House OKs $18B in New Taxes on Oil Companies

The House has approved $18 billion in new taxes on the largest oil companies.

The money collected over 10 years is intended to provide tax breaks for wind, solar and other alternative energy sources and for energy conservation.

The measure passed by the House by a 236-182 vote Wednesday as lawmakers cited record oil prices and rising gasoline costs.

Senate Democratic leaders say they will put the bill on a fast track and try to avoid a Republican filibuster. The White House says the bill unfairly singles out the oil industry. President Bush is expected to veto the legislation if it passes Congress.

Rep Jim McDermott, D-Wash., urged lawmakers to "stop the madness of subsidizing oil companies" when the industry earned $123 billion last year.

"Gas prices have been soaring," added Rep. Richard Neal, D-Mass., noting that across much of the country people are "struggling to pay energy costs that have skyrocketed in a harsh winter."

But Republicans contended the tax provisions would reduce investment in oil and gas development and lead to higher prices.... "This bill singles out one industry," complained Rep. Kevin Brady, R-Texas.

House Speaker Nancy Pelosi, D-Calif., noted that the House twice last year passed similar tax provisions — only to have it die in the Senate — and "since then the price of gasoline has gone up 75 cents" a gallon and large oil companies have made record profits. She said the bill will spur clean energy production with tax incentives for those industries.

Pelosi's office distributed a state-by-state list of high gasoline prices compared with oil industry profits, including a record $40.6 billion in earnings by ExxonMobil Corp. last year.

The bill would roll back two lucrative tax breaks for the largest U.S. oil companies, and use the money for tax incentives to support wind, solar and biofuel industries as well as energy efficiency programs.

Pelosi called the shift of tax benefits from oil to alternative energy development critical to increased energy independence and lowering energy costs.

The White House maintains that singling out the oil companies for higher taxes "would reduce the nation's energy security rather than improve it" and "lead to higher energy costs to U.S. consumers and business."

President Bush would be urged by his senior advisers to veto the bill should Congress send it to his desk, the White House said in a statement on the eve of the House vote.

The oil industry has lobbied intensely against the legislation, calling it a "discriminatory bill" that unfairly targets companies that already pay more taxes than U.S. manufacturers.

"New taxes ... will even further reduce our energy security by discouraging new domestic oil and natural gas production and refinery capacity expansions," the American Petroleum Institute said in a statement.

The bill would direct more than $8 billion to bolster investment in wind, solar, biomass and geothermal energy development, extending many of the tax credits for these industries that have either recently ended or are scheduled to expire at the end of this year.

It also would provide tax breaks for certain energy conservation programs, including a $300 credit for people making their homes more energy efficient. Nearly $2 billion would go toward establishing energy conservation bonds for environmentally beneficial community programs.

"These incentives must be extended immediately to void significant harm to the development of clean energy industries in the United States," said a letter sent to lawmakers by more than 100 businesses, electric utilities, environmental groups and energy efficiency advocates.

A similar tax proposal passed the House last summer, but it was abandoned in the Senate where Republicans overwhelmingly opposed it. Bush at the time promised he would veto the measure because it singled out the oil industry for new taxes.

The bill targets a tax break that Congress provided in 2005 to help domestic manufacturers. It also would limit the amount of tax credits the largest U.S. oil companies could claim under that law. The bill also would limit the tax break provided to oil companies in connection with foreign oil and gas extraction.

The oil companies would have to pay an additional $17.65 billion in federal taxes over 10 years under the proposed changes, according to an analysis by the House Ways and Means Committee.

Democrats anticipated passage of the bill by the House and hoped that the recent surge in oil prices and gasoline costs at the pump would garner more support for it in the Senate.