SENATE BILLS AIM TO IMPOSE U.S. OIL IMPORT FEE

Two senators have filed a bill that would establish a $25fbbl floor price for U.S. oil imports. The Clinton administration is considering added energy taxes as part of legislation to spark the U.S. economy and reduce the budget deficit (OGJ, Feb. 1, p. 15). Bennett Johnston (D-La.), chairman of the Senate energy committee, and Sen. Bob Krueger (D-Tex.) filed a bill they hope will influence the Clinton plan.

Feb. 9, 1993

3 min read

Two senators have filed a bill that would establish a $25fbbl floor price for U.S. oil imports.

The Clinton administration is considering added energy taxes as part of legislation to spark the U.S. economy and reduce the budget deficit (OGJ, Feb. 1, p. 15).

Bennett Johnston (D-La.), chairman of the Senate energy committee, and Sen. Bob Krueger (D-Tex.) filed a bill they hope will influence the Clinton plan.

Their oil import fee would be phased in if the price of internationally traded crude oil falls below $25/bbl and would equal the difference between $25 and the existing world market price. The bill provides an additional differential of $2.50/bbl for product imports and petrochemical feedstocks, creating a floor price of $27.50/bbl for those products.

Earlier, Sen. Don Nickles (R-Okla.) filed a bill for a $25/bbl floor but with a $3 bbl surcharge for products. Both bills were referred to the Senate finance committee, chaired by Sen. Daniel Patrick Moynihan (D-?4.Y.).

IMPORT FEE REASONING

Johnston said based on Energy Information Administration price projections, a $25/bbl floor would raise about $50 billion for the government through 2000, reduce consumption 200,000 b/d, and increase U.S. production 300,000 b/d, thus cutting imports 500,000 b/d.

Johnston said an oil import fee designed to maintain a reasonable floor price for oil would give assurance to producers planning to drill - and to banks and investors lending them money - that there will be some protection against lower oil prices.

Krueger said, "This is legislation that is not designed from parochial interest. It is designed to address national concerns. Every day we are sending $150 million overseas to buy foreign oil."

George P. Mitchell, chairman of Mitchell Energy & Development Corp., said since an oil import fee was mentioned as a possible energy tax, Saudi Arabia has indicated it plans to cut production and thereby raise the price of oil.

"Every time it looks as though the U.S. is about to take control of its energy policy, the Organization of Petroleum Exporting Countries tries to undermine our sovereignty by manipulating the market. Such actions highlight the need for a fee on imported crude oil and petroleum products."

OPPOSITION

The Petroleum Marketers Association of America vowed to oppose an oil import fee. It said oil import fees and carbon taxes are regressive.

The Northeast-Midwest Congressional Coalition complained an oil import fee disproportionately would harm their regions of the country. And it noted that a fee of only $1.71/bbl might raise $5 billion of federal tax revenue but would cost American consumers $10.6 billion because the price of domestically produced oil also would rise.

Other energy tax proposals also came under fire.

William McCormick, chairman of Consumers Power Co., Jackson., Mich., said a broad based energy tax could increase the cost of Michigan's energy intensive manufactured products $1 billion/year and raise taxes on Michigan residential and commercial energy users by the same amount.

The Ohio Steel Industry Advisory Commission opposed any carbon tax saying it would raise manufacturing costs and impede competitiveness without providing a benefit to the environment. It said a $6/ton tax would cost the nine primary steelmakers belonging to the commission nearly $40 million/year.