(CNSNews.com) - A Senate proposal to curb tax credits for the world’s five largest oil companies and extend tax breaks to wind-energy companies faces opposition from the American Petroleum Institute (API) and many who favor increased domestic oil production.
“Make no mistake, raising taxes on this industry would ripple through the economy, hurting all Americans,” said Stephen Brockton, tax policy manager for API.
“Considering we [oil and natural gas] are one of the few industries that continue to invest, innovate and actually create jobs throughout the economic downturn, the best you can say about this tax increase proposal is that it’s counter-productive,” he said on a Monday morning conference call.
Introduced by Senator Robert Menendez (D-N.J.), the Repeal Big Oil Subsidies Act would limit the number of tax credits currently available to the five most profitable oil companies: ExxonMobil, Chevron, BP, ConocoPhillips and Shell.
Conversely, the bill seeks to incentivize wind-energy production and the purchase of energy-efficient homes and appliances by American consumers.
“Let me be very clear: Monday’s vote to repeal big oil tax subsidies is the big test, and Americans will decide who passes and who fails,” said Menendez. “It’s time to stand up for real families and stand up to Big Oil.”
However, a 2011 study commissioned by API found that the U.S. government would collect more revenue and create more jobs if it encouraged domestic oil exploration and production.
Some of the pro-domestic oil production policies outlined in the study include increased exploration on federally owned land in the Gulf of Mexico, Alaska and the Rocky Mountains, as well as lifting the drilling moratorium in New York State.
Moreover, API told CNSNews.com that the government would experience an estimated $127 billion increase in revenue if it encourages the development of oil and natural gas and a $29 billion revenue loss if it chooses instead to boost taxes on the oil and natural gas industry.
Brockton noted that oil companies already pay the most taxes of any industry in the United States. And because oil companies inject so much into the economy, Congress should find ways to facilitate domestic production rather than inhibit it.
“Every day, this industry [oil and natural gas] delivers $86 million to the federal treasury in taxes, rental payments, royalties, and other production fees. That’s over $30 billion every year, and more is delivered to state and local governments,” said Brockton.
“The oil and natural gas industry invested more than $470 billion in the U.S. economy in 2010… that’s more than half the size of the 2009 government stimulus, but it happens every year and doesn’t require an act of Congress.”
John Hofmeister, the former president of Shell Oil Company, called the Senate proposal and President Obama’s support for it “political shenanigans.” The discriminatory nature of the bill “would set horrible precedent” by allowing Congress to target select industries for discriminatory treatment, he added.
Curbing tax breaks for oil companies “ represents a very tiny increment of revenue to a government that is in need of significant -- both tax and deficit-spending -- reform,” Hofmeister told CNSNews.com.
“The fact that the president supports this legislation is quite worrying in that discriminatory treatment in the face of the need for wholesale reform—I think is really a non-starter when it comes to public policy.”
In addition to repealing tax credits for the five largest oil companies, the Repeal Big Oil Subsidies Act extends income tax credits for renewable energy sources such as wind, renewable diesel and biofuel derived from algae.
The proposal also includes a tax credit of up to $10,000 on training courses for mine rescue workers and expensing for mine safety equipment.
Menendez introduced a similar proposal in May 2011, but the bill was withdrawn after failing to receive 60 votes to ensure its passage. The final vote tally was 52-48, with three Democrats voting against the bill.
Incumbent Sens. Mary Landrieu (D-Louis.), Ben Nelson (D-Neb.) and Mark Begich (D-Alaska) voted against the May 2011 proposal.