Lawmakers in Washington are pushing a tax break for oil refiners as part of a compromise allowing unfettered crude-oil exports for the first time in 40 years.
Sen. Tom Carper, D-Del., proposed a tax credit of up to $3 a barrel to independent refiners that would be harmed if Congress abolishes U.S. crude-export restrictions. A separate proposal would increase the manufacturing tax credit refiners can collect. Critics say the idea would double-up benefits to the oil industry, when Congress should instead be taking steps to curb the production and use of the fuel.
“This would be a major giveaway to the oil industry at the same time the rest of the world is working diligently to forge a deal to combat climate change,” Lena Moffitt, Washington-based director of Sierra Club’s Beyond Dirty Fuels Campaign, said Friday. “We need to be moving away from, and not underwriting, fossil fuels.”
The negotiations signal that Democrats are willing to consider the possibility of oil exports, a policy goal long sought by oil producers including ConocoPhillips. In return, Democrats are also seeking long-term extensions of tax breaks for renewable energy such as solar and wind.
Congressional leaders plan to continue their talks through the weekend as they consider adding the crude-export provision to legislation to fund the federal government before current spending authority expires Wednesday.
Environmentalists say aid to the oil industry is bad policy, especially as negotiations are winding down in Paris for an accord to slow global warming. Envoys at the United Nations climate talks are negotiating into Saturday, a day beyond schedule, as India warned of divisions that may thwart a deal address climate change.
Lukas Ross, a climate and energy campaigner at Friends of the Earth, called the refiners-for-exports idea “a comedy of the absurd.”
“Trying to make the refiners whole is sort of missing the bigger picture,” David Turnbull, campaigns director for Oil Change International, said in an interview from the talks in Paris. Lifting the crude-export ban “would absolutely undercut the message the Obama administration is trying to send” in Paris, he said.
Sen. Edward Markey, D-Mass., said earlier this week than any agreement to lift the export ban would have to include renewing tax breaks for wind and solar energy for at least 10 years and should be “tied in terms of size and scope” to benefits that oil companies receive from lifting the ban.
Assistance for refiners may help secure the support of lawmakers in mid-Atlantic states like New Jersey and Pennsylvania, where Delta Air Line’s Monroe Energy and PBF Energy have a presence.
“Democrats keep upping the price” for lifting the export ban, Sen. John Cornyn of Texas, the Senate’s number-two Republican, said Thursday. “Senator Carper has some ideas along those lines that cause me some concern, but everything is in play.”
Sen. John Hoeven, R-N.D., said the refiners’ credit would cost $7 billion over 10 years — maybe too expensive to win the support of his party. The American Fuel & Petrochemical Manufacturers, a Washington-based industry group, said it opposed Carper’s proposal, which wouldn’t help about 35 percent of U.S. refiners. The industry group also opposes linking crude exports and renewable energy tax credits.
An alternative proposal floated Friday would increase the manufacturing tax credit to 9 percent from 6 percent for refiners, people familiar with the discussions said.
Even if Congress lifts the export ban, producers may not see any immediate benefit because U.S. crude isn’t significantly cheaper than international oil — a trend that will probably continue next year, Bloomberg Intelligence analyst Gurpal Dosanjh said.
President Barack Obama has opposed legislation to lift the ban and called instead for ending tax breaks for oil drillers and using the cash to invest in solar and wind energy. But the administration is now leading the talks with Republicans on this issue, Senate Minority Whip Richard Durbin said Thursday.
Obama spokesman Josh Earnest said Friday said the White House is “in the loop” on the talks but wouldn’t share details.
The intense lobbying now underway on Capitol Hill come after two years of congressional and industry focus on the U.S. crude-export restrictions, put in place to counter the energy- supply shortages of the 1970s. Advocates of repeal hope to secure a deal this year, since campaigns for the U.S. presidential election in 2016 will force any any controversial political decisions to grind to a halt.
“There’s a view that this is the last chance,” said Kevin Book, managing director at ClearView Energy Partners LLC in Washington, adding that he didn’t necessarily agree with that perspective.
“There’s an almost certain bite at the apple at the end of next year in a post-election lame duck session.”
Book said the longer lawmakers are willing to extend renewable-energy tax credits, the more likely a deal may be. “It’s good cover for everybody on both sides, even if it’s hard to swallow,” he said.
Even that may be a high bar to clear. AFPM, the refiners’ organization, opposes linking crude-exports and renewable tax credits, as do environmental groups including the Sierra Club and Friends of the Earth.
“I still think the whole thing will crater,” said Michael McKenna, a lobbyist working for Koch Industries Inc., a company opposed to the negotiations. “It’s the worst deal I’ve ever seen.”