While the Senate successfully fought off Democratic efforts to levy a windfall profits tax on the earnings of major energy companies in the $60 billion tax reconciliation bill that was passed early Friday, lawmakers added nearly $5 billion to the tax burden of oil companies and repealed tax benefits that were approved in the energy bill in August.
The tax legislation, which cleared the Senate by a 64-33 vote shortly after midnight, calls for major energy companies to pay an additional $4.9 billion in taxes next year under a LIFO inventory accounting change. The proposal would apply primarily to integrated oil companies that have gross receipts of more than $1 billion annually. The White House indicated it would veto the tax bill if this provision wasn't removed.
As one of the sponsors of the inventory accounting change, Sen. Charles Schumer (D-NY) said it was "amazing" that the White House "would threaten to use its first veto ever to help its big oil buddies even at a time when they're rolling in record profits."
Also still in the bill (S. 2020) was a proposal by Sen. Ron Wyden (D-OR) to scale back a tax break for oil and gas drilling projects so that large integrated companies are prevented from benefiting. The tax break, which was part of the Energy Policy Act of 2005, would have provided incentives of about $1 billion over a 10-year period, according to Wyden's office.
Democratic efforts to penalize energy companies even further by stripping them of more tax benefits and imposing stiffer taxes were rebuffed by Republicans, along with a handful of Democrats.
By 64 to 35, Senate rejected a Democratic amendment to levy a 50% excise tax on oil company profits above $40 a barrel that aren't reinvested to expand oil and natural gas supplies or build new refinery capacity. Spearheading the opposition to the amendment on the Senate floor was Sen. Craig Thomas (R-WY).
Also rejected was an amendment by Sen. Dianne Feinstein (D-CA) that would have rescinded certain tax breaks for integrated energy companies related to oil and gas well intangible drilling and development costs. Her measure would have repealed the tax benefit for large companies that have an average daily worldwide production of at least 500,000 barrels of crude for any taxable year beginning after Dec. 31, 2005.
Feinstein offered the proposal after the executives of five major energy companies testified at a joint Senate committee hearing earlier this month that they didn't need the tax incentives offered in the Energy Policy Act of 2005. And Sen. Pete Domenici (R-NM), chairman of the Senate Energy and Natural Resources Committee, argued the tax break that Feinstein sought to void was not part of the energy bill. Rather, he said it had been policy for "eons."
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