Senate Debates oil companies 'Windfall'

[Dear Maggie]

Wall Street Journal
November 17, 2005

Senate Debates 'Windfall' Tax On Oil Companies
By BRODY MULLINS
Staff Reporter of THE WALL STREET JOURNAL
November 17, 2005; Page A3

WASHINGTON -- The Senate debate over tax cuts veered toward tax increases on oil-company profits Wednesday, as lawmakers sought to respond to public discontent over high gas prices.

Senate Democrats last night offered a proposed "windfall profits" tax on oil companies, with a floor vote expected today. Earlier in the week, the Republican chairman of the Senate Finance Committee added a provision to the pending tax bill that would raise an additional $5 billion over two years from major oil companies such as Exxon Mobil Corp., Chevron Corp. and BP PLC.

Neither idea is expected to survive in final legislation, since both the White House and top Republican leaders oppose them. Still, their place on the congressional agenda reflects a heightened sense of turmoil as President Bush flounders politically and lawmakers look toward the 2006 midterm elections.

Republican Sen. John Sununu of New Hampshire and Democratic Sen. Ron Wyden of Oregon today plan to offer a third idea: Their joint proposal would roll back tax benefits the energy industry receives in the form of oil-depletion and depreciation incentives.

"A number of these provisions in the tax code were written in the 1980s and early 1990s, when oil was much less expensive," Mr. Sununu said. His New Hampshire Republican colleague, Sen. Judd Gregg, was among the first to suggest that Congress consider new taxes on robust oil-company profits, which come as consumers are squeezed by pump prices and bracing for further jolts in winter-heating bills.

The proposal offered by Democratic senators would impose a tax on oil-industry profits. Democratic Sen. Byron Dorgan of North Dakota, the author of the measure, would add a 50% tax on profits of major integrated oil companies when the price of oil exceeds $40 a barrel.

A windfall tax on oil-industry profits was last enacted in 1980 and repealed in 1988 amid a collapse in oil prices.

Republican opponents in both chambers expressed confidence the measure would fail. "There's a lot of jawboning," said Rep. Tom Cole, a Republican from energy-rich Oklahoma. "It's easier to be a demagogue" than for minority Democrats to achieve a legislative majority, he said.

Mr. Dorgan acknowledged that he faces an uphill fight. He said the debate itself would provide Democrats an opportunity to use the energy-price issue against a majority party that typically champions free-market forces.

Months of public unhappiness over gas prices, combined with sagging approval ratings for both Congress and the president, have created ripe conditions for some sort of congressional response. In last week's Wall Street Journal/NBC News poll, a majority of Democrats, Republicans and independents said Congress should promptly enact a federal cap on gas prices.

Although that idea has no significant support on Capitol Hill, public sentiment behind it has lawmakers in both parties looking for myriad ways to adapt energy policy beyond the bill Mr. Bush signed this year.

Sen. Charles Grassley (R., Iowa) included his limited oil-tax boost in the Finance Committee bill in response to such pressures. Although the rules of Senate debate will make it difficult for opponents to strip the measure on the floor, House Republicans vow to block it when the two chambers meet to reconcile their different versions of tax legislation.

"While there seems to be some momentum in the Senate on this, we in the House are not in favor," said Ron Bonjean, a spokesman for Speaker Dennis Hastert of Illinois.

Mr. Grassley's provision, included in a bill approved by the Finance Committee, would change the way the companies pay taxes on oil and gas drilled on U.S. land. According to calculations by the Senate Finance Committee, the new accounting rules would effectively raise taxes for oil companies by $5 billion over two years.

The tax bill originally was crafted by Republicans as a way to extend President Bush's 15% rates for capital gains and dividends, exempt millions of Americans from the alternative minimum tax and extend a slew of other tax incentives to businesses and individuals. The capital-gains and dividend provisions have been temporarily set aside amid complaints from moderate Republicans that they were inappropriate amid a simultaneous debate over cuts affecting social programs.

Yesterday, Republican Sen. Sam Brownback of Kansas and Democratic Sen. Joseph Lieberman of Connecticut also proposed new tax credits to promote hybrid vehicles, lightweight materials for cars and the use of mass transit.

Rep. Jack Kingston (R., Ga.) suggested the federal government save gas by cutting mail service on Saturdays. Democratic Sen. Frank Lautenberg of New Jersey accused executives of the largest U.S. oil companies of lying to Congress during testimony last week.

