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Congress and the Bush administration have made very little progress this year on addressing the short-term and long-term energy issues facing the nation. Incentives for wind and solar must be renewed by the end of the year. Otherwise, countless alternative energy projects are in jeopardy, which is one reason we see T. Boone Pickens touting his plan for wind power. Meanwhile, the Republicans gained a campaign issue after John McCain decided to shift his position of off-shore drilling.

A group of moderate Republicans and Democrats have been working together to forge a compromise bill, and we will likely see a vote on the measure in the fall.

High energy prices have become a bitterly contested political issue. Republicans are bashing Democrats for standing in the way of drilling for more oil and gas at home, while Democrats retort that their rivals are misleading the American public by saying that such drilling would significantly lower prices. Yet amid the partisan bomb-throwing over America’s future energy policy, Washington is actually making a rare effort to forge a compromise.

Over the summer a group of five GOP and five Democratic senators, dubbed the Gang of 10, hammered out a comprehensive energy proposal. And now, after taking withering heat from both left and right, the idea is gaining support. Three more senators from each party have officially signed on, and the proposal is expected to come up for a vote in the Senate when Congress returns from the current recess. “We’ve seen the tide gradually turn,” says Senator Saxby Chambliss (R-Ga.), who began the effort with a visit in June to Senate colleague Kent Conrad (D-N.D.). “Thank goodness there are some people willing to work across the aisle.”

The proposal contains some items on the Republican wish list, such as opening areas of the Outer Continental Shelf to drilling and boosting nuclear power. The Democrats get incentives for wind, solar, and other renewables along with energy efficiency measures—and pay for much of the projected $84 billion cost by eliminating tax breaks on the oil and gas industry. “Some environmentalists have serious problems with it, but it’s actually a pretty good deal,” says Joseph J. Romm, senior fellow at the Center for American Progress, a Democratic think tank, and a top Energy Dept. official in the Clinton Administration.

As the compromise gains momentum, it is creating dilemmas for both parties. There are plenty of reasons to be against it. For one, John McCain’s choice for running mate, Alaska Governor Sarah Palin, is a strong advocate of opening up new areas like the Arctic National Wildlife Refuge to the oil and gas industry. Polls also show that Republicans are getting a major boost by blaming Democrats for blocking increases in oil and gas supplies, so why would they give up their best campaign issue? “One man knows we must now drill more in America and rescue our family budgets:…McCain,” says one ad for the GOP Presidential candidate, which accuses Democratic rival Barack Obama of standing in the way.

There are citics of the plan on the left and the right. Environmentalists don’t like any drilling, while conservatives worry that the compromise will deprive McCain of his best campaign issue. Rush Limbaugh argued that the compromise would “cut the knees off of Senator McCain.”

From a policy point of view, the compromise makes sense. We can’t let the incentives for wind and solar expire, and we need to promote investment in more alternative energy as soon as possible. I don’t think drilling will have a material impact on our future energy needs, but permitting drilling in exchange for the concessions on alternative energy makes sense to me. The bill also repeals tax breaks for the oil companies.

From a political point of view, this could be a benefit for Obama. He has already announced he supports the basic framework of the proposal, while McCain has not yet signed on. It permits Obama to argue that he can compromise on drilling, while also neutralizing a campaign issue. McCain would be in a tough spot if he opposes the bill, since it would mean he voted against drilling AND alternative fuels.

Either way, a compromise is needed. I hope something passes.