards for ethanol," said the Senate Democratic leader, Tom Daschle of South Dakota, who wants to triple the use of ethanol over the next decade.