House poised to pass energy measure; Senators promise a fight 

The U.S. House is poised to vote today on legislation aimed at boosting alternative energies such as wind and solar power at the expense of the oil and gas industry. It faces a tough battle for Senate and presidential approval.

The bill toughens car fuel-economy standards, mandates an increase in the use of gasoline alternatives such as ethanol, requires that utilities get 15 percent of their power from renewable sources and includes a $21 billion tax package. Congressional action comes two weeks after crude oil futures prices hit a record $99.29 a barrel on Nov. 21.

Senate Republicans are promising to fight House Speaker Nancy Pelosi’s proposal, singling out the tax package and so- called renewable portfolio standard, or RPS, which is opposed by utilities such as Atlanta-based Southern Co.

“I don’t think it has a chance because of the tax package and the RPS,” Republican Senator David Vitter of Louisiana said yesterday. Vitter says he is “confident” the legislation won’t get the 60 votes it needs to proceed in the Senate.

The legislation includes $10 billion worth of taxes over 10 years on the five top oil and natural gas companies – BP Plc, ConocoPhillips, Chevron Corp., Royal Dutch Shell Plc and Exxon Mobil Corp.

Part of the money raised by that tax and others would fund an extension of tax credits for wind, solar and biomass power providers, as well as credits for hybrid cars.

Veto Threat

President George W. Bush’s advisers have said they will recommend a veto of any measure that raises taxes on the oil industry or includes a federal RPS. Twenty-six states and the District of Columbia already have some requirements that utilities purchase renewable power.

“The bill’s tax provisions take direct aim at companies’ ability to expand oil and natural-gas production and refining capacity,” Red Cavaney, president of the American Petroleum Institute, wrote in a Dec. 5 letter to all House members. It “likely would consequently tighten supplies in a time of rising demand.”

The renewable power requirement is “simply a tax on electricity,” said David Ratcliffe, Southern’s chief executive officer.

“My customers wind up paying significantly more for electricity” because his region cannot support enough renewable resources to meet the requirement, he said. Over a 10-year period, it would add more than $10 billion to power costs, Ratcliffe said.

Promises

Vitter and New Mexico Senator Pete Domenici, the senior Republican on the Energy and Natural Resources Committee, said Democratic leaders broke promises to keep those measures off the legislation.

“Harry Reid made a commitment to keeping those provisions off the bill and now he has completely reneged on that,” Vitter said.

The legislation is an attempt to reconcile differing measures approved earlier by the House and Senate. House members will begin debate on it today at 10 a.m. local time, Drew Hammill, a spokesman for Speaker Pelosi, said in a telephone interview yesterday.

The bill is also sprinkled with provisions that have little to do directly with energy policy.

Among other things, the measure revives a proposal that stalled in Congress last year that would allow paper-products companies that harvest their own trees, such as Federal Way, Washington-based Weyerhaeuser Co., to pay a top tax rate of 15 percent on profits attributable to that timber instead of the 35 percent corporate rate. That would equalize the tax treatment of forestlands owned by companies and investment trusts, which already have a 15 percent burden.

Tax Incentives

The measure also would offer tax incentives to Alaskan fishermen whose livelihoods were hurt by the 1989 Exxon Valdez oil spill, direct federal resources to rural schools, and use tax credits to subsidize transportation projects in New York City.

To help pay for these provisions, the measure also would raise $3.4 billion in taxes from investors by requiring brokers to report stock-purchase prices to the Internal Revenue Service beginning in 2009 and the price of all other types of securities beginning in 2011. The move is designed to reduce false reporting of transactions by taxpayers.

Democratic Representative Edward Markey has said the aim is to have the legislation on the president’s desk by the end of next week.

The legislation “could have very tough sledding in the Senate,” Christine Tezak, senior analyst at Stanford Group Co., said in a note issued yesterday.

Gathering the needed votes may take time, including potentially bringing Democratic senators back from presidential campaigning and congressional trips to the climate-change talks in Bali, Indonesia, she wrote.

The Senate was unable to get the 60 votes it needed in June to include a renewable power requirement or attach a tax package to energy legislation it approved.

By Tina Seeley

Bloomberg

6 December 2007