US energy, chem leaders slam new energy tax bill

13 February 2008 18:50  [Source: ICIS news]

WASHINGTON (ICIS news)--US energy, refining and chemical leaders warned on Wednesday that new Democrat-sponsored legislation to increase taxes on oil and gas will discourage production at a time when US energy demand is increasing.

 

The American Petroleum Institute (API) and the National Petrochemical & Refiners Association (NPRA) were sharply critical of a new energy tax measure introduced by the Democrat leadership in the US House late on Tuesday.

 

The bill, HR-5351, titled the “Renewable Energy and Energy Conservation Tax Act of 2008,” would effectively increase taxes on integrated oil and gas production companies by some $18.5bn (€12.7bn) over ten years by eliminating tax credits now available to energy majors.

 

That revenue would be redirected to a variety of tax breaks and incentives for renewable energy proposals for electricity generation and transportation fuels such as cellulosic ethanol.

 

“The American taxpayer should not be subsidising oil and gas companies during times of record profits and record prices at the pump,” said House Ways and Means Committee Chairman Charles Rangel (Democrat-New York).  The committee is the principal revenue-raising authority in Congress.

 

The $18.5bn in taxes from energy producers would be given as tax credits, for example, to electric utilities that generate more power from wind, geothermal and ocean wave sources and home owners who install solar, geothermal or wind energy equipment.

 

The bill also would create a new production tax credit of 50 cents/gal for cellulosic ethanol. That credit would be in addition to the existing 51 cents/gal for ethanol fuel use.  It would give tax credits of up to $50,000 to retail fuel stations that install E-85 ethanol pumps.

 

NPRA President Charles Drevna said the House energy tax package “isolates the domestic oil and gas industry for punitive taxes that would discourage reinvestments in new technologies and facility efficiency upgrades”.

 

US chemical manufacturers, heavily dependent on natural gas as a feedstock and power source, have opposed similar earlier tax measures on grounds they would discourage gas production amid high demand and consequently increase gas pricing pressures.

 

Drevna warned that the bill’s denial of production tax credits would discourage “much-needed investment in domestic energy infrastructures, refining capacity expansions and domestic oil and gas production”.

 

“With demand for gasoline continuing to grow each year, US refining capacity is already significantly strained despite multi-billon dollar reinvestments by the industry to expand it,” Drevna added.

 

API President Red Cavaney said that “promoting the use of alternative energy resources is a worthy energy policy goal” but that “doing so by imposing new taxes on the oil and natural gas industry would not help supply the stable and affordable supplies of energy necessary to meet the growing needs of American consumers”.

 

In a letter to Rangel and other House members, Cavaney said that oil and gas companies already pay more in taxes as a percentage of income than other US manufacturing firms.

 

Kevin Book, senior energy analyst at investment bank FBR, said that while the new energy bill is almost certain to pass in the House, it faces more opposition in the Senate and a certain presidential veto.

 

($1 = €.69)


By: Joe Kamalick
+1 713 525 2653



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