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Senate Vote on Oil, Gas Taxes May Be Delayed Due to Pakistan Events

Senate debate and a possible vote on repealing oil and natural gas tax breaks, which was anticipated this week, is now expected to be pushed back for at least a week following the news that Osama bin Laden was killed in Pakistan.

Senate Majority Leader Harry Reid (D-NV) "has indicated that he intends to bring a vote to the Senate floor as soon as he possibly can. Our understanding is that may have slipped [for] a week at least" due to the events in Pakistan, said Jack Gerard, president of the American Petroleum Institute (API) during a teleconference with reporters Tuesday (see Daily GPI, May 3).

When a bill to roll back the tax breaks does come to the Senate floor, it's unclear what legislative vehicle will be used -- President Obama's proposal to eliminate $4 billion in oil and gas tax breaks in fiscal years 2011 and 2012; a plan by Sen. Max Baucus (D-MT), chairman of the Senate Finance Committee, to repeal billions of dollars in tax breaks for the five largest oil and gas producers; or an undisclosed legislative proposal.

"I expect that they're creative enough and experienced enough that he [Reid] will find whatever vehicle he believes is appropriate," said Gerard. He sees both the president's and Baucus' proposals as possible legislative vehicles to end tax breaks for oil and gas.

API is opposed to any legislation that would repeal tax breaks for oil and gas companies in general, and it particularly objects to the Baucus plan. Gerard questioned the constitutionality of a plan that punishes five individual companies by stripping them of their tax breaks. "We need to stay focused on energy policy, not demonizing industries," he said.

Gerard's push to keep the tax breaks for producers is at odds with what the major producers, Shell, BP and ExxonMobil, told Congress in 2006: that they didn't need the tax incentives (see Daily GPI, Jan. 4, 2007).

He believes there will be bipartisan opposition in Congress to end oil and gas tax breaks, foiling the chance that legislation would be sent to the White House. The Obama administration and congressional Democrats have tried for years to no avail to end oil and gas tax breaks.

The Baucus proposal, among other things, would disallow special treatment for oil and gas companies under Section 199, which is intended to promote job growth. "Again if it's good for the broader industry...it [the Section 199 tax incentive] should be good for all segments of industry and business," including oil and gas, Gerard said.

He said he and other API officials plan to go to Capitol Hill to "visit with everyone who will hear us" on the tax issue, including the leaders of the House and Senate.

At this stage, the House and Senate are at a standstill on key energy issues. While the proposal to repeal oil and gas tax breaks may find support in the Senate, the House is prone to vote against such a measure. Meanwhile the House is expected to begin debating and voting out measures this week to expand permitting and leasing (see related story). The Senate is likely to be less receptive to the bills.

"I think at this...stage of the process it's premature to predict" whether a compromise can be reached between Democrats and Republicans in the two chambers on these energy issues, Gerard said. However he believes that "pressure will continue to mount" from the public on energy items, and that Congress will have a difficult time of ignoring it.

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