States that would be directly impacted by offshore oil and gas drilling would be able to veto that drilling in a draft climate and energy plan Sens. John Kerry, D-Mass., and Joe Lieberman, I/D-Conn., will be unveiling Wednesday, according to a summary of the proposal.

The plan retains language in an earlier version originally set to be unveiled last month that allows drilling to occur as close as 75 miles from the coastline.

"Mindful of the accident in the Gulf, we institute important new protections for coastal states by allowing them to opt-out of drilling up to 75 miles from their shores," according to the summary. "In addition, directly impacted states can veto drilling plans if they stand to suffer significant adverse impacts in the event of an accident."

Coastal producing states also will split 37.5 percent of the revenue earned by offshore drilling "to help protect their coastlines and coastal ecosystems," according to the summary.

The proposal would not allow states to institute their own cap-and-trade programs to limit greenhouse gases, but "those states who have already taken a leadership role in implementing their emission reduction policies will receive compensation for the revenues lost as a result of the termination of their cap and trade programs," according to the summary. The senators are aiming to "ensure predictability" for industries covered under a carbon cap and pricing system. "Rather than allowing a patchwork of conflicting state and federal regulations, it lays out one clear set of rules for reducing greenhouse gas emissions," the summary said.

The plan also includes a "hard price collar" to limit the cost of meeting the caps. This includes a "price floor" of $12 per carbon ton that would increase 3 percent over inflation annually and a "price ceiling" of $25 per ton that would increase 5 percent annually over inflation.

The two senators -- faced with at least the temporary loss of their lone Republican partner, Sen. Lindsey Graham, S.C. -- have, with his help, tried to craft a plan that would preserve a delicate balance between highly contrasting interests and in a political climate that does not appear favorable toward pushing a broad bill through this year.

The senators aimed to make concessions that would bring on board Midwesterners wary of how it would affect manufacturers, the coal industry and consumers; centrists in both parties who want more domestic oil and gas drilling; and drilling opponents who have new ammunition in the ever-growing Gulf oil spill.

While electric utilities would be required to buy emission allowances quickly, the bill would not require energy-intensive and trade-sensitive manufacturers and other industries to be covered until 2016.

Transportation sector emissions "will remain under the carbon pollution cap," but producers and importers of refined products will not participate in a carbon market. They will instead purchase allowances "at a fixed price from the allowance auction."

The plan will phase in a border tax on countries that do not make similar efforts to reduce their greenhouse gas emissions, in order to help keep U.S. manufacturing and other jobs from being outsourced to China and elsewhere while still trying to keep China and others at the table in international climate talks. "In the event that no global agreement on climate change is reached, the bill requires imports from countries that have not taken action to limit emissions to pay a comparable amount at the border to avoid carbon leakage and ensure we are able to achieve our environmental objectives," the summary states.

The plan would also give energy-intensive and trade-sensitive manufacturers and industries free allowances at first "to offset both their direct and indirect compliance costs." It would offer them other incentives as well, including $5 billion in clean energy manufacturing tax credits for producing advanced vehicles and parts. In another tip of the hat to Midwesterners, farmers would be exempt from the carbon limits in the bill.

The bill right away would send back to consumers two-thirds of the emissions revenues that are not dedicated to reducing the budget deficit -- which would likely amount to about 3 percent -- through energy bill discounts and direct rebates. There will also be additional assistance, including tax cuts and an energy refund program, to consumers who "may be disproportionately affected by potential increases in energy prices."

Following an "initial transition period," revenues will go into a "universal refund," which will eventually increase to include all revenues that do not go to reduce the deficit.

To entice coal-state fence sitters, the plan will authorize $2 billion annually for researching and developing carbon capture and sequestration, a technology currently unavailable that would be crucial to the long-term survival of the coal industry under a carbon reduction plan. There will also be "significant incentives" for the commercial deployment of CCS.

The plan would pre-empt EPA stationary greenhouse gas regulations but not the agency's mobile source limits.

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