Just a day after proposals for an extension to renewable energy tax credits were rejected for the eighth time, a bipartisan group of US Senators set out a new compromise bill designed to break the stalemate that has developed between Republicans and Democrats over new energy legislation.

Styling themselves as the "Gang of 10", the group set out a raft of proposals intended to address Democrat concerns over inadequate support for renewable energy and energy efficiency measures while appeasing Republicans who claim such initiatives will prove too expensive and that there should be a greater focus on tapping US oil reserves.

Central to the bill are proposals to open up fresh areas in the Gulf of Mexico and off the coasts of North Carolina, South Carolina and Georgia for oil drilling. Greater offshore exploration has been supported by many Republicans, but attempts to open up new fields have been repeatedly blocked by Democrats opposed to new drilling.

In return for Democrat support for offshore drilling, the legislation sets out a raft of new proposals to help the US make the transition to a low-carbon economy, including an extension of existing renewable energy and energy efficiency tax credits to 2012; new tax credits for consumers who buy cars that run on alternative fuels; billions of dollars of new funding for low-carbon vehicle R&D, and a target to move 85 per cent of new vehicles to non-petroleum-based fuels within 20 years.

The bill also addresses concerns among some senators that previous attempts to extend renewable energy tax credits had not been properly costed. The Senators leading the group, North Dakota Democrat Kent Conrad, and Georgia Republican Saxby Chambliss, said they would fund the $84 billion package of measures by scrapping $30 billion in tax breaks for energy companies and ensuring the federal government gets a share of revenue from new and existing offshore drilling leases.

Speaking at a press conference to launch the new bill, Arkansas Democrat Senator Blanche Lincoln said that after years of partisan wrangling the compromise move would be widely welcomed. "The American people have been clamouring for us to come together and that is what this group did," she said.

However, law-makers will now have to wait five weeks for the bill to proceed after the Senate began its summer recess on Friday.

The US renewables industry has expressed grave concerns that law-makers will fail to agree an extension to tax credits before they lapse at the end of the year. They claim that some projects are already being postponed as a result of the uncertainty, and that without the incentive more than 100,000 jobs and $19bn of investment would be at risk.