US Senate Democrats Unveil New Energy Tax Plan

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US: May 8, 2008

WASHINGTON - Democrats in the Senate Wednesday unveiled a new energy package that would revoke $17 billion in tax breaks extended to big oil companies like Exxon Mobil Corp and slap a 25 percent windfall profits tax on firms that don't invest in new energy sources.

The day that US oil prices hit an all-time peak of $123.93 a barrel, Democrats moved to act on soaring gasoline pump prices, which are a growing political liability in the November presidential election.

The Consumer-First Energy Act -- assembled by Senate Majority Leader Harry Reid and other key Democrats -- would tax big energy companies, halt filling the emergency US oil stockpile, and seek to put checks on oil market speculation.

The Democrats' energy bill seeks to lay the blame for record-high gasoline prices over $3.60 a gallon on the Bush administration, big oil companies like Exxon and the OPEC oil cartel.

"The Bush administration has led us down the path of the most significant energy crisis we have had in decades, if not in all time," Reid told reporters.

Meanwhile, oil traders are "making out like bandits," oil companies are "making money hand over fist," and "oil-rich countries are thumbing their noses at American consumers," Reid said.

The American Petroleum Institute, which lobbies for big US oil companies, said Democrats' plans would discourage investment in energy production and lead to less supply.

"None of these proposals will lower the price at the pump," Senate Republican leader Mitch McConnell said. "All will increase the strain on the family budget."

Instead, Senate Republicans proposed competing legislation which calls for new US oil production in offshore areas as well as Alaska's Arctic National Wildlife Refuge.

Visiting Republican leaders on Capitol Hill, President Bush said he was "deeply concerned" about gasoline prices, which are predicted to peak in June at $3.73 a gallon on average, and called for more oil drilling and refineries.

One thing missing from the bill was a plan to suspend an 18.4-cents-per-gallon federal tax on gasoline this summer - an idea that has divided Democratic presidential candidates senators Barack Obama and Hillary Clinton.

Democrats point out that gasoline prices have more than doubled since Bush took office in 2001, while "Big Oil" companies made over $500 billion in profits.

Energy analysts said lawmakers plans would do little to curb energy use by US consumers, who comprise 5 percent of global population but use 20 percent of its oil supply.

"It's placate and pander and point the finger - that's where the politics are going right now," said Frank Verrastro, an energy expert at the Center for Strategic and International Studies. "Somebody has got to tighten their belt."

Windfall profits taxes sparked a downturn in US oil production when former President Carter proposed them in the 1970s. But unlike Carter's plan, which was essentially an excise tax on oil prices, the new proposal would tax oil companies' profits if they fail to invest in new supply, Democratic Sen. Charles Schumer said.

The proposal would have generated up to $17 billion in tax receipts in 2007, which would go toward alternative energy research under the bill's terms, Schumer said.

The Senate bill seeks to revive a plan already passed by both the Senate and the House that would allow the federal government to sue OPEC -- source of one-third of global oil supply -- for price manipulation.

(Editing by Christian Wiessner)

Story by Chris Baltimore

REUTERS NEWS SERVICE