Big Oil May Face a $5 Billion Levy

By Edmund L. Andrews
The New York Times

Tuesday 15 November 2005

Senate panel approves addition to tax-cut bill.
Washington - In a sign of the political impact of soaring energy prices, the Republican-controlled Senate Finance Committee voted on Tuesday to impose a $5 billion tax next year on the nation's biggest oil companies.

The measure amounts to a one-year windfall profits tax, a concept that most Republicans had until recently denounced as a discredited idea from the 1970s. It was added to a larger bill that would cut taxes by about $61 billion over the next five years.

Conservative Senate Republicans who support the oil industry bitterly protested the measure, noting that Congress had just approved billions in new tax breaks to encourage oil and gas exploration. But every Republican on the panel voted for the overall package, which passed the committee by 14-8 and which the full Senate is expected to take up today.

Five of the largest oil companies recently reported that their combined profits for the third quarter surged to $33 billion as a result of skyrocketing oil prices. Last week, top oil executives testified at a congressional hearing, defending their record results in the face of mounting criticism.

Lawmakers have been prodding the oil companies to give up some of their profits and have floated the idea of a windfall profits tax. But party leaders and the White House have firmly opposed such a move. Many Senate Republicans are counting on House Republicans to reverse the new tax on oil companies and add back an extension of tax cuts.

Sen. Craig Thomas, R-Wyo., charged that his Republican colleagues were "undermining the energy policy that we have been working on for years" and would discourage exploration and production. "I suppose," he said gloomily, "it's because you found out that energy companies are making some money."

Senate Republicans refused to call their provision a "windfall profits tax," a tax that was imposed after oil companies enjoyed a similar spike in oil company profits in the early 1970s. Critics of the windfall profits tax contended that it merely discouraged production and contributed to severe gasoline shortages.