Senate Finance Panel Okays $28.5B Energy Tax Package
WASHINGTON (Dow Jones)
The U.S. Senate Finance Committee Tuesday passed a major energy tax package that would see oil companies footing the bill for much of the $28.5 billion cost to encourage clean and alternative energy technologies.
The Energy Advancement and Investment Act of 2007 would extend production tax credits for renewable energies such as wind and solar to 2013, offer billions in credits for clean coal projects and carbon dioxide storage, and significantly expand incentives for hybrid vehicles and biofuel production.
The package - passed by a 12-6 vote - is expected to be tacked onto the comprehensive energy bill the Senate is debating in the chamber this week.
"The provisions of this bill constitute the most comprehensive set of incentives for the production of clean, alternative energy ever contemplated by Congress," Sen. Jeff Bingaman,, D-N.M., chairman of the committee's energy sub-panel said.
Finance Committee Chairman Max Baucus, D-Mont., said that the package was necessary given that gasoline prices are over $3 a gallon, crude is north of $60 a barrel and there is concern over mounting global warming.
"This is a monumental, record-breaking bill that does a lot for the country...and takes us in the right direction" Baucus said. "It moves us beyond the the frontier and helps us to address the energy policy challenges of the 21st century," he added.
Although ranking member Chuck Grassley, R-Iowa, whose state will benefit from the biofuels provisions, supported the chairman's legislation, other Republicans were staunchly opposed to the bill.
"This is the biggest tax and spend bill that we've seen...and is bad spending policy and bad tax policy," said Sen. Jon Kyl, R-Ariz.
Kyl and Sen. Jim Bunning, R-Ky., primarily expressed concern over the $21 billion in additional taxes for big oil companies.
Firstly, a severance tax on the crude and natural gas that companies sell would be levied over 10 years and is estimated to raise $10.7 billion.
As the provision would provide credit for companies' petroleum royalty payments, the measure would essentially be a tax on future production from controversial oil and gas leases signed in 1998-1999 that omitted royalty price thresholds.
Bunning said the tax, based on a Supreme Court ruling that said Congress couldn't legislate changes to federal contracts, would likely face legal tangles in court.
Bingaman, however, said the provision didn't change any contracts but simply taxed companies on future production.
Furthermore, $9.4 billion would be raised over 10 years by denying a manufacturing tax deduction for major integrated oil companies' domestic energy production.
The Finance Committee instead plans to fund energy technologies that will cut imports of foreign crude and reduce greenhouse gases thought to cause global warming.
For renewable energy, including wind, biomass, solar, geothermal and hydropower, almost $10 billion will go to extending renewable energy production tax credits five years to 2013. It authorizes $3.6 billion from 2008-2011 for clean renewable energy bonds.
Although coal isn't traditionally viewed as "clean," the bill proposes spending almost $7.5 billion on coal projects such as coal-to-liquid and gasification technologies that would produce energy at 20% lower carbon dioxide emissions by storing the greenhouse gas underground.
Specifically, almost $1 billion would go toward clean energy coal bonds; $3.8 billion over 10 years for credits for clean coal facilities; $434 million for accelerated depreciation of CO2 pipeline investments; and credits for CO2 capture. A $10-a-ton credit would be given to firms that stored the CO2 in oil or gas reservoirs, which increases petroleum recovery, and a $20-a-ton credit would be given for permanent storage underground. Also, an alternative fuels credit would be extended 39 months to 2012, costing nearly $1 billion.
The bill also seeks to boost the biofuel market through a myriad of incentives, including a new 50 cent-a-gallon tax credit for ethanol, and extension of biodiesel tax credits.
Congressional staff said Tuesday that the amendment tacking on the tax package to the comprehensive energy bill may face a cloture vote - which would limit the debate on the amendment but require a 60-vote margin - because of the $21 billion in oil taxes.
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