What: All Issues : Fair Taxation : Corporate Tax Breaks, Oil & Gas Industry : Energy policy (H.R. 6)/On passage
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Energy policy (H.R. 6)/On passage
house Roll Call 40     Jan 18, 2007
Y = Conservative
N = Progressive
Winning Side:
Progressive

This was the final vote on a bill to repeal certain tax subsidies enjoyed by the oil and gas industry and direct federal funds instead toward developing renewable and alternative energy sources.

The legislation would change several different laws affecting the oil industry, including the 2005 energy legislation, by repealing $14 billion in tax breaks and other subsidies and redirecting that money into a fund to foster research and development of alternatives to fossil fuels. The bill also would eliminate a 2004 tax credit for oil and gas companies, worth $7.6 billion in tax revenue over the next 10 years.

Furthermore, the bill would require the payment of royalty fees from certain oil and gas companies for offshore drilling rights that had been waived in 1998 and 1999, amounting to about $4.4 billion in royalties annually. In 1995, oil companies were granted waivers from paying royalties on production as an incentive to drill in the Gulf of Mexico when energy prices were low (with the rationale that low oil prices were a disincentive to drill). In a drafting error made by the Interior Department, however, the leases written in 1998 and 1999 left out a crucial mechanism that was supposed to require the companies to pay royalties to the federal government if prices reached over a certain threshold. As a result of this error, energy companies reported record profits in 2006, all the while avoiding royalties to the federal government for the drilling rights.

Democrats maintained that the legislation was simply righting past wrongs done to the American taxpayer and undoing freebies to the oil industry. They claimed that the bill simultaneously improved America's energy independence while promoting responsible stewardship of the environment.

"We are here to take one small and bipartisan step toward making clean renewable energy a reality in America. And imagine my surprise, Big Oil doesn't think it is a good idea," said Rep. Jim McDermott (D-Wash.). "Two years ago, Big Oil muscled their way into a corporate tax break they had never earned and didn't need. They are siphoning off $1 billion a year right out of the pockets of U.S. taxpayers, and they want it to last forever, right along with $10 billion in quarterly profits that they have been reporting."

McDermott pointed out that a Department of Energy study revealed that 86 percent of the country's energy supply is expected to come from oil, coal, and natural gas in the year 2030, the same proportion of the country's energy consumption that carbon provides today, all the while energy prices are expected to climb. "In other words," McDermott said, "if this country does not pursue a radically different approach to energy, we can expect dirty air, more pain at the pump, and more reliance on foreign oil."

Many Republicans argued that the legislation violates the sanctity of contracts by retroactively imposing new fees and taxes on the oil industry. They said that Democrats were effectively taxing American oil production, further deepening the country's dependence on foreign oil.

"Mr. Speaker, our friends on the other side of the aisle have proposed a so-called energy bill that they claim will promote America's energy independence," said Rep. Phil English (R-Pa.). "In reality, Mr. Speaker, the Democrats have presented the House chamber with a placebo that will ultimately reduce domestic energy production, give American energy companies less of a reason to invest in exploration here at home, encourage greater dependence on foreign oil, and damage America's manufacturing base.

"The Democrats' solution to America's energy crisis is to single out oil and gas producers for a tax increase," English continued.

Despite the fierce rhetoric on both sides, the energy bill passed easily. Thirty-six Republicans crossed party ranks to vote for it, and only four Democrats voted against it. Thus, by a vote of 264 to 163, the House passed legislation that would reign in the tax subsidies to oil and gas producers, require the companies to pay royalty fees on drilling rights and direct the revenue to promote alternative and renewable energy sources. The bill faced uncertain prospects in the Senate.

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