The windfall profits tax has re-emerged

How serious are the prospects for Congress reviving the windfall profits tax? Serious enough for Sen. Pete V. Domenici (R-N.M.) to ask the chief executives of the five largest US oil companies for detailed explanations of how they use their profits to re-invest in energy production.

How serious are the prospects for Congress reviving the windfall profits tax? Serious enough for Sen. Pete V. Domenici (R-N.M.) to ask the chief executives of the five largest US oil companies for detailed explanations of how they use their profits to re-invest in energy production.

Domenici, the ranking minority member on the Energy and Natural Resources Committee, asked the leaders of BP America, Exxon Mobil, Chevron, ConocoPhillips and Shell Oil in an Apr. 30 letter to assess how proposals to increase taxes on domestic production would affect their companies.

"In order to help me gain a better understanding of your investments and your activities related to helping meet our nation's future energy needs, I am writing to request a summary of all public information in this area," Domenici said in his letter.

"In your summary, please include the amounts that you are re-investing in domestic and international oil and gas production. Additionally, I am particularly interested in the extent of your investment in clean energy sources such as wind, solar, biomass and geothermal energy," he continued.

Gasoline tax proposal

Domenici's letter came two days after Sen. Hillary R. Clinton (D-N.Y.), in her campaign for the Democratic presidential nomination, proposed using a windfall profits tax to pay for suspending the federal tax of 18.4 cents/gal for gasoline and 24.4 cents/gal for diesel fuel during this summer's driving season.

Clinton said on Apr. 28 that she also would like to repeal approximately $7.5 billion in incentives which were part of the 2005 Energy Policy Act, stop filling the Strategic Petroleum Reserve and release oil from it to counter price spikes, crack down on speculation and market manipulation, and put more pressure on the Organization of Petroleum Exporting Countries to increase production.

"We have a choice. We can choose to have you continue to pay the federal gas tax this summer or we can choose to have the oil companies pay for it out of their record profits," she said at a May 2 "Get Out the Vote" event in Hendersonville, N.C.

Obama responded on Apr. 29 in Winston-Salem, N.C., that suspending federal motor fuel taxes this summer, which was first proposed by presumed Republican presidential nominee Sen. John McCain (Ariz.), was an election year gimmick. But he added that he also favors taxing oil companies' excess profits.

An oil industry response

Oil and gas industry associations are trying to counter what clearly is election year rhetoric. "Siphoning away earnings from the industry through new tax schemes won't help address the current market situation. It won't increase investments, it won't produce more supply and it won't help consumers," American Petroleum Institute Chief Economist John C. Felmy said on May 6.

"It will hurt oil and natural gas company owners, 98.5% of whom have no connection with the oil industry other than through the pensions they receive invested in oil company stock, or through their 401k programs, individual retirement accounts and other stock holdings," he told the House Transportation & Infrastructure Committee's Highways and Transit Subcommittee.

But Rep. Dennis J. Kucinich (D-Ohio), who chairs the Oversight and Government Reform Committee's Domestic Policy Subcommittee, said on May 2 that he plans to introduce a bill with provisions including a windfall profits tax, and that 60 other House members support it.

"Consumers are continuing to be gouged at the gas pumps daily. The only thing rising faster than the price of gasoline right now is the skyrocketing profits of the oil companies," Kucinich maintained.

Contact Nick Snow at nicks@pennwell.com

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