The U.S. Senate Thursday defeated efforts to include a $32 billion tax package in the underlying broad energy bill (HR 6), but Democrats scored a procedural victory to limit debate on the measure.

By 57-36, Republicans held back an attempt to bring to the floor for a vote the tax package that provides incentives for renewable fuels and clean energy, but strips oil and natural gas producers of benefits and assesses new taxes. It was not clear whether Majority Leader Harry Reid (D-NV) would try to bring up the measure again.

The Senate, by 61-32, invoked cloture on the underlying energy bill, which started the clock running on 30 hours of debate and prevents any senator from filibustering the bill. Reid wants to wrap up the energy bill by late Friday or over the weekend, but Capitol Hill observers have their doubts about whether the deadline will be met.

The defeat of the Senate tax package was a major victory for oil and gas companies, which would pay for the bulk of the $32 million in tax incentives for alternative fuels. The measure would impose a 13% excise tax on oil and gas produced in the Gulf of Mexico. But since it would allow producers to credit their royalties against the tax, it would be mostly a tax on producers that have refused to pay royalties on production from the flawed 1998-1999 deepwater leases. The tax package, which was voted out of the Senate Finance Committee earlier in the week, also would revoke a manufacturing credit for major integrated companies for income attributable to domestic oil and gas production (see Daily GPI, June 20).

The two proposals would require oil and gas producers to pay more than $20 billion in additional taxes over the next 10 years, according to the Joint Committee on Taxation.

The Senate tax package "raises taxes in the wrong places and then it spends in the wrong places," said Sen. Pete Domenici of New Mexico, the ranking Republican on the Senate Energy and Natural Resources Committee, in the Wall Street Journal. "The tax provisions in this bill will increase the cost of gasoline at the pump for Americans, increase the electricity bills for families, and work severe hardship on our natural gas supply," he added.

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