House Democrats aim at oil industry subsidies

Reuters
House Democrats aim at oil industry subsidies
By Chris Baltimore

WASHINGTON (Reuters) - Democrats in the U.S. House of Representatives on Friday introduced a bill that would rescind billions of dollars worth of tax incentives extended to U.S. energy companies and put the money into a fund earmarked for renewable energy.

Sponsors of the Creating Long-term Energy Alternatives for the Nation Act, or CLEAN, said it will save U.S. taxpayers about $13 billion over an unspecified number of years, but industry groups said it could hinder U.S. oil companies' ability to find and develop new energy sources.

Going after "Big Oil" is a top priority of the House of Representatives' Democratic leadership, which says oil companies have earned record profits at the expense of U.S. motorists paying high gasoline prices.

As part of legislation they pledged to unveil in the first 100 hours of the new legislative session, House Speaker Nancy Pelosi and nearly 200 co-sponsors introduced a bill that repeals a 2004 tax deduction for energy companies.

The bill also rolls back tax breaks for geophysical studies conducted by the five biggest U.S. integrated oil companies, and repeals some incentives to produce oil and natural gas in deep waters of the Gulf of Mexico.

However, the bill did not change oil and gas inventory accounting rules that some analysts said were in play in the legislation, and left intact incentives to build new U.S. refineries.

Instead, the lion's share of the savings comes from striking a phased-in 3-percent tax reduction that Congress gave to all U.S. manufacturers in 2004, which would have been in force through 2013. Ending that benefit will save about $6.5 billion in the 2007-2016 period, according to data from Congress' Joint Committee on Taxation.

In comparison, ending the geophysical tax breaks will save $103 million, according to committee data.

The bill would take the savings and put it into a renewable energy fund, which Congress will dole out at a later date to provide incentives for yet-unspecified renewable energy sources.

"This is just an act to take money from the oil industry and use it on alternatives -- that's just a repeat of the mistakes of the past," said John Felmy, chief economist at the American Petroleum Institute, U.S. oil and gas companies' biggest lobbying group.

Similar measures pursued by Congress in the 1980s that taxed oil industry profits and diverted money toward renewables were a "colossal failure" that ended up lowering U.S. oil production and boosting import dependence, Felmy said.

Environmental groups applauded the bill.

Friends of the Earth called the bill "a significant and welcome departure from the energy policy offered by the previous Congress and the Bush administration."