Big Oil

Executives from Big Oil--Exxon Mobil, Chevron, ConocoPhillips, RoyalDutch Shell and BP--testified in Congress in hearings last week before the Senate Energy and Commerce committees.  See the notice of the hearing here.  Part of the concern relates to the Energy Policy Act of 2005, which you can access here.  Dick Cheney headed a task force to develop energy policy, and environmental groups have long sought information on the contacts that members of the task force had with Big Oil.  Environmentalists suspected that Big Oil representatives had access that was denied to environmentalists and that resulted in energy policies and incentives that heavily favor Big Oil in the energy bill.  So one of the questions asked in the hearings last week related to the role of Big Oil in the 2001 task force.  Most of the executives responded that they "hadn't participated", yet a secret list compiled by the White House shows that executives from Exxon, Conoco, BP and Shell did meet at various times with Cheney aides and the head of the task force and continued to have easy access to Cheney and other White House officials.  See John J. Fialka, Oil Executives Could Face Probe of Their Testimonyh to Congress, Wall St. J., Nov. 17, 2005, at A10, this New York Times story, and this CNN Money story. 

Big Oil demands for access to public lands made it into the task force's recommendations, and many of those provisions were wrapped into the energy bill passed by Congress this fall.  To many ordinary Americans, the package appears to be one more giveaway of public resources.  Tax incentives for building refineries, access to public lands and other provisions come on top of the long-provided oil depletion allowance that provides a windfall tax break to Big OIl that is hard to justify under either economic or fairness theories.

And Big Oil doesn't need to feed at the public trough of tax subsidies to make a decent profit.  The Senate hearings were particularly focused on the huge profits that Big OIl has made in recent months while consumer costs for energy products have skyrocketed.  It appears that Big Oil has been enjoying profit growth in the 40% range--not chicken feed by anyone's estimates.  See this story and this LA Times article discussing the sometimes tense hearings about high profits. The Senate Finance Committee even voted on Nov. 15 to include a windfall profits tax in its package of tax bills. 

Any hope that the Senate would take a truly hard look at its energy and tax packages benefitting Big Oil was shortlived.  Senator Dorgan proposed a windfall profits tax as an addition to the $59 billion tax cut package, but the Dorgan amendment failed to carry.  The Senate also failed to pass an amendment proposed by Maria Cantwell that would have permitted the President to declare energy emergencies and impose more severe penalties for price-gouging during such emergencies.  In spite of the record-breaking profits of the extractive industries, the Senate could not muster the courage to pass an amendment to the tax bill proposed by Diane Feinstein that would have rescinded tax breaks for energy exploration.  See this story.   The bill, however, did include about $4.3 billion of accounting changes that are the focus of a White House veto threat.  See this story in the Guardian.

The Senate passed its almost $60 billion tax cut bill in the early hours Friday morning. (See Guardian story, above).  It includes an extension of the AMT higher exemption rate and extends most expiring tax cut provisions, including various tax breaks for businesses.  The Senate wisely, on the insistence of Senator Snowe in the Finance Committee, removed from its bill the extension of the giveaway capital gains and dividends rate cut for wealthy investors.  The House, however, expects to pass an even larger tax cut bill that will include that break for wealthy investors, and House and Senate Republican leaders insist they will make sure it is included in the bill that comes out of conference.   The House bill does not currently include extension of AMT relief for middle-class taxpayers.

Also early Friday morning, after suffering a significant and well-deserved defeat of its spending bill for education and health care, the House Republican majority managed to push through its so-called "deficit reduction" budget bill, with a 217-215 vote.  That bill paves the way for the House's planned tax cuts by chopping $50 billion out of programs like Medicare, food stamps and student loans.  See this CNN story.  The Republican leadership made some minimal concessions to pass the bill--such as permitting 40,000 school children whose parents would lose food stamps to remain eligible for school lunch programs and removing a requirement that the poorest recipients of Medicaid pay more for their health care.  Nevertheless, the result of this bill is government stepping back from its duty to provide a safety net for its citizens, and the reason for this bill is to pay for tax cuts that primarily go to the benefit of corporations, wealthy investors and other Americans in the top quintile of the income distribution.

When the House passes its tax cut bill and sends it to conference with the Senate-passed tax cut bill, let's hope that the conferees don't succeed in retaining the House version of the bill that cuts government funding by giving a needless tax break to the wealthiest Americans.  Hopefully, also, the Senate AMT provision will be retained by eliminating some of the tax breaks for corporate America.  The conferees should listen to the American people who are beginning to speak more plainly about their desire for a functioning government, infrastructure needs, and safety nets for the poor. Tax cuts for the wealthy investor class do nothing for the common good.  Instead, Americans want Congress to use those funds either to reduce the deficit or to invest in education, research, and health care that will benefit all Americans.