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THE WALL STREET JOURNAL: House Votes to Rescind Tax Breaks for Oil Industry

By SIOBHAN HUGHES
February 28, 2008; Page A12

WASHINGTON — The House of Representatives voted to repeal $18 billion of tax breaks for oil and gas producers, and to use the savings to finance tax incentives for wind-power projects, solar panels and more energy-efficient cars.

The bill, which passed by 236-182, faces long odds amid opposition in the Senate and a White House veto threat. But it allowed House Democrats to promote renewable energy as an alternative to high-priced oil, and to take aim at the oil industry, which is in the midst of a profit boom as prices keep rising.

“We have the opportunity to invest in clean, renewable energy and energy efficiency, and grow our economy, creating new jobs,” said House Speaker Nancy Pelosi (D., Calif.)

Republican opponents of the bill said they supported extending tax credits for renewable-energy investments that expire at the end of 2008. But they complained that taking away tax breaks for oil companies would drive production overseas to less stable countries, and make it harder for U.S. companies to compete in a global economy.

“There will be less investment in American energy, there will be less production of American energy, we will have more dependence on foreign oil, and we will have higher fuel prices,” said Rep. Kevin Brady (R., Texas). “Make no mistake: Politicians are shooting at Big Oil, but they’re hitting American energy workers, and they’re hitting families in the pocketbook.”

Under the bill, Congress would extend through 2011 tax credits for newly built wind farms and other facilities that generate power from renewable sources such as landfills. The government estimates the cost at $6.6 billion over 10 years, making it the single most expensive tax break in the legislation. Congress would also extend, through 2016, the tax credit of 30% that companies may claim for investments in solar products and so-called fuel cells. Fuel cells convert fuel into electrical energy without any combustion, thereby minimizing pollution.

Consumers would gain new tax breaks for buying plug-in hybrid cars.

Oil and gas companies would lose some $13.6 billion in tax breaks granted in 2004 for domestically produced goods. Exxon Mobil Corp., Chevron Corp., ConocoPhillips, Royal Dutch Shell PLC and BP PLC would lose the tax breaks entirely. The deduction would be frozen at 6% for smaller oil and gas companies. That deduction had been scheduled to jump to 9% in 2010.

Oil companies would also lose another $4.1 billion under provisions that provide less-favorable tax treatment for certain kinds of foreign income.

The House last year repeatedly passed similar legislation, but it has faced more obstacles in the Senate. Last year, the Senate fell one vote short of the number of votes needed to repeal the oil-tax breaks.

Write to Siobhan Hughes at [email protected]

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