Houston Chronicle: Close vote expected on energy legislation

Senate proposal faces test today while House plan moves forward

By DAVID IVANOVICH
Copyright 2007 Houston Chronicle Washington Bureau
June 20, 2007, 10:31PM

WASHINGTON — Lawmakers in both houses of Congress continued to focus Wednesday on energy legislation, the future of which could hinge on a close vote in the Senate today.

The Democratic-controlled Senate has been struggling to finish work this week on a far-reaching energy conservation package that would raise fuel mileage requirements for cars and trucks and dramatically expand the nation’s reliance on renewable fuels.

The bill faces a crucial test today. The Senate is slated to decide whether to cut off debate on a tax package that would slap oil and gas companies with $29 billion in new taxes to pay for alternative energy and cleaner coal projects.

“I think it will be extremely close — one or two votes,” said former Democratic Sen. John Breaux of Louisiana, who has been closely monitoring the progress of the energy bill.

Breaux, a supporter of the oil and gas industry, predicted the bill’s proponents will not be able to find the 60 votes needed to avoid a filibuster.

Bill may be in trouble

Advocates on various sides of the debate warned that the entire bill could be in jeopardy if the tax package were to die.

The package would impose a new severance tax ranging from 12.5 percent to 14 percent on oil and natural gas produced from the Gulf of Mexico’s federal waters, although producers would be able to use their existing federal royalty payments as credits against the tax.

Critics say the provision is really aimed at companies that have escaped paying royalties on leases signed in 1998 and 1999, because the U.S. Minerals Management Service neglected to include the standard price thresholds to trigger royalty payments when oil prices reach certain levels.

The package also would specifically exclude the nation’s five largest oil companies — Exxon Mobil, Chevron Corp., Shell Oil Co., BP and ConocoPhillips — from a scheduled rollback in the corporate tax rate. And it would increase the taxes the oil companies pay on their operations overseas.

The tax package passed out of the Senate Finance Committee on Tuesday by a 15-5 vote, with four Republicans voting for it. But the package infuriated other Republicans.

Sen. Kay Bailey Hutchison, R-Texas, likened it to the windfall profits tax imposed on the oil industry in 1980.

Administration weighs in

White House economic policy adviser Al Hubbard argued the severance tax is really a backdoor way to renegotiate the contracts with companies that currently hold the flawed leases signed in 1998 and 1999.

The tax package is only the first hurdle. The Senate on Wednesday delayed a vote on new fuel mileage requirements, an issue that splits Democrats in both houses along geographic lines. And Senate Energy and Natural Resources Committee Chairman Jeff Bingaman, D-N.M., is pushing an amendment that would require that more electric power be generated from renewable sources such as wind, a measure facing fierce opposition from politically powerful utilities in the Southeast.

In the House, the tax-writing Ways and Means Committee on Wednesday approved a tax package that, like the Senate bill, would keep energy companies from enjoying the corporate tax break. But instead of limiting that provision to the top five integrated oil companies, the House bill would target all oil and gas companies.

While the tax package is moving forward in the House, however, Democrats there remain divided on a number of issues, including fuel mileage requirements and incentives for companies to make diesel and jet fuel from coal.

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