Feb. 14 (Bloomberg) -- A proposed $140 billion fund for asbestos exposure victims was blocked in the U.S. Senate as it failed to overcome an objection that the company-financed plan would cost taxpayers billions of dollars.

Supporters fell one vote short of the required 60 votes to waive a budget rule barring legislation that increases government spending by $5 billion in any of four decades after 2016. Senate Majority Leader Bill Frist held out a slim hope that the measure might be revived because of the absence of one senator, Democrat Daniel Inouye of Hawaii.

The Senate vote was 59-40 to waive the budget requirement, meaning that Inouye could be in position to cast the 60th and decisive vote to reconsider the fund if there is another roll call. The chief sponsors of the bill, Republican Arlen Specter of Pennsylvania and Democrat Patrick Leahy of Vermont, said they haven't given up.

``We have just begun to fight,'' Specter said in a statement. He said Inouye told him he would vote to waive the budget rule and permit debate to continue, meaning ``we may win this one yet.'' Inouye missed the Senate vote to be with his sick wife, Specter said.

Prior to the vote, Frist, a Tennessee Republican, said he would abandon the asbestos plan if it were blocked by a procedural impasse. ``If we are unsuccessful this week in addressing asbestos, that is it for this year,'' he said. After the roll call, he said he hasn't decided if or when to move for reconsideration.

Private Financing

Opponents, citing a Congressional Budget Office study, warned that the fund might not take in enough revenue to cover all claims, forcing it to borrow money. Specter called the budget violation a technicality because the government would just be a conduit for private financing and the taxpayers wouldn't be at risk.

The measure was intended to end asbestos lawsuits that have forced into bankruptcy almost 80 companies, such as USG Corp., the world's largest wallboard maker, and insulation manufacturer Owens Corning. People with respiratory disease or cancer would be paid from $25,000 to $1.1 million depending on how sick they became from long-term exposure to the fibrous mineral used to make brakes, roofing, gaskets and other products.

The measure was opposed by most insurance companies, such as St. Paul Travelers Companies and Liberty Mutual Group, which said the legislation wouldn't foreclose lawsuits if the trust failed.

Company Opposition

It also was opposed by a group of mostly smaller and medium- sized companies, such as oil and gas engineering services provider Foster Wheeler Ltd. They argued they would have to contribute too much money to the trust. Exxon Mobil Corp. and Shell Oil Co. also said they would be forced to pay too much.

Ten Republicans voted today to scuttle the fund, including Lindsey Graham of South Carolina, a member of the Senate Judiciary Committee that had approved the measure.

A letter the Congressional Budget Office sent to the Senate last night gave supporters a boost by stating that the trust fund wouldn't add any money to the federal deficit. Still, the letter underscored the objection by Nevada Republican John Ensign that the proposal would add to the federal budget years from now.

The budget office said the fund would continue to make ``substantial payments'' for claims, resulting in more than $5 billion in spending in any of the four decades after 2016. Any legislation that generates such spending is barred by congressional budget rules.

To contact the reporter on this story: James Rowley at jarowley@bloomberg.net

Last Updated: February 14, 2006 20:25 EST