Senate rejects new oil taxes as it passes energy bill

The US Senate passed an energy bill by 65 to 27 votes as midnight approached June 21, but Democrats were frustrated after Republicans blocked several new oil taxes in it earlier that day.

Nick Snow
Washington Correspondent

WASHINGTON, DC, June 22 -- The US Senate passed an energy bill by 65 to 27 votes as midnight approached June 21, but Democrats were frustrated after Republicans blocked several new oil taxes in it earlier that day.

"Democrats believe it is more important to invest in clean, affordable energy produced right here in America than to protect the multibillion dollar oil industry," said Majority Leader Harry Reid (D-Nev.) following the bill's passage. "That is why, in the coming months, we will continue to move forward by enacting additional measures that put consumers, the economy, our national security, and the environment first," he said.

An amendment containing the new oil taxes fell short of the three-fifths majority necessary to end debate by 57 to 36 votes. It had emerged from the Senate Finance Committee 2 days earlier as proponents emphasized the renewable and alternative energy technology financing incentives which they said made the new taxes necessary.

Immediately before the June 21 cloture vote, Finance Committee Chairman Max Baucus (D-Mont.) said the debate boiled down to whether Congress wanted to give alternative and renewable energy technologies the kind of tax breaks the oil industry had received since 1926.

"I think the time has come for us to give the same kinds of incentives to other industries—alternative energy, renewable fuels, clean coal technologies, and so forth—that the oil and gas industry have enjoyed for decades and decades," Baucus said. "We are not taking these incentives from the oil and gas industry at all. We are just saying the time has come for us to give incentives to make America more self-sufficient in the production of energy," he said.

Measures passed with the bill include an increase in fuel-economy standards for new motor vehicles; requirements that half the cars made by 2015 be capable of running on 85% ethanol blends or biodiesel and that 36 billion gal/year of ethanol be produced by 2022; and a "price-gouging" measure that makes the charging of "unconscionably excessive" prices for oil products a crime. The bill also sets new energy-efficiency standards for appliances, provides financial support for research into fuel-efficient vehicle technologies, and supports demonstrations of methods for capture and sequestration of carbon dioxide emitted by power plants.

'Eminently reasonable'
Energy and Natural Resources Committee Chairman Jeff Bingaman (D-NM) defended the proposed 13% severance tax on future Gulf of Mexico production. "It is designed so it will not be unduly burdensome on any company…. It does not abrogate contracts. It is a forward-looking tax provision which I think is eminently reasonable," he said.

But Sen. Mike Enzi (R-Wyo.) said taxing future production on the US Outer Continental Shelf "will most certainly not encourage the domestic energy production we all believe is so important." He also criticized the amendment's proposals to revise the foreign tax credit and make refiners ineligible for a manufacturer's tax credit.

Sen. Pete Domenici (R-NM), the Energy and Natural Resources Committee's chief minority member, said proponents of the offshore production severance tax claimed it would affect only major oil companies. Domenici said, "Not true. In fact, there are 40 lessee companies. Nearly 75% of all companies holding leases on the OCS would be subject to a 13% punitive tax."

Oil industry groups expressed relief that the proposed taxes did not make it into the final bill, but questioned the provision that would require the Federal Trade Commission to investigate gasoline price-gouging allegations during a presidentially declared national energy emergency.

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