Bloomberg News

Republicans Block Repeal of Oil-Company Tax Breaks Obama Sought

March 29, 2012

The U.S. Senate rejected a Democratic bill to repeal about $24 billion in tax breaks to oil companies and use the money to pay for clean energy development and deficit reduction. Photo: Patrick Semansky/Bloomberg

The U.S. Senate rejected a Democratic bill to repeal about $24 billion in tax breaks to oil companies and use the money to pay for clean energy development and deficit reduction. Photo: Patrick Semansky/Bloomberg

Senate Republicans blocked a Democratic bill to repeal about $24 billion in U.S. tax breaks for the nation’s biggest oil companies, three days after agreeing to advance the measure as a way to debate energy.

President Barack Obama, speaking at the White House before today’s vote, had urged lawmakers to pass the legislation. Republicans opposed repealing the tax breaks and blamed Obama’s energy policies for the rise in gasoline costs.

High prices at the pump “are having a negative impact on Americans’ daily lives,” Senate minority leader Mitch McConnell, a Kentucky Republican, said during the debate. “So we think the American people are entitled to this debate.”

Republicans said the bill, introduced by Senator Robert Menendez, a New Jersey Democrat, would keep raising gasoline prices. They criticized Obama for blocking TransCanada Corp. (TRP)’s Keystone XL oil pipeline, restricting offshore production, and supporting solar-panel maker Solyndra LLC, a solar panel maker that went bankrupt two years after winning a $535 million U.S. loan guarantee.

Obama said the top three oil companies operating in the U.S. made more than $80 billion in profit last year, with Exxon Mobil Corp. (XOM:US) collecting almost $4.7 million an hour.

“It’s not as if these companies can’t stand on their own,” Obama said.

Nine Votes Short

Senate Democrats fell nine votes short of the 60 required to advance the tax-repeal bill. Maine Republican Senators Olympia Snowe and Susan Collins joined all but four Democrats to back the bill. Democratic Senators Mark Begich of Alaska, Mary Landrieu of Louisiana, Ben Nelson of Nebraska, and Jim Webb of Virginia voted with Republicans against the bill.

The legislation would raise almost $24 billion over 10 years by repealing breaks to Irving, Texas-based Exxon Mobil, London’s BP Plc (BP/), Houston’s ConocoPhillips (COP:US), San Ramon, California-based Chevron Corp. (CVX:US) and Royal Dutch Shell Plc (RDSA), based in The Hague.

Of the total repealed, about $11.7 billion be used to pay for tax credits for conservation and renewable energy development, with the rest going to deficit reduction.

In a show of rare bipartisanship, the Senate voted 92-4 March 26 to debate the legislation, a signal that both parties saw a political advantage in debating energy issues with Americans paying more to fill their tanks. The vote today was a procedural step that effectively killed the measure.

Per gallon prices rose to $3.921 yesterday, from $3.595 a year ago, according to AAA.

Campaign Issue

The rise has made energy a issue in the presidential campaign, Bruce Oppenheimer, a Vanderbilt University professor who has written on energy and politics, said in an interview.

Candidates have debated the merits of a Canada-to-U.S. oil pipeline, expanded offshore drilling and subsidizing clean- energy development to move away from dependence on fossil fuels.

Whether gasoline remains an issue in November depends on whether prices recede, Oppenheimer said.

“When prices drop back down, maybe because of something the government did or more likely not because of anything the government did, the American attention to it drops off almost immediately,” Oppenheimer said in an interview.

Energy analysts told a Senate Energy and Natural Resources Committee hearing before the vote that gasoline prices have increased because of tighter margin between oil supplies and demand and geopolitical fears about Iran’s nuclear intentions.

‘Magic Buttons’

Daniel Yergin, chairman of IHS Cambridge Energy Research Associates, said the U.S. lacked “magic buttons” to push to lower prices. More production in North America and elsewhere may help reduce costs over time, he said.

Supply disruptions in Iran, South Sudan, Russia, Yemen, China, Syria, and other nations will maintain pressure on gasoline prices, said Frank Verrastro, director of the Energy and National Security Program for the Center for Strategic and International Studies in Washington.

Democrats said the pump price is outside of Obama’s control.

“We do not face cycles of high gasoline prices in the United States because of a lack of domestic production or a lack of access to federal resources or because of environmental regulations getting in the way of us obtaining cheap gasoline,” said Senator Jeff Bingaman, a New Mexico Democrat and chairman of the Senate Energy panel.

Senator Lisa Murkowski of Alaska, the top Republican on the committee, said more production in the U.S. and oil from Canada can help moderate price increases.

“We recognize that there a lot of different factors that are driving up the fuel costs,” she said. “But there are some things that I think that we can influence.”

To contact the reporter on this story: Jim Snyder in Washington at jsnyder24@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net


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Companies Mentioned

  • XOM
    (Exxon Mobil Corp)
    • $104.25 USD
    • 0.71
    • 0.68%
  • COP
    (ConocoPhillips)
    • $86.76 USD
    • 0.74
    • 0.85%
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