June 24 (Bloomberg) -- A plan to limit U.S. greenhouse gas emissions won new support under an agreement to give farmers and coal-fired electric utilities added benefits in a bill set for a vote this week in the House.

About 100 members of environmental, labor and religious groups rallied on Capitol Hill today in favor of the legislation, while the U.S. Chamber of Commerce and others questioned its cost and workability. The House plans a June 26 vote.

On past energy issues “it used to be environmentalists on one side and industry on the other,” House Energy and Commerce Committee Chairman Henry Waxman said at the rally. “Here we have environmentalists, industry, labor unions and faith-based groups all together saying now is the time for the House to pass the energy bill.”

The measure would cap emissions and create a market system for trading pollution permits. The bill is designed to control greenhouse gases that contribute to climate change, reducing them 17 percent from 2005 levels by 2020.

Waxman, a California Democrat, and House Agriculture Committee Chairman Collin Peterson, a Minnesota Democrat, reached an agreement yesterday on agricultural provisions in the bill after weeks of negotiations.

Lawmakers remain divided on several issues, including the measure’s cost and a provision that would ban over-the-counter trading of derivatives and other instruments based on pollution credits created by the legislation.

Energy Tax

Republican leaders labeled the measure an energy tax and predicted Democrats wouldn’t have the votes to pass it. Republican Whip Eric Cantor of Virginia said Democratic leaders have fewer than 200 votes for the bill, short of what they’ll need to pass it.

“This bill is disconnected to the reality facing so many of America’s families and certainly families in the regions where coal is a big part of the economy,” Cantor told reporters.

The American Petroleum Institute, which represents oil and gas companies including Exxon Mobil Corp., yesterday asked members to vote against the bill, saying it would raise fuel prices.

Waxman, Peterson, House Speaker Nancy Pelosi, a California Democrat, and Representative Edward Markey, a Massachusetts Democrat, met with a group of Republicans today in an effort to win their support. Markey and Waxman are the chief sponsors of the legislation, called the American Clean Energy and Security Act.

Republican Support

“We believe the changes we’ve made are going to increase the likelihood of passage of the bill,” Markey told reporters after the meeting. The agreement on agricultural provisions “is going to lead to support from moderate Republicans when the vote is cast,” he said.

“This is going to be a tight vote,” said Gerald Connolly, a Virginia Democrat.

The changes negotiated with Peterson would primarily benefit not-for-profit coal-fired power plants, which would get more free permits.

Companies such as Great River Energy in Maple Grove, Minnesota, and Dairyland Power Cooperative in La Crosse, Wisconsin, would gain from the change.

The bill, more than 1,000 pages long, faces hurdles from opponents who cite cost concerns and say it may cause job losses. One provision would require that all derivatives trading in the U.S. carbon market be conducted on exchanges rather than over-the-counter.

Trading Costs

That rule would increase trading costs, according to the 69-member New Democrat Coalition, a group that says it favors economic growth. The oversight of greenhouse-gas trading would destroy jobs, the group said.

“This language mandates that all over-the-counter derivative trading be put on an exchange and charged a fee,” Representative Mike McMahon, a New York Democrat, said in an interview. “That’s something that we oppose fundamentally.”

Peterson told reporters the idea is to standardize the trading of carbon credits.

“There will not be any trading of any carbon credits on anything other than a regulated exchange, no customized swaps or anything,” Peterson said.

Under yesterday’s agreement, Peterson will offer an amendment authorizing the U.S. Department of Agriculture, rather than the Environmental Protection Agency, to oversee farm- and forest-based carbon offsets. Farmers and other agricultural interests had sought the change.

‘Strong Bias’

“There is a pretty strong bias in farm country against EPA,” said Representative Tim Walz, a Minnesota Democrat and Agriculture Committee member.

Under an earlier agreement, the bill would be revised to give more free pollution permits to coal-fired power plants.

That change was made after the National Rural Electric Cooperative Association argued that the formula for allocating free carbon dioxide permits gave too much help to utilities with access to carbon-free sources such as nuclear power and hydroelectric dams and too little aid to coal-fired utilities.

The removal of this “windfall” means the association won’t fight to defeat the bill, the organization’s chief executive officer, Glenn English, said in an interview.

“We’re not supporting the bill, but we’re not going to stand in the way and call out our membership and urge their members to kill the bill,” English said.

To contact the reporters on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net; Simon Lomax in Washington at slomax@bloomberg.net.

Last Updated: June 24, 2009 19:00 EDT