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Daily Telegraph: Democrat backlash against US oil industry

Daily Telegraph

(Nancy Pelosi, leader of the House of Representatives)

By David Litterick, in New York
Last Updated: 12:12am GMT 20/01/2007

Nancy Pelosi, leader of the House of Representatives, which wants to strip the oil industry of tax breaks and increase royalties
The oil industry faces a $14bn (£7.1bn) bill over the next 10 years after the US House of Representatives agreed on measures that would strip the industry of tax breaks and force it to make larger royalty payments.

The bill marks the end of an often vitriolic campaign against “big oil” by Democrat politicians, who have threatened the industry for years but only now have the power to do anything about it after their electoral victory last year.

The proposals rescind $7.6bn in tax breaks for oil drillers that the Congress passed in 2004 and will raise another $6.3bn in increased royalties from companies that pump oil and gas in the Gulf of Mexico and Alaska.

The second provision attempts to correct mistakes made in drilling leases when they were first granted in the late 1990s. They entitled companies drilling in deep water to avoid royalties on much of their initial production, but omitted a standard clause that eliminated the incentive if oil prices climbed above $34 a barrel.

Although the oil companies cannot be forced to renegotiate their leases, those that refuse will be asked instead to pay a “conservation fee” on each barrel produced. If they refuse to do that, their leases will not be renewed.

The bill won overwhelming support despite opposition from the White House, which said it wrongly singled out oil companies for higher taxes, undermined “the sanctity of contracts”, and increased the country’s dependence on foreign oil.

However, the Democrats made targeting companies like BP, ExxonMobil and Chevron one of their key pledges last year, accusing them of “gouging” consumers through high petrol prices.

“Big Oil is hitting the taxpayer not once, not twice, but three times,” said Representative Nick Rahall of West Virginia, the new chairman of the House natural resources committee. “They are hitting them at the pump. They are hitting them at the Treasury through the tax code. And they are hitting them with royalty holidays.”

House Democratic leader Steny Hoyer said: “The oil and gas industry is extraordinarily well established and well off. It does not need the American taxpayer’s help to be successful or to make a dollar.”

The bill will pass to the Senate, also now under Democrat control, and from there to President George W Bush. Although he could use his veto, he is thought unlikely to take that step.

Nevertheless, Republicans have made clear their opposition, calling the bill “a win for OPEC” that would punish Americans by forcing the country to import more oil from anti-US regimes in Iran and Venezuela.

The industry reacted angrily. “This is a political bill playing on the campaign rhetoric of the 2006 election,” said Barry Russell, president of the Independent Petroleum Association of America.

“At a time when we need more American energy, it simply doesn’t make sense to harm those companies that can provide it.”

The bill would funnel the $14bn raised into a special fund to develop alternative energy resources.

“The San Francisco Democrats want to run cars with wind,” said Representative Steve Pearce, referring to new House leader Nancy Pelosi, who comes from the famously liberal city. and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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