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U.S. Sen. Max Baucus is drafting legislation to end billions of dollars in federal government subsidies for the five largest oil and gas companies as they report huge first-quarter profits amid high gas prices, his office said Thursday.
The plan could end up saving tens of billions of dollars, a portion of which would be invested in increasing production of cleaner and cheaper domestic fuel and providing incentives for buying fuel-efficient vehicles, Baucus spokeswoman Kathy Weber said.
The Montana Democrat said his proposal would eliminate a manufacturing deduction that companies are now allowed to make, and reduce a tax credit for royalty payments the companies make to foreign governments.
The plan also would create an excise tax on certain Gulf of Mexico leases.
Details on the proposal, such as an estimate of savings and where that money would go, are being worked out, Weber said.
Baucus, who chairs the Senate Finance Committee, expects to introduce the legislation next week.
The announcement comes a day after Senate Majority Leader Harry Reid said the Senate would be considering President Barack Obama's proposal to repeal the subsidies in light of the companies' enormous quarterly profits.
Obama wants to use the money, which he has estimated at $4 billion a year, to invest in alternative energy in an effort to reduce the country's dependence on foreign oil.
The companies affected by the changes would be Exxon Mobil Corp., ConocoPhillips, Chevron Corp., BP PLC and Royal Dutch Shell PLC. Small, independent producers would not be affected, Weber said.
Exxon on Thursday reported earning nearly $11 billion in the first quarter of 2011, up 69 percent from a year ago. Shell reported $8.78 billion, a 60 percent increase from the previous year. BP's earning rose 16 percent to $7.2 billion, and ConocoPhillips' income grew 43 percent to $3 billion.
Chevron, the second-biggest U.S. oil company, was expected Friday to report a 25 percent increase to $5.69 billion.