Sen. Charles Grassley (R-IA), chairman of the Senate Finance Committee, said last week he would oppose a proposal to impose a windfall profits tax on oil companies, but he called on major energy companies to voluntarily give a percentage of their huge quarterly earnings to fuel fund programs that supplement the Low-Income Home Energy Assistance Program (LIHEAP).
In letters to the American Petroleum Institute, Natural Gas Supply Association and the Independent Petroleum Association of America, Grassley said it was "not unreasonable to expect [corporate members of the energy trade associations] with 50, 75, or 100% growth in earnings this quarter to contribute a mere 10% of those profits to fuel fund programs that supplement LIHEAP." The Bush administration last week said it did not support Grassley's action.
Energy companies "have a responsibility to use these record profits to invest in more exploration, production and refining capacity to increase supply of petroleum products," as well as a "responsibility to help less fortunate Americans cope with the high cost of heating fuels" this winter, Grassley wrote. "Your members have an opportunity to demonstrate that they're good corporate citizens."
Industry analysts have estimated that the 29 major oil and natural gas companies in the Standard & Poor's stock index are expected to earn $96 billion this year, up from $68 billion in 2004 and $43 billion in 2003, he noted. Companies that have reported third quarter profits so far have earned more than $20 billion, an increase of more than 50% over last year.
Grassley asked each energy association to provide a status report on their members' charitable contributions.
In a related development, Sen. Pete Domenici (R-NM), chairman of the Senate Energy and Natural Resources Committee, also indicated last week he would oppose a proposal of Sen. Judd Gregg (R-NH) to levy a tax on the excess profits of energy companies, with the proceeds going to help senior citizens and low-income customers with their winter heating bills. Other top congressional leaders and the Bush administration have signaled that they would not support the tax as well.
Still, this is the loudest and most serious outcry for a windfall profits tax since the last one was repealed in 1988 at the urging of President Reagan, the Wall Street Journal reported. The tax had been passed at the end of the Carter administration as part of a compromise to end Nixon-era price controls on oil.
At the request of Senate Majority Leader Bill Frist (R-TN), the Senate energy panel and the Senate Commerce, Science and Transportation Committee will hold a joint hearing on Wednesday (Nov. 9) to address the run-up in energy prices and corporate profits. Appearing at the joint hearing will be CEOs of ExxonMobil, Shell and other oil and gas companies, state attorneys general and Deborah Platt Majoras, the chair of the Federal Trade Commission. The CEOs are expected to be grilled by lawmakers whose constituents face high heating fuel costs this winter.
Meanwhile, Sens. Byron Dorgan of North Dakota and Chris Dodd of Connecticut added their names to the expanding list of Democrats calling for Congress to impose a windfall profits tax on major oil companies.
The two lawmakers said they will ask the Senate before Thanksgiving to vote to levy a 50% tax on the excessive profits of oil companies, with the money to be directly rebated to consumers. They plan to offer their bill (S. 1621) as an amendment when the Senate considers tax policy during the budget reconciliation debate. The Senate is expected to take up the tax package in about two weeks, the senators said.
The bill would place a 50% excise tax on sales of crude oil at prices above $40 a barrel -- the average level reached last year. The tax would not apply to energy companies that invest their profits in new refinery capacity, renewables or to increase domestic oil and natural gas supplies, according to Dorgan and Dodd.
The senators' announcement came after ExxonMobil Corp. reported whopping profits of nearly $10 billion for the third quarter in late October. Shell, ConocoPhillips, British Petroleum and ChevronTexaco also have posted significant increases in their quarterly earnings.
Sen. Charles Schumer (D-NY) introduced a bill to tax the windfall profits of large energy companies to raise money for Katrina relief and reduce the federal deficit, up to $60 billion over two years. Other Democrats have proposed anti-gouging measures (see NGI, Oct. 31).
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