Tax Incentives

Democrats propose energy tax breaks

House Democrats outlined $18 billion in tax incentives over 10 years for alternative energy and efficiency improvements Monday, proposing to pay for them by rescinding tax breaks for the biggest oil companies.

The tax package is expected to be included in an energy bill later in the week that also would lift the sweeping federal bans on offshore oil and gas drilling off the Pacific and Atlantic coasts.

The legislation would open, wherever a state agrees, waters at least 50 miles from shore from New England to Washington State. An exception would be waters off Florida's western coast where energy development would continue to be banned.

The tax provisions are similar to those that passed the House earlier this year, but not the Senate.

The proposal would extend tax credits for wind and solar industries that are scheduled to expire this year and provide a variety of tax incentives to spur development of alternative non-fossil energy resources such as cellulosic ethanol and other biofuels.

It would provide tax incentives to people wanting to put solar panels or mini-wind turbines on their homes, and to companies that encourage bicycle commuting by making available bike storage areas.

To pay for the new tax incentives, House Democrats want to roll back a pair of tax breaks enjoyed by the five largest oil companies. One was enacted to benefit all domestic manufacturers against foreign competition and the other involves tax credits claimed by U.S. oil companies for oil pumped overseas.

Together the two provisions, if continued, will save the largest oil companies $17.7 billion in taxes over the next decade.

Meanwhile, a sharp debate continued Monday over whether the Democrats' energy legislation actually will produce any more oil from offshore waters.

Republicans argued that the Democratic plan leaves out nearly 90 percent of the 18 billion barrels of oil believed to be located in areas of the Outer Continental Shelf now off limits because it would continue the ban in a 50-mile shoreline buffer.

And they argue that states would have little incentive to go along with drilling off their beaches — even 50 miles out to sea — if they would not share in the billions of dollars in federal royalties. The Democrats proposal has no royalty sharing provision.

The legislation would "do very little to increase U.S. oil supplies" and "...denies Americans access to some of our nation's most promising energy resources" that could be brought to market the fastest, Red Cavaney, president of the American Petroleum Institute, wrote in a letter to House Speaker Nancy Pelosi.

Pelosi has argued that the drilling proposal is a "reasonable compromise" with those who demand more offshore drilling. She also said oil companies should give up some of their tax subsidies in return for wider access to the government's energy resources.

(Published by AP - September 16, 2008)