Last Election Day, in a rare victory for common sense in California, voters turned back a measure that would have put a surtax on oil produced in the state. Wisely, the electorate saw this for what it was: An attempt to make California oil more expensive to produce. The effect was easy to see: Production would be driven to other states and the price of gas would climb in the Golden State. Having failed in California, a prominent Californian, House Speaker Nancy Pelosi, aims now to take this bad idea national in the form of H.R. 6, which will likely reach the House floor today.
What H.R. 6 will do is repeal several tax provisions — or at least insofar as they apply to one industry — duly passed by bi-partisan majorities in both houses. Unfortunately (from Pelosi & Company’s perspective) some of these provisions benefit the oil industry by rewarding domestic exploration and production. Oh, the horrors! For example, it will rule oil and gas companies ineligible for an otherwise-legitimate tax deduction as a domestic manufacturer (in their case, of petroleum and petroleum by-products, like gasoline) under Sect. 199 of the American Jobs Creation Act of 2004 and will adversely change recently-passed depreciation rules for energy exploration activities. In so doing, it will not only take away some of the incentive for domestic exploration and production, but it will drive up the price of oil and will drive exploration overseas, making us even more dependent on foreign sources of oil. In other words, it will do to the US what the failed California proposition threatened to do to California.
And lest you think this cleverly-named CLEAN Act is about energy, think again. First of all, this is a Ways & Means Committee bill, an odd point of origination for energy legislation. Second, the Dems’ fact sheet on the bill is rife with poll-tested class warfare gibberish, sneering about “raking in record profits” and “Big Oil Giveaways.” Never mind that 90% of the nation’s oil and gas wells are drilled by the small independent producers and that ExxonMobil paid over twice as much in taxes in the 3d quarter of ’06 than they made in profits. This is a crusade, get outta the way.
You would think “energy dependence” would be a loser of a political cause, but apparently not when wrapped in Big Oil rhetoric. At the end of the day, HR 6 will leave us far more dependent on foreign sources of energy. The so-called CLEAN Act is one more step in the Dems’ war on profits, and a big step in the wrong direction on energy.
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