WASHINGTON – While the hurricanes of 2005 brought loss and suffering to hundreds of thousands of people, they also brought record profits for oil companies that benefited from higher prices while offshore rigs and pipelines were shut down.
The result has spawned some curious politics. Last week, Senate Republicans tucked a $4 billion dollar tax increase on giant oil companies into a bill providing $60 billion in tax cuts to victims of Hurricane Katrina, various U.S. industries and upper-middle class families.
Click in the box to the right to watch a report by FOX News' Major Garrett.
The White House immediately vowed to veto the Senate bill, placing it in the awkward position of sacrificing tax cuts for millions of Americans in order to shield oil companies from higher taxes even after they racked up more than $32 billion in third-quarter profits.
"They are threatening to undermine an entire bill, something that is the priority of many Americans across the country and of other industries, and of many sectors of the economy would be threatened, just to protect the oil and gas industry," said Navin Nayak, an environmental advocate at U.S. Public Interest Research Group.
When top oil executives defended their profits in a joint hearing on Capitol Hill, some lawmakers suggested they donate a portion of those earnings to help poor Americans pay higher heating bills. When that didn't happen, Iowa Republican Sen. Charles Grassley changed the rules on government taxation of inventories held by the nation's five biggest oil companies. That suddenly exposed the five companies to higher federal taxes. This change affects no other industry.
"The United States is now behaving like a third world country by changing the rules of the game. If another country tried to do this to our companies, the State Department would lodge a protest," said Peter Van Doren, a senior fellow at the Cato Institute, and the editor of the organization's journal Regulation.
The Senate adopted the Grassley oil tax, winning praise from environmental groups.
"When an industry has recorded the highest profits in the history of American capitalism I think it would be a common sense solution to ask the industry to pay its fair share in taxes," Nayak said.
But the oil tax faces an uncertain future. House Republicans strongly oppose it. The oil industry is mobilizing to block it as are conservative groups anti-tax groups.
"You don't ever want to change tax rules in a particular sector because capital doesn't have to invest in oil," Van Doren said.
As the oil industry fights to kill this new tax, it's also trying to win the right to drill for oil in Alaska's Arctic National Wildlife Refuge. In the end, the current betting is the oil industry will lose both fights — get the taxes, but not the drilling rights.
Get all the stories you need-to-know from the most powerful name in news delivered first thing every morning to your inbox