The amendment to the Senate’s highway bill needed 60 votes to pass, but was rejected in a 51-47 vote.
The closely watched vote pitted billionaire T. Boone Pickens, who has been promoting natural gas vehicles since 2008, against Koch Industries, an energy conglomerate that saw the plan as interference in the private sector.
Praised by President Barack Obama and Senate Majority Leader Harry Reid, the five-year plan would spur purchases of long-haul trucks and commercial vehicles that can run on cheap and abundant U.S. natural gas. The subsidies would be paid for from fees charged to users of the fuel.
As gasoline prices spike to new highs for this time of year, Obama has promoted the concept as part of a long-term plan to reduce gasoline prices, a top issue ahead of November elections.
The bill would also have provided tax credits for building pumps and other infrastructure needed for filling more vehicles with the fuel.
“If you vote against this amendment, you cannot go home and tell your constituents that you have done everything you can to reduce (gasoline) prices,” said Robert Menendez, a New Jersey Democrat who cosponsored the bill, ahead of the vote.
The Senate was slated to vote on as many as 22 amendments to the highway bill on Tuesday.
A proposal to extend tax breaks for wind, solar and advanced biofuels also failed to garner enough support to pass in a 49-49 vote.
Wind turbine makers such as GE and Denmark’s Vestas had been closely watching the vote for signs that the incentive, called the production tax credit, would be extended after it expires at the end of the year.