House of Representatives has passed an energy bill which has been criticised for clearing the way for oil drilling in a wildlife refuge in Alaska.
The bill contains $18.7bn of tax incentives for the promotion of a wide variety of energy sources.
Late on Thursday, the Republican-led House of Representatives rejected an amendment to the bill which would have banned drilling in parts of Alaska.
This move means the House is now on a collision course with the US Senate, which last month voted against drilling in the Arctic National Wildlife Refuge (ANWR).
Most Democrats have been against drilling in the ANWR and they argue the bill favours the oil industry.
But Republicans say that the US needs to increase its domestic energy supplies to reduce dependence on imported oil.
The plan has been highly controversial from the start, with environmentalists saying drilling in the ANWR would seriously harm the wildlife living there.
The ANWR, on the north-east coast of Alaska, is home to caribou, migrating birds and polar bears.
We have no right to jeopardise a pristine wilderness that should be preserved for the next generation
Opponents of the Alaska oil plan have argued that forcing US auto makers to make smaller cars would be a better way of making the US less dependent on foreign oil.
But the so-called auto fuel economy measure proposal, which requires a 5% reduction in fuel used by vehicles such as pickup trucks and suburban utility vehicles by 2010, was not endorsed by the House.
One of the sponsors of the anti-drilling amendment, US Representative Ed Markey said: "We have no right to jeopardise a pristine wilderness that should be preserved for the next generation."
The Senate will be discussing the energy bill next month.