Senate Democrats agree to drop energy bill's tax provisions

US Senate Democrats agreed to jettison oil and gas tax provisions after the modified energy bill missed cloture for a second time on Dec. 13 by a 59-40 vote.

Nick Snow
Washington Editor

WASHINGTON, DC, Dec. 13 -- US Senate Democrats agreed to jettison oil and gas tax provisions after the modified energy bill missed cloture for a second time on Dec. 13 by a 59-40 vote.

Majority Leader Harry M. Reid (D-Nev.) said the tax provisions would be removed after the motion to limit debate failed by a single vote. "We're disappointed, but the bill will still be significant because it contains the first significant [Corporate Average Fuel Economy] standards increase in 32 years," he said.

Mary L. Landrieu of Louisiana was the sole Democrat to vote against cloture. "One-sided policymaking solves few problems, and America's path forward depends on a comprehensive, balanced approach to energy conservation and domestic production. We must invest in smart energy solutions for the future, but not at the expense of the states that strengthen our energy security today," she said in a statement following the vote.

Reid said he hopes the Senate passes the bill, minus the tax provisions, by the end of this week.

The action will significantly improve its chances of becoming law since US President George W. Bush has said he would veto any legislation containing new taxes. Senate Minority Leader Mitch McConnell (R-Ky.) said deleting the tax provisions will make the bill acceptable to Republicans.

"This bill will get signed and become law. It will be the most significant energy act we can pass and get signed by the president. It's not dead. The vote caused it to stay alive, and it's ready to go back to the House and on to the president," maintained Pete V. Domenici (R-NM), the Energy and Natural Resources Committee's ranking minority member and one of the bill's most vocal opponents until now.

The close vote clearly upset one leading Senate Democrat, who said it was historic but not in a good way. "Pitted against each other were the energy companies of the past against those of the future. The Senate historically has been kind to oil companies, and that position prevailed today by one vote. The oil companies are celebrating today in their board rooms. Not only are they enjoying record profits, but they also continue to receive federal subsidies," said Majority Whip Richard J. Durbin of Illinois.

"Aren't taxes high enough on domestic producers of oil and gas?" responded John Cornyn (R-Tex.). "This vote shows that we believe there should be more domestic production. Congress can pass and repeal bills, but it can't repeal the law of supply and demand. One reason that prices are going up is that supplies aren't keeping pace. We need to open more US areas for responsible development, which the oil and gas industry is capable of."

Most oil and gas associations did not respond immediately. The American Petroleum Institute said in a statement it applauded the decision which recognizes the adverse effect increased taxes would have on future energy supplies. "The remaining legislation contains provisions which will enhance our energy security. However, we have serious concerns about elements of the bill regarding biofuels. We hope that these will be addressed in subsequent actions, including regulatory rule-making," it said.

Contact Nick Snow at nicks@pennwell.com.

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