House seeks more oil royalties, kills tax breaks

Reuters
House seeks more oil royalties, kills tax breaks
By Chris Baltimore and Tom Doggett

WASHINGTON (Reuters) - The new Democratic-led House of Representatives passed legislation on Thursday aimed at "Big Oil" that would roll back some industry tax breaks and force energy companies to pay more drilling royalties, valued at $14 billion over 10 years.

Passage of the bill by a vote of 264-163 capped House Speaker Nancy Pelosi's 100-hour agenda, which included measures to raise the minimum wage, lower student loan interest rates and bolster homeland security.

The $14 billion raised from the additional royalties and repealed tax breaks would fund research for renewable energy sources. The measure must be approved by the Senate and the president before it becomes law.

It is unclear if President George W. Bush would sign the measure. He supports repealing some of the tax breaks but opposes renegotiating royalty contracts.

Going after major integrated U.S. oil firms like Exxon Mobil Corp., Chevron Corp. and ConocoPhillips has been a top priority for the House Democratic leadership, which says the companies' record profits have come at the expense of U.S. motorists paying high gasoline prices.

"The oil and gas industry is extraordinarily well established and well off," said House Democratic leader Steny Hoyer. "It does not need the American taxpayer's help to be successful or to make a dollar."

'WIN FOR OPEC'

Republican opponents said the bill would raise U.S. energy costs, and Republican Rep. Roy Blunt of Missouri called it "a win for OPEC," referring to the group of oil-exporting nations that produces over a third of the world's oil.

About half the bill's savings comes from eliminating a lower tax rate on oil companies, which will bring in about $6.5 billion from 2007 to 2016, according to a congressional estimate. The lower tax rate had been given to all U.S. manufacturers in 2004, including oil companies.

The rest of the money would come from a "conservation fee" on oil and gas production that the bill would impose on energy companies that refused to renegotiate faulty leases signed in 1998 and 1999. That would raise about $7.6 billion.

Republicans and U.S. oil and gas industry groups said such measures would hurt U.S. consumers by making it more expensive to find and produce domestic supplies.

"In reality, the only people it punishes is the American people," said Rep. Dennis Hastert, Illinois Republican and former House speaker.

Rep. Mike Rogers, Michigan Republican, said the bill would require U.S. consumers to import more oil from U.S. nations like Iran and Venezuela, which are both OPEC members and foes of U.S. policy.

"If you care about our children, stop sending the money to (Iranian President Mahmoud) Ahmadinejad and (Venezuelan President Hugo) Chavez," Rogers said.

Bush has said big oil companies do not need government help amid historically high oil prices, but opposed forcing energy companies to renegotiate faulty drilling contracts, which as written would allow energy companies to avoid paying about $10 billion in royalties.

(Additional reporting by Kevin Drawbaugh)