Write to Brody Mullins at brody.mullins@wsj.com


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Oil Executives Could Face Probe
Of Their Testimony to Congress
By JOHN J. FIALKA
Staff Reporter of THE WALL STREET JOURNAL
November 17, 2005; Page A10

WASHINGTON -- Sen. Frank R. Lautenberg called on the Justice Department to launch an "immediate criminal investigation" into whether executives at five major oil companies lied to Congress.

In hearings last week before the Senate Energy and Commerce committees, Sen. Lautenberg (D., N.J.) had asked the executives whether their companies or any representatives of their companies had participated in Vice President Dick Cheney's energy task force in 2001. Most of the executives responded that they hadn't participated in the task force, which drew up the Bush administration's energy policy.

Sen. Lautenberg's Justice Department request came after the Washington Post reported that a secret list compiled in the White House showed that executives from the five companies met with the task force.

"What went on at these secret White House meetings that may be motivating oil company executives to deny their participation?" Mr. Lautenberg asked in a statement yesterday.

Sen. Lautenberg asked the Justice agency to investigate the testimony by top officials of Exxon Mobil Corp., Chevron Corp., ConocoPhillips, Royal Dutch Shell PLC and BP America, BP PLC's U.S. subsidiary.

Lea Anne McBride, a spokeswoman for Mr. Cheney, said yesterday, "I am not familiar with such a list." Andrew D. Lundquist, executive director of the 14-member task force, said he held individual meetings with "many oil companies" as well as leaders of major environmental and consumer groups.

Tom Fitton, president of Judicial Watch, which unsuccessfully sued the White House to get the records of the task force, said the issue was not a matter of meetings. "We wanted to get into discovery to find out the extent of their [the oil companies'] involvement." The Supreme Court rejected the lawsuit, saying the discovery effort by outside groups would intrude into the deliberative process of the executive branch.

The task force, known as the National Energy Policy Development Group, produced a detailed list of proposed energy policies in May 2001, many of which were included in the 1,700-page energy bill that passed last summer.

To some extent, the responses during the hearing revolve around a technical definition of "participation." The U.S. Court of Appeals for the District of Columbia concluded in May that none of the oil companies or other nongovernment groups participated in the task force's deliberations to the extent that they had a vote on or veto over its decisions.

Exxon Mobil spokesman Mark Boudreaux said Lee R. Raymond, chief executive, was accurate in telling the Senate hearing last week that company officials didn't meet with the task force itself. But he noted that Exxon previously confirmed, in response to questions from the New York Times, that Mr. Raymond met with Mr. Cheney and that other Exxon officials met with a task-force staff member, both in February 2001. Mr. Boudreaux confirmed yesterday that staffer was Mr. Lundquist.

There was "nothing sinister or secret" about the Lundquist or Cheney meetings, Mr. Boudreaux said. He noted that on the same day that Exxon officials met with Mr. Lundquist, they also met with officials of the General Accounting Office, now called the Government Accountability Office, and with a group of Capitol Hill staffers from both parties; the following day they met with the Washington Post. The purpose of all of the meetings, Mr. Boudreaux said, was for Exxon to present its annual energy outlook, a document the company updates yearly and makes available to the public.

A ConocoPhillips spokesman said James Mulva, chairman and CEO of Phillips Petroleum in 2001, was "correct in stating that no one from his company participated in the vice president's task force. He was not aware that Archie Dunham and Alan Huffman of Conoco reportedly appeared at task force meetings." Conoco and Phillips Petroleum merged in 2002.

Don Campbell, a spokesman for Chevron, said his company didn't participate in the task force or attend its meetings. He added, however, that "as a matter of course, Chevron's Washington office has ongoing discussions with officials in the administration and the Congress on U.S. energy policy."

Ross J. Pillari, president of BP's American subsidiary, told Sen. Lautenberg at the hearing that he didn't know whether any BP America officials met with task-force members because he wasn't at that level in the company at the time. BP America spokesman Ronnie Chappell said yesterday that BP doesn't comment on its meetings with government officials as a matter of policy, "but I can tell you that meeting with state, local and government officials on energy issues is something that occurs almost daily."

--Jeffrey Ball contributed to this article.

Write to John J. Fialka at john.fialka@wsj.com