The House last Wednesday passed by a wide margin Democratic legislation that would extend tax breaks for renewable energy and energy efficiency at the expense of oil and natural gas producers.
The bill (HR 5351), which was voted out out the House Ways and Means Committee last month, cleared the House by 236 to 182. It would strip oil and gas companies of $18 billion in tax breaks over the next decade and re-invest them in renewable fuels, such as wind, solar, geothermal, cellulosic ethanol and biofuels, and promote energy efficiency. Many of the tax credits for renewable energy are due to expire at the end of the year.
This was the House’s fourth attempt to push a renewable fuel measure through Congress.
House Republicans opposed the measure, saying it would stymie investment in the oil and gas industry, result in less production and would move more U.S. jobs overseas. The bill faces a precarious future in the Senate, where Republicans also object to rolling back oil and gas tax breaks. To avoid the hurdles in the Senate, the Senate Budget Committee is considering including the renewable tax credit package in the Senate’s version of the filibuster-proof budget reconciliation measure. But even if it clears Congress, the bill would still face a veto by President Bush.
This legislation is a “non-starter,” said Rep. Phil English (R-PA). “It’s not going to go [any place] in the Senate,” and the president has threatened a veto, he noted. An attempt by English to strike the tax increases for oil and gas from the measure was defeated.
“This latest bit of political theater is unlikely to see a second act” in the Senate, agreed House Republican Whip Roy Blunt of Missouri. Sen. Pete Domenici of New Mexico, the ranking Republican on the Senate Energy and Natural Resources Committee, said the bill “was a bad idea when it first passed the House in…2007, and it’s a bad idea now.”
House Speaker Nancy Pelosi (D-CA), by far the strongest champion of the bill, reminded lawmakers that Congress last year took action to put the nation on a new energy course (see NGI, Dec. 17, 2007). She urged the House to “take the next step” by passing the renewable tax package. Pelosi justified repealing oil and gas tax breaks by pointing out that producers made record profits last year. ExxonMobil alone made $40.6 billion in profits in 2007, she said. “We’ve got to stop asking the taxpayer to subsidize the past and invest in the future,” agreed Rep. Rahm Emanuel (D-IL).
Rep. Jim McCrery (R-LA) countered that the oil and gas “profits that have been denigrated” closely parallel the high level of producer investment to find oil and gas resources.
Rep. Gene Green (D-TX) said the bill unfairly penalized oil and gas interests and could hurt consumers. He supported moving forward on renewable energy, but “without jeopardizing our energy security.” Other lawmakers said the House was “picking winners and losers in the marketplace” with the bill.
Democrats “[are] asking Big Oil to share just a tiny part of the subsidies” that it has received for years, said Rep. Lloyd Doggett (D-TX). This bill is “green,” and the only people seeing “red” are oil and gas interests.
“This legislation alone will not bring down gas prices, but it is a vital step forward,” acknowledged Rep. Steny Hoyer (D-MD). “We must move toward those alternatives” to traditional energy resources.
The bill would extend renewable energy tax credits by three years (through Dec. 31, 2011) for certain qualifying facilities, including wind, closed-loop biomass, open-loop biomass, geothermal, small irrigation hydropower, landfill gas and trash combustion facilities. Also candidates for the extended tax credit are facilities that generate electricity from marine renewables (waves and tides). The proposal would cap the aggregate amount of tax credits that can be earned for these qualifying facilities placed in service after Dec. 31, 2009 at an amount equal to 35% of the facility’s cost.
The measure extends a 30% investment tax credit for solar energy property and qualified fuel cell property for eight years (through the end of 2016). It also authorizes $2 billion of new clean renewable energy bonds for public power providers and electric cooperatives.
To offset the costs of the renewable/efficiency tax package, the bill would deny Section 199 benefits for the top five integrated oil and gas companies, and freeze the benefits at 6% for the rest of the industry. It’s estimated that this proposal will raise nearly $14 billion over 10 years.
In addition, the measure also would eliminate the potential for oil and gas companies to manipulate their extraction income in order to achieve beneficial results under U.S. foreign tax credit rules. This provision is projected to raise $4.08 billion over 10 years.
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