House lawmakers, completing the Democrats' legislative priorities for their first 100 hours in power, approved legislation yesterday to repeal $7.7 billion in tax breaks for oil companies and to close a loophole in offshore-drilling leases.
The bill, approved 264-123, rescinds a $7.6 billion tax break from 2004 that allows oil companies to claim deductions for oil and gas production and refining. The measure also alters rules for depreciating geological survey expenses, which would add $104 million to federal coffers.
Taking back oil and gas subsidies approved in the Republican-controlled Congress and signed into law by President Bush is the last of six pieces of legislation House Speaker Nancy Pelosi has pledged to pass in the first 100 hours since Democrats took control of the chamber Jan. 4. Funds from the bill will be used to support alternative-energy supplies and energy efficiency.
"Oil and gas companies aren't going out of business because of this," said David Pursell, a principal at Pickering Energy Partners, of Houston.
"What it says is, the companies better be very careful if oil prices spike in the next two years, because you've got a Congress that's shown they're willing to come after them."
The American Petroleum Institute, a Washington group that lobbies on behalf of the largest U.S. oil companies, including Exxon Mobil Corp. and Chevron Corp., said the changes amounted to a tax increase that would lead to higher prices for consumers or reduced earnings for investors.
"This legislation seeks to end the unwarranted tax breaks and subsidies that have been lavished on big oil companies," said Rep. Nick Rahall (D., W.Va.), chairman of the House Natural Resources Committee.
The legislation "represents a significant step backward for our nation's energy security," Red Cavaney, president of the petroleum institute, told House members in a letter.
Repealing the tax breaks "will discourage new domestic oil and gas production and refinery capacity, threaten American jobs, and make it less economic to produce energy resources," increasing dependence on imported crude oil, Cavaney wrote.