Pelosi to Forge Ahead With $21 Billion Tax Package as Part of Energy Plan

Defying a threat of a presidential veto, House Speaker Nancy Pelosi intends to push ahead with a $21 billion tax package, including repeal of tax breaks for major oil companies, as part of an energy bill, aides to the speaker said Tuesday.

Democratic leaders circulated a summary of the legislation that includes the new taxes as well as a requirement for a 40 percent increase in automobile fuel efficiency, a huge increase in the use of ethanol as a motor fuel, and a mandate for utilities to use renewable fuels.

Republicans earlier this year blocked Senate attempts to pass new energy taxes, contending they would hinder domestic oil and gas production. Democratic supporters of the taxes said that with oil hovering near $90 a barrel and the industry making large profits, the tax breaks aren't needed.

The White House has said repeatedly that if the energy legislation singles out the oil companies for new taxes, advisers would recommend that President Bush veto the bill.

Energy Secretary Samuel Bodman reiterated the administration's opposition to such taxes in a meeting with reporters Tuesday. "It is wrong to single out an industry, the oil industry or any industry" for new taxes, Bodman said at an energy newsmaker sponsored by the Platts publication.

The House draft bill, expected to come up for a vote as early as Thursday, calls for repealing $13.5 billion in tax breaks given to major oil companies in 2004 and 2005 and another $8.5 billion in various non-energy tax increases and adjustment to raise revenue needed for the new energy programs, aides said.

They spoke on condition of anonymity because a final bill was still being crafted.

"We are repealing tax breaks for profit-rich oil companies so that we can invest in clean renewable energy" a summary notice to Democratic lawmakers said.

Drew Hammill, a spokesman for Pelosi, confirmed that the energy package will include the sizable tax provision. "It's in there," he said.

The new tax revenues would be used to spur development of renewable fuels including multiyear extensions of solar and wind energy tax credits; tax credits for conservation an energy efficiency, and to recoup lost gasoline tax revenues because of the increased auto fuel efficiency.

There has been speculation for days that House Democratic leaders would back away from the tax provisions, which have been strongly opposed by many Republicans in both the House and Senate and were the focus of an intense lobbying campaign by the oil companies and other industry groups.

Pelosi met for more than an hour Monday evening with Allan Hubbard, director of the president's National Economic Council, and afterward a spokesman said that she was "hopeful that the president "will join the business, labor and environmental communities and support this legislation."

Pelosi has called the legislation, worked out during weeks of discussions between Senate and House Democrats, "a new direction" in U.S. energy policy away from support of fossil fuels, especially oil, and toward spurring production of renewable energy, conservation and efficiency.

Republican leaders have ridiculed the legislation as "a non-energy energy bill" because it doesn't do anything to develop domestic oil or natural gas.

As its centerpiece, the bill would require automakers to increase fuel efficiency for cars, pickup trucks and SUVs to an average of 35 miles per gallon by 2020, the first increase in the federal auto fuel economy standard in 32 years.

It also would require a huge ramp up in the use of ethanol — both from corn and cellulosic material such as prairie grass and wood chips — over the next 15 years to 36 billion gallons a year by 2022, a sevenfold increase from today.

The legislation also would for the first time require all nonpublic utilities to use solar, wind or other renewable energy to produce 15 percent of their electricity. The national mandate is opposed by Southeast lawmakers who argue the region will have difficulty complying with the mandate and that will lead to higher electricity costs.