By Richard Cowan
WASHINGTON (Reuters) - The U.S. Congress is poised to debate energy legislation designed to toughen offshore drilling practices in the aftermath of the devastating Gulf of Mexico oil spill.
Depending on what finally happens, Congress' efforts could reshape the future of deep-water oil extraction in the Gulf.
Incentives for expanding the use of alternative fuels that are cleaner than oil and improving home energy efficiency also are included in the oil spill bill proposed by Senate Democrats.
Here are possible scenarios for the initiatives:
* HOUSE BILL PASSES
The House of Representatives is expected to vote on Friday on a bill that aims to improve offshore safety for workers and impose new controls on drilling equipment and underwater well construction. It also would ban companies with poor safety records, such as BP, from new offshore projects for up to seven years. Like the Senate bill, the House measure would lift the cap on industry liability for spills. There's currently a $75 million limit on economic damages.
* SENATE BILL FALTERS
Senate Democratic leader Harry Reid has put together a bill that Republicans and some moderate Democrats oppose. It too would set unlimited industry liability for oil spills and would retroactively cover the BP disaster in the Gulf.
Republicans have an alternative bill that sets liability caps on a case-by-case basis and lifts the drilling moratorium in the Gulf imposed by the Obama administration. It's unclear whether Reid would allow a vote on their alternative or any other amendments.
Reid says he'll try for passage by August 6, the start of a six-week recess. But he hasn't expressed optimism.
If a procedural vote next week fails to get the 60 votes needed to begin debate, Reid might move on to other bills and accuse Republicans of doing Big Oil's bidding.
* SENATE BILL IS RESURRECTED
When Congress returns in mid-September, Reid tries again on an oil spill bill. Some Democrats say they are open to negotiating changes to the spill liability provision. Lousiana Senator Mary Landrieu is pushing a plan that contains elements of an oil industry-backed proposal establishing a $10 billion mutual insurance fund to help cover future spills.
It's not clear whether liberals such as New Jersey Senator Robert Menendez would go along, although negotiations were underway.
* A HOUSE-SENATE COMPROMISE
Once both chambers pass an energy bill, they could name negotiators to work out a compromise that would then have to be voted on before sending the legislation to President Barack Obama for enacting into law.
The fate of some of the most controversial items would be decided by the House and Senate "conferees" -- including the kind of liability cap and whether the federal government should ban companies with poor safety records from new offshore drilling.
This could play out sometime between mid-September and whenever Congress recesses so members can campaign at home for re-election on November 2.
* A LURKING BATTLE?
Democrats have the option of taking an energy bill and attaching some explosive legislation to it: mandatory reductions in carbon dioxide emissions from utilities and factories, which are blamed for global warming.
The House passed a sweeping climate control bill more than a year ago, but efforts sputtered in the Senate.
If Democrats made such a move, it likely would play out after the November 2 elections in a "lame duck" session at the end of the year.
It would be a difficult maneuver, especially if Republicans win the elections. They would argue that voters rejected the carbon controls Democrats were pushing.
But the idea is that some wavering Democrats who face tough re-election bids this year might be more amenable to a climate control bill after November 2. Any improvement in the shaky U.S. economy between now and the end of the year also could boost chances for a climate bill that opponents argue would raise energy prices and encourage jobs to move abroad.
This scenario is a long-shot.
More likely for a bill dealing with climate change: In early 2011, when Environmental Protection Agency regulations on carbon dioxide are about to kick in, Congress gets more serious about passing a climate change bill.
(Editing by Vicki Allen)
