Sen. John Kerry (D-MA) and Rep. Maurice Hinchey (D-NY) have introduced legislation that would repeal at least $28 billion in tax breaks over a 10-year period for oil and natural gas companies, as well as end royalty relief for offshore production.
The Kerry-Hinchey measure seeks to abolish billions of dollars of tax incentives that were granted to oil and gas companies in the Energy Policy Act of 2005 (EPAct), along with subsidies that were available to the industry prior to the energy bill being passed by Congress and signed into law by President Bush last year. In addition, the bill proposes to stop the practice of royalty relief for energy produced on the Outer Continental Shelf (OCS).
Hinchey also offered an amendment last week to significantly scale back royalty relief as part of the fiscal 2007 Interior spending bill, which the House Appropriations Committee approved by voice vote. His proposal authorizes the federal government to renegotiate more than 1,000 leases that were issued by the Interior Department in the late 1990s (see related story).
Hinchey introduced the "Energy Fairness for America Act" in the House earlier this month, while Kerry sponsored the bill in the Senate in late April (S. 2670). The two lawmakers are exploring ways to pass the bill as a stand-alone measure or as an amendment to a larger bill.
Key natural gas-related provisions in the bill call for Congress to repeal:
The bill also would reevaluate the last in, first out accounting method used by large integrated oil companies for their inventories (raises $4.3 billion over 10 years), and denies foreign tax credits for payments to a foreign country if the foreign country does not have a generally applicable income tax (raises $10 billion over 10 years).
"The oil companies never needed or deserved these massive tax breaks and subsidies in the first place and they certainly don't need them now as their executives roll around in more cash than they know what to do with," Hinchey said. "Of all the ways to save taxpayer money, repealing tax breaks...for oil companies has to be near the top of the list of ways to do so."
While testifying before the House Judiciary Committee in March, the CEOs of the major oil and gas companies said they didn't need the tax breaks that were offered in EPAct (HR 6) and supported their elimination. However, the smaller independent producers, who account for a large part of domestic oil and gas production, and marginal well producers are likely to suffer the most if the tax breaks are abolished.
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