House OKs new taxes on big oil companies

The House approved $18 billion in new taxes on the largest oil companies Wednesday as Democrats cited record oil prices and rising gasoline costs in a time of economic troubles.

The money collected over 10 years would provide tax breaks for wind, solar and other alternative energy sources and for energy conservation. The legislation, approved 236-182, would cost the five largest oil companies an average of $1.8 billion a year over that period, according an analysis by the Ways and Means Committee. Those companies earned $123 billion last year.

Senate Democratic leaders said they would put the bill on a fast track and try to avoid a Republican filibuster. The White House said the bill unfairly takes aim at the oil industry. President Bush is expected to veto the legislation if it passes Congress.

Crude oil prices have topped and pump prices are more than $3 per gallon, with indications that $4 is not out of the picture as the summer driving season approaches.

During debate, Rep Jim McDermott, D-Wash., urged lawmakers to "stop the madness of subsidizing oil companies" when the industry earned $123 billion last year.

"Gas prices have been soaring," added Rep. Richard Neal, D-Mass. He said many people are "struggling to pay energy costs that have skyrocketed in a harsh winter."

Republicans contended the tax proposals would cut investment in oil and gas development and lead to even higher prices. "This bill singles out one industry," complained Rep. Kevin Brady, R-Texas.

House Speaker Nancy Pelosi, D-Calif., noted that the House twice last year passed similar tax plans, but they did not pass the Senate. Since then, the price of gasoline has climbed and large oil companies have made record profits. She said the bill will spur clean energy production with tax incentives for those industries.

Pelosi's office distributed a state-by-state list of high gasoline prices compared with oil industry profits, including a record $40.6 billion in earnings by ExxonMobil Corp. last year.

The bill would roll back two lucrative tax breaks for the largest U.S. oil companies. The money would go for tax incentives to support wind, solar and biofuel industries as well as energy efficiency programs.

Pelosi said shifting tax benefits from oil to alternative energy development was critical to increased energy independence and lowering energy costs.

The White House says singling out the oil companies for higher taxes "would reduce the nation's energy security rather than improve it" and "lead to higher energy costs to U.S. consumers and business."

Senior advisers would urge Bush to veto the bill should it pass Congress, the White House said in a statement before the House vote.

The oil industry has calling it a "discriminatory bill" that unfairly targets companies that already pay more taxes than U.S. manufacturers.

"New taxes ... will even further reduce our energy security by discouraging new domestic oil and natural gas production and refinery capacity expansions," the American Petroleum Institute said in a statement.

The bill would direct more than $8 billion to bolster investment in wind, solar, biomass and geothermal energy development, extending many of the tax credits for these industries that have recently ended or are scheduled to expire at year's end.

It also would provide tax breaks for certain energy conservation programs, including a $300 credit for people making their homes more energy efficient. Nearly $2 billion would go toward establishing energy conservation bonds for environmentally beneficial community programs.

"These incentives must be extended immediately to void significant harm to the development of clean energy industries in the United States," according to a letter to lawmakers from more than 100 businesses, electric utilities, environmental groups and energy efficiency advocates.

A similar tax proposal passed the House last summer, but was abandoned in the Senate where Republicans overwhelmingly opposed it. Bush at the time promised he would veto the measure.

The bill targets a tax break that Congress provided in 2005 to help domestic manufacturers. It also would limit the amount of tax credits the largest U.S. oil companies could claim under that law. The bill would restrict the tax break for oil companies in connection with foreign oil and gas extraction.

The oil companies would have to pay an additional $17.65 billion in federal taxes over 10 years under the proposed changes, according to an analysis by the House Ways and Means Committee.

Democrats hoped that the recent jump in oil prices and gasoline costs at the pump would help with the prospects in the Senate.