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Senate Rejects Bid to Roll Back Oil, Gas Tax Breaks

Three days of fiery debate in the Senate on the Obama administration's energy policies came to a quiet end Thursday with the defeat of a Democratic-sponsored bill that proposed rolling back billions of dollars in tax breaks for oil and natural gas producers.

Senators voted 51-47 against the measure, falling nine votes short of the 60 needed to advance the legislation (S. 2204), sponsored by Sen. Robert Menendez (D-NJ). The outcome was expected. The Obama-backed bill was widely opposed by Senate Republicans. A few Democrats from producing states crossed the aisle to vote with them, including Sen. Mary Landrieu of Louisiana.

From the White House Rose Garden, President Obama prior to the vote called on Congress to pass the bill repealing the tax breaks for the Big Five producers: ExxonMobil Corp., BP plc, Royal Dutch Shell plc, Chevron Corp. and ConocoPhillips. The tax breaks and subsidies are "hitting the American people twice. You're already paying a premium at the pump right now. And on top of that, Congress thinks it's a good idea to send billions more of your tax dollars to the oil industry."

But John Felmy, chief economist for the American Petroleum Institute (API), countered that the tax breaks for oil and gas "are not subsidies. These are tax incentives that generally apply to all industries...We are just punitively being singled out."

The API launched a media campaign last week calling the Menendez bill "another bad idea from Washington." It urged constituents to call their senators and tell them to vote against the bill. The measure gained traction among Democrats because of rising gasoline prices (see NGI, March 26). But Republicans and industry argued that increasing gas taxes on oil and gas was not the course to take. Anyone who thinks raising taxes will reduce gasoline prices "failed third grade arithmetic," Felmy said.

"Hopefully [this] common sense vote in the Senate will end the Obama administration's attempt to blame high gasoline prices on the oil and natural gas industry," said Barry Russell, president of the Independent Petroleum Association of America. But he doubts that the Senate vote would put the issue to rest. "Repealing the oil and natural gas industry's [tax] provisions remains a centerpiece of the president's energy agenda as evidenced by his speech in the White House Rose Garden."

"It's time to stop bringing up the same bad proposals" in Congress, Felmy said. The Obama administration and Democrats in Congress have tried to repeal oil and gas tax breaks several times over the past four years and each time have been defeated. The most recent defeat came last May when Senate Republicans pushed back a Democratic effort to repeal $21 billion in tax preferences for the five largest producers (see NGI, May 2, 2011).

"I hope Congress will move beyond [this] distraction...silly rhetoric," and address serious energy policy proposals, Felmy said.

The Menendez bill, although limited to the tax breaks, prompted Republicans to launch broad attacks on Obama administration energy policies, including restrictions on access to federal offshore and onshore lands, as well as the Arctic National Wildlife Refuge.

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