WATCHING WASHINGTON BTU TAX TO HIT ROUGH ROAD IN CONGRESS

President Clinton's proposed BTU tax program seems headed for especially tough sledding in Congress. Oil and gas industry associations have linked arms in opposition. oil would take a double hit under the tax, posing lots of problems for refiners already facing uncertain, perplexing environmental standards for fuels. The tax would impose a stiff percentage price increase for Clinton's favorite fuel, natural gas. Pipelines would collect the natural gas BTU tax, and producers are worried

March 1, 1993

3 min read

President Clinton's proposed BTU tax program seems headed for especially tough sledding in Congress.

Oil and gas industry associations have linked arms in opposition.

oil would take a double hit under the tax, posing lots of problems for refiners already facing uncertain, perplexing environmental standards for fuels.

The tax would impose a stiff percentage price increase for Clinton's favorite fuel, natural gas. Pipelines would collect the natural gas BTU tax, and producers are worried it would come entirely out of their pockets rather than being passed through to consumers.

TAX FALLOUT

The BTU tax would cause such drastic distortions in the producing, refining, and pipeline segments that Congress may be compelled to consider a number of exemptions, which in turn will cause even more distortions.

The "blue book," the full details behind the Clinton proposal, hadn't been released last week. But the BTU tax outline alone was enough to have oil lobbyists wondering how an old hand at energy taxes like Treasury Sec. Lloyd Bentsen, a former Texas senator, could have had anything to do with it.

Fortunately, the Clinton administration does not appear to be firmly committed to the BTU tax as a policy as much as it is committed to the need to raise $71 billion to help pay for its economic recovery package.

An energy tax seemed to be the best opportunity to raise big bucks, and Clinton said a BTU tax was seen as the lesser among several evils.

Sensing that lack of commitment, Bennett Johnston (D-La.), Senate energy committee chairman, urged the administration to consider a broad value added tax (VAT) rather than a BTU tax. A dozen senators on his committee also expressed opposition to a BTU tax.

It also is fortunate that industry will have at least a couple of months to work to kill the BTU tax or to push for a substitute.

Bending to pressure from Capitol Hill, last week Clinton agreed to defer the economic stimulus proposal-and thus higher taxes-until Congress can vote on the spending cuts he has proposed.

THE BATTLEGROUNDS

If and when the BTU tax proposal goes to Capitol Hill, the main battlegrounds will be in the tax writing House ways and means and Senate finance committees. Any package they agree on is likely to clear the full House and Senate.

Neither committee has been particularly friendly toward the oil industry in the recent past, and both are controlled by Democrats anxious to support the president in his first legislative battle.

It's too soon to predict what will happen. One lobbyist said, "A lot of knowledgeable people appear to be opposed to a BTU tax, but Clinton has a big wave of support rolling here."