The Clinton administration continues to hone its BTU tax proposal behind closed doors, hoping to finish the package this week so it can send it to Congress next month.
The package must answer a number of sticky questions, including the all important issue of where taxes are imposed.
For example, will crude be taxed entering the refinery or products taxed leaving it? Will natural gas be taxed entering an interstate pipeline or when an end user takes possession? Those questions are important because if companies are required to collect the tax, they fear they may not be able to pass it on to their customers.
And there are perhaps a hundred other tough issues to resolve about the BTU tax plan, such as how the exemption for the nonfuel use of oil and gas can be made workable.
FOR AND AGAINST
Meanwhile, the Clinton administration is playing hardball. It considers any energy associations or companies who are not for the tax to be against it.
And it is not inviting tax opponents to its sworn-to-secrecy meetings with industry on how to make the BTU tax workable. Two notable outsiders are the American Petroleum Institute and National Petroleum Refiners Association.
That's part of the administration's strategy to befuddle the opposition and force some industry support for the BTU tax. So far, the only oil companies that have publicly embraced the tax are ARCO and Citgo Petroleum Corp.
Last week Citgo said, "We believe such a tax...should be broad based and as geographically neutral as possible. It should use existing tax collection points and mechanisms. And it should maintain a level playing field among various fuels and feedstocks."
Citgo, owned by a subsidiary of Petroleos de Venezuela, refines, transports, and markets fuels, lubricants, and petrochemicals.
Meanwhile, an Ohio state task force estimates the BTU tax would cost its citizens $33 billion, a finding that is likely to be duplicated in other rust belt states.
The tax force said the BTU tax would jack up Ohio energy costs 6.3%, affecting the state's three out of every 10 jobs that are in energy intensive industries.
I. John Reimers, Ohio Chamber of Commerce president, said, "In Ohio the combined impact of the tax would cancel any potential benefit the state could receive from the administration's economic stimulus package."
Screaming the loudest about the BTU tax are inland barge operators. The American Waterways Operators say the administration plan would boost the tax burden on the barge industry to $1.19/gal from 19cts, capturing one fourth of its members' annual revenues.
SPR FALLOUT
Whatever happens on taxes, budget cutting may doom further purchases for the Strategic Petroleum Reserve.
SPR has capacity for 750 million bbl, and holds nearly 570 million.
The Clinton administration proposes to cut the nominal fill rate to 13,000 b/d from 20,000 b/d. Now Republicans on the House budget committee are urging all that SPR purchases be halted. The White House is quite likely to agree.
Copyright 1993 Oil & Gas Journal. All Rights Reserved.
