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Senate Bill to Levy Windfall Tax, Roll Back Incentives Bites the Dust

June 16, 2008
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The Senate last Tuesday voted not to move forward with Democratic energy legislation that would revoke $17 billion in tax breaks for energy companies, impose a windfall profits tax on energy companies that don't invest in renewable energy sources and impose federal penalties for energy price gouging (see NGI, May 12).

By 51-43, the Senate voted against cloture, effectively killing the measure (S. 3044) for now. The defeat came only a few days after Democrats failed to achieve cloture to move their climate change measure forward (see NGI, June 9). The Democratic setback wass a major victory for the oil and gas industry, as well as the New York Mercantile Exchange, which had serious concerns with the legislation. It also was a big win for Senate Republicans.

Sen. Pete Domenici of New Mexico, the ranking Republican on the Senate Energy and Natural Resources Committee, called the measure the "No Energy" bill. "The last time a windfall profits tax was imposed -- in 1980 -- it reduced domestic oil production by up to 1.27 billion bbls during a period in which dependence on foreign oil grew from three to 13%."

The legislation, sponsored by Senate Majority Leader Harry Leader Harry Reid (D-NV) and several top Democrats, would have imposed a 25% windfall profits tax on the largest oil and natural gas companies that don't invest in renewable energy, as well as rolled back $17 billion in tax incentives for producers to be reinvested in the development of renewable fuels, consumer price protection and energy efficiency technology.

The bill also sought to revive a plan already passed by both the Senate and the House of Representatives to allow the federal government to sue the Organization of Petroleum Exporting Countries -- source of one-third of global oil supply -- for price manipulation. In addition, the legislation sought to to prevent oil market speculation and would have prevented companies that trade U.S. oil futures from routing transactions through offshore markets to evade position limits. And it required the Commodity Futures Trading Commission to boost margin requirements for all oil futures transactions.

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