House Energy Bill Increases Tax Breaks

Legislation at Odds With Bush Proposal

The House this week will consider $8 billion in tax breaks targeted to the energy industry at a time when some of those companies are enjoying soaring profits from high consumer prices.

The vast majority of the tax breaks would benefit companies that produce and supply traditional forms of energy, with a large portion going to the oil and natural gas sector.

The House legislation, approved last week by the Ways and Means Committee, is at odds with the Bush administration's approach. The president's proposed budget calls for $6.7 billion in tax breaks for energy, with 72 percent going toward renewable sources of energy and energy efficiency, compared with about 6 percent in the House plan.

Dana M. Perino, a White House spokeswoman, would not comment on the House measure but referred to comments made by President Bush last week. "I will tell you with $55 oil we don't need incentives to oil and gas companies to explore," Bush said in a speech to newspaper editors in Washington. "There are plenty of incentives. What we need is to put a strategy in place that will help this country over time become less dependent."

Crude oil prices have been high because of increasing demand that has pushed production close to its limits. That has helped send the cost of gasoline at the gas pump to record highs in recent weeks. The price of other sources of energy have been unusually high as well.

For the oil and gas industry, the legislation allows some costs associated with exploration to be deducted over a shorter time period and provides tax benefits when oil and gas production is delayed and a lease is extended. It reduces the depreciation period for natural gas distribution and gathering lines as well as the depreciation period for electricity transmission and pollution-reducing facilities added to some coal-fired power plants.

The measure also includes some tax credits for solar energy equipment, fuel cells and energy efficiency improvements to existing homes.

Environmentalists are outraged, saying the bill provides giveaways to big energy companies, such as ExxonMobil Corp., whose 2004 profits set a record. "The energy bill is just another example of the House Republican leadership overreaching for corporate interests," said Erich Pica of Friends of the Earth.

Navin Nayak of the U.S. Public Interest Research Group said the measure should have included tax breaks for hybrid cars, wind energy production and other efficiency and renewable energy items included in failed 2003 energy legislation. "They've clearly gone on a junk-food diet," Nayak said of the House. "They've cut out everything healthy."

The tax package will be considered as part of a larger energy bill that is expected to be debated before the full House beginning tomorrow. The Senate, where a similar energy bill failed in 2003 after a filibuster, is still crafting its new version. The Bush administration has said passage of the legislation is a top priority and will help address increasing prices, a contention disputed by opponents.

House Republicans stood by the measure, which provides the $8 billion in tax savings over a 10-year period. It was approved by the committee in a 26 to 11 vote that was generally along party lines but with five Democrats supporting the legislation and one Republican voting against it.

Rep. Mark Foley (R-Fla.) said that he and some other committee members wanted a larger percentage of the tax breaks going for energy efficiency and renewable energy, but that Chairman Bill Thomas (R-Calif.) did not want to add those, as a way of gaining negotiating power with the Senate.

"It's not always pretty watching this stuff happen, and some of us were concerned," Foley said. "There's a lot of give and take that has to occur. [Thomas] plays a better hand of poker than I do, so I'll have to defer to him at this point."

Christin Baker, a spokeswoman for Thomas, pointed to comments Thomas made before the committee vote in which he said he expects the percentage of tax breaks for traditional energy companies to decrease before a final bill is drafted.

"Members of this committee perhaps cannot, in this bill, express their full support for a wide range of diversified energy production," Thomas said. He added that negotiations with the Senate will lead to legislation that "will look somewhat different and more diversified than the measure before the committee today."

By Justin Blum
Washington Post