February 28, 2008 in Business

House OKs bill on breaks for oil

H. Josef Hebert Associated Press
 

WASHINGTON – House Democrats were primed to raise oil industry taxes. It didn’t hurt their cause when a barrel of crude reached the once unthinkable level of $102 and there was talk of possible $4-a-gallon gasoline this summer.

Those were among the numbers hanging in the air as the House debated legislation Wednesday that would roll back $18 billion in tax breaks over 10 years for the country’s five largest oil companies.

Those companies earned $123 billion last year, one Democrat after another reminded colleagues.

With those kinds of profits, “stop the madness of subsidizing oil companies,” said Rep. Jim McDermott, D-Wash.

Republicans said the Democrats’ attack was unfair – “spiteful and wrong” to Rep. Jim McCrery, R-La. But that argument seemed lost amid the outrage over high pump prices.

The House approved the $18 billion tax plan by a 236-182 vote, despite a veto threat from the White House. The measure also faces an uncertain fate in the Senate.

The money collected over 10 years would provide tax breaks for wind, solar and other alternative energy sources and for energy conservation.

Approval came amid “a convergence of events” that included record crude oil prices and gasoline heading steadily upward, acknowledged Rep. Rahm Emanuel of Illinois, the No. 4 House Democrat. The price of a barrel of crude settled just under $100 after reaching $102.08 earlier Wednesday.

Seventeen Republicans supported the tax measure, he noted. That was 10 more than did so in August when the House passed a similar bill that later died in the Senate.

Senate Democratic leaders said they planned to put the bill on a fast track and try to avoid a GOP filibuster. The White House said that the bill unfairly takes aim at the oil industry and that President Bush was expected to veto it if it passes Congress.

Several years ago, when oil cost $55 a barrel, Bush said oil companies need no government subsidies to pursue more oil or gas, according to House Majority Leader Steny Hoyer, D-Md.

“With the price of oil hovering around $100 do we really believe this incentive is justified?” Hoyer asked. “Do these companies need taxpayer subsidies to look for new product? They don’t need any incentive.”

Republicans said the new taxes would inhibit investments in domestic oil and gas exploration and production and in turn could lead to higher prices. That argument also was made in recent weeks by the American Petroleum Institute, the trade group for the major oil companies.

“It punishes the oil and gas industry. This is wrongheaded. It will result in higher prices at the gasoline pump. It’s spiteful and wrong,” said McCrery, of Louisiana, where the industry plays a prominent economic role.

McCrery, the top Republican on the House Ways and Means Committee, which developed the tax proposals, cited statistics that show that oil companies already pay more taxes than many other industries.

The bill would roll back two lucrative tax breaks for the five largest U.S. oil companies. One helps manufacturers compete against foreign companies; the other gives American companies a tax credit related to oil and gas extraction outside the country. Democrats estimated that those current breaks will save the oil companies $17.65 billion in taxes over the next 10 years if kept in place.

The House-passed bill would use that money to promote renewable energy industries – such as wind, solar and cellulosic ethanol plants – by extending tax credits that recently expired or are scheduled to expire at year’s end.

The bill also would offer tax credits for more energy efficient homes and a credit for “plug-in” gas-electric hybrid cars that would capture electricity off the power grid, once such cars become available in showrooms.

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