By Richard Cowan

WASHINGTON (Reuters) - Congress is poised
to debate energy legislation designed to toughen offshore
drilling practices in the aftermath of the devastating Gulf of
Mexico oil spill.

Depending on what finally happens, Congress' efforts could
reshape the future of deep-water oil extraction in the Gulf.

Incentives for expanding the use of alternative fuels that
are cleaner than oil and improving home energy efficiency also
are included in the oil spill bill proposed by Senate
Democrats.

Here are possible scenarios for the initiatives:

* HOUSE BILL PASSES

The House is expected to vote Friday
on a bill that aims to improve offshore safety for workers and
impose new controls on drilling equipment and underwater well
construction. It also would ban companies with poor safety
records, such as BP, from new offshore projects for up to seven
years. Like the Senate bill, the House measure would lift the
cap on industry liability for spills. There's currently a $75
million limit on economic damages.

* SENATE BILL FALTERS

Senate Democratic leader Harry Reid has put together a bill
that Republicans and some moderate Democrats oppose. It too
would set unlimited industry liability for oil spills and would
retroactively cover the BP disaster in the Gulf.

Republicans have an alternative bill that sets liability
caps on a case-by-case basis and lifts the drilling moratorium
in the Gulf imposed by the Obama administration. It's unclear
whether Reid would allow a vote on their alternative or any
other amendments.

Reid says he'll try for passage by Aug. 6, the start of a
six-week recess. But he hasn't expressed optimism.

If a procedural vote next week fails to get the 60 votes
needed to begin debate, Reid might move on to other bills and
accuse Republicans of doing Big Oil's bidding.

* SENATE BILL IS RESURRECTED

When Congress returns in mid-September, Reid tries again on
an oil spill bill. Some Democrats say they are open to
negotiating changes to the spill liability provision. Lousiana
Senator Mary Landrieu is pushing a plan that contains elements
of an oil industry-backed proposal establishing a $10 billion
mutual insurance fund to help cover future spills.

It's not clear whether liberals such as New Jersey Senator
Robert Menendez would go along, although negotiations were
underway.

* A HOUSE-SENATE COMPROMISE

Once both chambers pass an energy bill, they could name
negotiators to work out a compromise that would then have to be
voted on before sending the legislation to President Barack
Obama for enacting into law.

The fate of some of the most controversial items would be
decided by the House and Senate "conferees" -- including the
kind of liability cap and whether the federal government should
ban companies with poor safety records from new offshore
drilling.

This could play out sometime between mid-September and
whenever Congress recesses so members can campaign at home for
re-election Nov. 2.

* A LURKING BATTLE?

Democrats have the option of taking an energy bill and
attaching some explosive legislation to it: mandatory
reductions in carbon dioxide emissions from utilities and
factories, which are blamed for global warming.

The House passed a sweeping climate control bill more than
a year ago, but efforts sputtered in the Senate.

If Democrats made such a move, it likely would play out
after the Nov. 2 elections in a "lame duck" session at the end
of the year.

It would be a difficult maneuver, especially if Republicans
win the elections. They would argue that voters rejected the
carbon controls Democrats were pushing.

But the idea is that some waivering Democrats who face
tough re-election bids this year might be more amenable to a
climate control bill after Nov. 2. Any improvement in the shaky
U.S. economy between now and the end of the year also could
boost chances for a climate bill that opponents argue would
raise energy prices and encourage jobs to move abroad.

This scenario is a long-shot.

More likely for a bill dealing with climate change: In
early 2011, when Environmental Protection Agency regulations on
carbon dioxide are about to kick in, Congress gets more serious
about passing a climate change bill.

(Editing by Vicki Allen)