Climate Change / Global Warming & Investing Implications

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Democrats to Target Oil Majors in New US Congress
By Tom Doggett and Chris Baltimore
Reuters

Wednesday 08 November 2006

Washington - Big oil companies will be a top target of Democratic lawmakers when they officially take over the House of Representatives early next year.

Democrats picked up enough seats in Tuesday's US election to win majority control of the House and have promised to roll back billions of dollars in tax breaks and other financial incentives extended to the oil industry in energy legislation Congress passed last year.

Democratic Rep. Nancy Pelosi, who is poised to be the next Speaker of the House when the new Congress convenes in January, says oil companies have unfairly earned record profits by gouging consumers at the gasoline pump.

Pelosi says taking away the financial relief given to Big Oil in last year's Republican-written energy law will be among the six major tasks Democrats plan to tackle in the first 100 hours after she slams the gavel to convene the new House.

She says Democrats will go after oil companies by enacting tough laws to stop gasoline price gouging, and some Democrats want to impose a windfall profits tax on Big Oil.

Rep. Rahm Emanuel, who heads the House Democrats' campaign committee, said Democrats will "redirect" the billions in breaks given to oil companies to programs that will move the United States toward energy independence.

"You know, (oil companies are) making billions of dollars, charging us $3 a gallon, of course those folks don't need tax breaks," said Howard Dean, chairman of the Democratic National Committee. "We can use that money to balance the budget."

The energy bill had about $2.8 billion in tax breaks and financial incentives for the oil and gas industry.

The legislation allowed companies to speed up writing off exploration and drilling expenses, and immediately deduct half the cost of large oil refinery expansions.

Legislation to repeal those tax breaks and other government financial incentives would also have to clear the Senate and then be signed by President George W. Bush.

Bush could veto any legislation that House Democrats propose, raising the possibility of energy policy deadlock over the next two years.

"You've still got a Republican president so what can you get done?" said Robert Ebel, an energy expert at the Center for Strategic and International Studies. "It's probably going to be two years where nothing is going to happen" on energy issues.

Tax Break Rollback?

Repealing the financial relief would affect domestic oil giants such as Exxon Mobil Corp., Chevron Corp. and ConocoPhillips, and large US operations of foreign firms such as BP Plc and Royal Dutch Shell. Mark Kibbe, a tax policy analyst with the American Petroleum Institute, said the tax breaks make it more affordable for companies to search for oil and gas in the United States, instead of looking in other countries where production costs are generally much cheaper.

"You're increasing the costs of those projects and you're making US companies that much less competitive in the world market," he said.

Guy Caruso, who heads the federal Energy Information Administration, warned that taking away the government's financial help could kill some energy projects. "The more expensive the project, the more affected they will be from a rollback in tax incentives and breaks," he said.

Costly projects like drilling for crude in the very deep waters in the Gulf of Mexico or developing the thick oil trapped in shale rock in the Rocky Mountain region could be shut down, said Caruso.

"There are some projects I'm sure would drop off the table," he added.

http://www.truthout.org/issues_06/110906EC.shtml