From: H. Josef Hebert, Associated Press
Published January 19, 2007 12:00 AM

House Approves Fees, Taxes on Oil Companies; Plans to Use Money for Renewable Fuels

WASHINGTON -- The House rolled back billions of dollars in oil industry subsidies Thursday in what supporters hailed as a new direction in energy policy toward more renewable fuels. Critics said the action would reduce domestic oil production and increase reliance on imports.


The energy legislation was the last of six high-priority issues that House Speaker Nancy Pelosi, D-Calif., had pledged to push through during the first 100 hours of Democratic control. The bill passed by a 264-163 vote.


The bill's prospects are uncertain the Senate, where Democrats hold a narrow majority. The top Republican on the tax-writing Senate Finance Committee, Sen. Charles Grassley of Iowa, said the bill was "another pig in the poke" that targets incentives necessary to promote domestic drilling.


The legislation would impose a "conservation fee" on oil and gas taken from deep waters of the Gulf of Mexico; scrap nearly $6 billion worth of oil industry tax breaks enacted by Congress in recent years; and seek to recoup royalties lost to the government because of an Interior Department error in leases issued in the late 1990s.


Democrats said the legislation could produce as much as $15 billion in revenue. Most of that money would pay to promote renewable fuels such as solar and wind power, alternative fuels including ethanol and biodiesel and incentives for conservation.


"The oil industry doesn't need the taxpayers' help. ... There is not an American that goes to a gas pump that doesn't know that," said Majority Leader Steny Hoyer, D-Md. Pump prices topped $3 per gallon last year as the oil industry earned record profits.


The bill, Hoyer said, "starts to move our nation in a new direction" on energy policy.


The bill's opponents accused the Democratic majority of grandstanding and said the legislation was unnecessary.


"We do not need a tax on domestic energy production and development," said Rep. Dennis Hastert, R-Ill., the former House speaker. "Increasing taxes on our nation's energy industry means one thing -- more reliance on foreign oil and gasoline."


Added Rep. Don Young, R-Alaska: "If you want to do things right, let's tax foreign oil."


Young, who had on a bright red shirt, made reference to it when he said, "It's the color of this bill we're debating -- Communist red." The legislation "amounts to a taking of private property" by forcing oil companies to renegotiate leases they view as valid contracts, he said.


The bill would bar companies from future lease sales unless they agree to renegotiate flawed leases issued in 1998-99 for deep-water drilling in the Gulf of Mexico.


Because of a government error, the leases did not contain a trigger for royalties if prices soared -- as they have in recent years. As a result, the companies have avoided $1 billion in royalties so far and stand to avoid an additional $9 billion over the life of the leases, the Interior Department says.


The White House said it strongly opposes the new production fees and future lease bans. Those steps could reduce domestic production, according to the administration. It views the repeal of the tax break for oil companies as unfairly singling out an industry.


That break, aimed at helping U.S. manufacturers compete against imports, has saved oil companies $700 million a year, House Democrats say.


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On the Net:


Information on the bill, H.R. 6, can be found at http://thomas.loc.gov/


Source: Associated Press


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