Energy Package Is Hung Up on Taxes

By David Ivanovich
The Houston Chronicle

Tuesday 16 October 2007

White House threatens veto; Democrats dig in heels.

Washington - The White House is threatening to veto any energy bill that seeks to raise taxes on oil companies, prompting Democratic lawmakers Tuesday to accuse the administration of being too cozy with the industry.

President Bush's senior advisers will recommend he veto any energy legislation Democratic leaders may produce that raises taxes or uses the tax code to "single out specific industries," Allan Hubbard, director of the National Economic Council, said in a letter sent late Monday to congressional leaders.

Weighing in on the energy debate as House and Senate leaders are trying to craft a compromise energy package, the Bush administration called for tougher fuel mileage requirements for cars and trucks and an "ambitious" alternative fuel standard.

But the White House made clear it would try to kill any legislation it deems an assault on the oil industry - including a House plan that would rescind $16 billion worth of tax breaks for the oil and gas companies.

"At a time when gas prices are high, Democrats have offered precisely the wrong approach of higher taxes," White House spokesman Scott Stanzel said. "They want to single out energy producers for higher taxes, which will only raise prices on Americans and decrease investment in new sources of energy."

House Democrats vowed not to back down, paving the way for a confrontation over energy policy this fall.

"There the Bush administration goes again - coddling Big Oil," Rep. Edward Markey, D-Mass., said.

The Senate and House passed markedly different energy bills this summer. Democratic leaders, working behind closed doors, are trying to write a new energy bill. Their goal is to produce a bill that can pass muster in both houses - probably before the Thanksgiving recess.

The Senate-passed bill would raise average fuel mileage requirements for cars, trucks and sport utility vehicles to 35 miles per gallon by 2020, up 10 miles per gallon from current levels.

That legislation also would require the nation to use 36 billion gallons of renewable fuels by 2022.

While the language in the bill is not exactly what the president wants, the general thrust parallels the administration's goals.

The House bill contains no such provisions.

To avoid a veto, Hubbard wrote, an energy bill must "not reduce but instead increase domestic energy production."

Republicans have derided the House plan as a " 'Where's the energy?' energy bill," which producers complain will discourage domestic oil and gas drilling by raising fees, delaying permit approvals and throwing up a number of other roadblocks.

The House package would exclude oil companies from a scheduled rollback in the corporate tax rate for U.S. manufacturers, increase taxes on energy companies' overseas operations and complicate producers' efforts to write off drilling expenses.

In the closely divided Senate, Republicans successfully fend-ed off a tax package targeting the oil and gas industry.

Lee Fuller, vice president of government relations for the Independent Petroleum Association of America, welcomed the administration's objections, calling the letter "a positive addition to the debate."

Markey scoffed at what he described as the administration's concerns lawmakers might create a bill that was "too tough on the oil industry."

Another key provision of the House bill would require investor-owned utility companies to generate at least 15 percent of their electricity from renewable energy sources such as wind and solar power by 2020.

Opponents, particularly in the South, fear their utilities would not be able to meet such a standard and would force rate increases on consumers.

A similar measure failed in the Senate, and Hubbard warned any such language could draw a veto.

Hubbard also reiterated the administration's concerns with the so-called "NOPEC" provision, which would brand as illegal efforts by the Organization of the Petroleum Exporting Countries to control world oil prices. The White House also objects to language that would outlaw price gouging at the gas pump, which Hubbard's letter says would "impose price controls that could bring back long gas station lines reminiscent of the 1970s."

Karen Wayland, legislative director for the Natural Resources Defense Council, suggested that even legislation that contained the unwanted provisions might be difficult for Bush to veto if it also contained the first major increase in fuel mileage requirements in 30 years.

But with the presidential campaign in full swing and primary votes starting early next year, lawmakers may not have much more time to pass meaningful legislation.

"If lawmakers head home in December without voting on an energy bill, we think partisan tremors from presidential primaries in January will make a 2008 energy bill unlikely," Kevin Book, an energy policy analyst with Arlington, Va.'s Friedman, Billings, Ramsey & Co., wrote in a report issued Monday.

-------