By Richard Rubin, CQ Staff

The leaders of the Senate Finance Committee are trying yet again to extend tax breaks for renewable energy, revealing on Thursday another attempt to break a continued logjam.

Chairman Max Baucus and ranking Republican Charles E. Grassley released a new tax package that will top $40 billion once revenue estimates are finalized.

“Here we are again,” said Baucus, D-Mont. “I’m starting to feel like Don Quixote, except I’m not jousting at windmills. I’m jousting for windmills.”

The measure includes tax incentives for carbon sequestration, plug-in hybrid vehicles, conservation, wind energy, solar energy, nuclear energy and biofuels. Some provisions would extend expiring provisions, while others would create new law. It is offset largely by higher taxes on the oil and gas industry.

Baucus and Grassley want to inject their proposal into the upcoming Senate debate over energy policy, and it could get added to a bill that would expand offshore drilling.

Baucus and Grassley have tried throughout the 110th Congress to assemble an energy tax proposal that can get through the Senate. The closest they came was in December 2007, when the Senate was completing work on a major energy policy bill (PL 110-140).

A cloture vote on the amendment came one vote short, on a 59-40 margin.

The House has repeatedly passed energy-tax measures, most recently including them in a broader “tax extenders” bill (HR 6049) that also is pending in the Senate.

Lawmakers in both houses generally agree that the tax breaks for renewable energy should get extended, but they disagree sharply about whether and how those provisions should be offset with revenue increases. Earlier this year, the Senate voted 88-8 to add a smaller energy-tax package without offsets to a housing bill (HR 3221), but the House removed it.

Like the new Baucus-Grassley approach, previous versions have relied on revenue increases affecting the oil and gas industry. Senate Republicans successfully argued that any cost increase on the industry would deter investment and cause prices to increase, but Baucus said he hopes that recent gasoline and oil price spikes will convince senators

Grassley, who usually opposes offsets being used to extend existing tax policy, said this issue is different.

“What we have done is used production incentives in one area of energy and move them to another area of energy,” said Grassley, R-Iowa.

The renewable-energy industry continues to warn that failure to extend the tax breaks beyond their Dec. 31 expiration date will damage the country’s ability to shift away from fossil fuels. Because projects must be producing electricity by Dec. 31 to receive the tax credit, even wind turbines that take a few months to build are now on hold.