Democrats Seeks To Roll Back Oil Co. Welfare

Democrats seek to reclaim energy tax breaks
Republicans and oil industry executives oppose the bill, which calls for using the money as incentive to develop cleaner fuel sources.
By Edmund L. Andrews, New York Times
Last update: June 17, 2007 – 9:47 PM


WASHINGTON - Senate Democrats are seeking a major reversal of energy tax policies that would take billions of dollars in tax breaks and other benefits from the oil industry to underwrite renewable fuels.

The tax increases would reverse incentives passed as recently as three years ago to increase domestic exploration and production of oil and gas. The change reflects a shift from the Republican focus on expanding oil production to the Democratic concern about reducing global warming.

On Tuesday, the Senate Finance Committee will take up a bill that would raise about $14 billion from oil companies over 10 years and would give about the same amount of money as new incentives for solar power, wind power, cellulosic ethanol and numerous other renewable energy sources. The bill is one of the signature issues this year for Democrats, along with immigration and the war in Iraq, and one in which they hope to clearly distinguish themselves from the Republicans.

But Senate Democrats are expected to go beyond the $14 billion in tax changes in the draft bill. Democratic officials said the committee is all but certain to adopt a proposal by New Mexico Sen. Jeff Bingaman that would raise $10 billion from companies that drill for oil and gas in federal waters but do not currently pay royalties to the government.

"We are cutting back subsidies for the oil and gas industry and using that money to finance the development of new and cleaner sources of energy," said Bingaman, who plans to attach the entire tax package to the energy bill on the Senate floor.

It is unclear how much President Bush or Republicans in Congress will fight the proposed tax shift. The ranking Republican on the Senate Finance Committee, Iowa Sen. Charles Grassley, has already endorsed the $14 billion package.

But the plan could easily founder because of opposition to any one of many hotly disputed provisions in the broader energy bill. Just last week, a threatened filibuster by Republicans forced Democrats to postpone a floor vote on requiring electric utilities to produce 15 percent of their power from renewable fuels. The White House, meanwhile, has threatened to veto the bill if lawmakers do not drop a provision intended to prosecute what Democrats call "unconscionably excessive" gasoline prices.

Because Senate Democrats want to offset the cost of any new tax breaks with tax increases elsewhere, many lawmakers are pushing for even more tax raises from oil companies.
Oil executives are protesting loudly, saying that the proposed changes would take money away from exploring and drilling in the United States and increase the nation's dependence on imported foreign oil.

"They talk about our companies as if they're owned by space aliens," said John Felmy, chief economist at the American Petroleum Institute, a trade association. "They talk about energy security, but these provisions could have the opposite effect in terms of reducing our production here and increasing our imports."

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