(Jun 19, 2007)

Senate advances proposal to tax oil companies

By H. Josef Herbert
From AP

WASHINGTON (AP) - A proposal to hit oil companies with $29 billion (euro21.6 billion) in new taxes advanced in the U.S. Senate on Tuesday, targeting the money to energy conservation, wind turbines, electric hybrid cars and clean coal technology.

The massive tax package, double what Democrats had talked about as recently as last week, is ''designed to promote clean and sustainable energy,'' said Sen. Max Baucus, a Democrat and chairman of the Finance Committee that approved the measure by a 15-5 vote.

It will be added to energy legislation being considered by the full Senate.

Senators acknowledged that oil companies would howl over the new taxes.

But Sen. Chuck Grassley, a Republican, said, ''We have entered a new era in energy markets ...(that) requires a dramatic shift away from tax incentives for oil and gas production'' and toward support for other energy sources and efficiency.

On the Senate floor, meanwhile, senators rejected two proposals Tuesday aimed at accelerating the development of liquefied coal for use as a substitute for diesel and jet fuel. Environmentalists argue liquefied coal produces more than twice the greenhouse gases of conventional diesel.

Supporters argued that coal is America's most abundant energy resource. ''It would be downright foolish not to take advantage of this resource,'' said Sen. Mitch McDonnell, the Republican leader.

A proposal by Sen. Jim Bunning, a Republican, that would have required the use of 6 billion gallons (22.7 billion liters) of liquefied coal a year by 2022, was rejected 55-39. A second measure that would have authorized $10 billion in federal loans to help build coal liquefaction plants, offered by Sen. Jon Tester, a Democrat, was turned back 61-33.

The tax package that emerged from the Finance Committee reflected the dramatic tilt of congressional sentiment toward renewable fuels _ and away from support of oil companies _ since Democrats took over control of Congress last January. In part, the shift stems from growing concerns about the impact of fossil fuels on global warming and motorists' anger over soaring gasoline prices.

The bill would funnel about $11 billion (euro8.2 billion) over 10 years into the development of renewable fuels such as ethanol, biodiesel and power from wind turbines in a combination of extensions of existing tax breaks and new tax benefits. An additional $18 billion (euro13.4 billion) in tax breaks _ from tax credits to clean and renewable energy bonds _ also were approved.

To pay for the reductions in revenue, the legislation targeted the large oil companies, either ending a number of tax benefits, some provided as recently as three years ago, and imposing new taxes.

The measure would extend and increase taxes paid under an oil spill liability law and eliminate existing tax credits involving foreign oil production. In all, the tax changes were expected to cost the industry more than $15 billion (euro11.1 billion) over a decade.

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