$100 oil fuels tax flap over Big Oil, renewables

NEW YORK (MarketWatch) -- As crude futures pushed to an inflation adjusted, all-time high of $103.95 a barrel this week, a measure to shift about $18 billion in tax credits for the U.S. petroleum industry to wind and solar energy landed in the U.S. Senate.

The Renewable Energy and Energy Conservation Tax Act of 2008, which currently contains the change in tax credits, is one of several courses of action now under scrutiny in Congress. Some legislators are looking to the oil and gas giants for much-needed revenue in a world where triple-digit oil prices remain a reality for the foreseeable future.

In turn, the lobbying effort over energy-related taxes in Washington has ramped up considerably, with oil companies squaring off against a collection of industry groups from business, environmental and labor groups.

No major votes are expected this week in the Senate, observers said.

Under the renewable tax credit approved by the U.S. House of Representatives last week, $18 billion of subsidies for big oil companies would be channeled into renewable-energy resources.

That's an idea not being greeted warmly by companies that produce and sell energy from fossil fuels. While record prices help oil producers, it squeezes refining margins as the cost of crude outpaces gasoline prices at the pump.

Even if retail gasoline prices hit $5 a gallon this year, companies that extract precious crude from the ground will continue to reap rewards, but at a higher cost of doing business.

Sponsored by:

XOM 84.51, -2.68, -3.1%) , ramped up its rhetoric on Monday, arguing that it needs to keep spending big money to maintain and grow production to meet an expected 35% jump in world oil demand by 2030.

Exxon has pledged to increase its $20 billion a year in development costs, while hailing "stable tax policies" as "critical" to meet America's growing energy needs.

In 2007, Exxon disclosed income taxes of $30 billion on revenue of $390 billion and net income of $40.6 billion, a new record. Including income, sales-based and all other taxes, Exxon paid $105.7 billion in 2007 taxes, or about 44% of its revenue. Averaged out from 2003-07, the company calculated that it paid about $13 billion a year in U.S. taxes.

Still, the profits by major oil companies will likely stay in the spotlight for the time being, with Americans reeling from higher food and gas prices tied to crude.

Congress is going over a production tax-credit extension, the creation of a national renewable-portfolio standard and climate-change legislation -- all of which are related to energy and oil.

Groups pushing for renewable-energy support include the Union of Concerned Scientists, the Retail Industry Leaders Association, the Association of Home Appliance Manufacturers and the American Institute of Architects, among others.

Rhone Resch, president of the Solar Energy Industry Association, said that the coalition supports the extension of renewable-energy tax credits, but signaled some flexibility on whether the money would come directly from oil and gas companies or from some other means.

He commented that while fossil-fuel firms have gotten permanent tax credits in the past, the renewable-energy business has faced expiration dates every two years.

"We'd like to see tax credits consistent with those enjoyed by other technologies," Resch added.

Is what's good for Exxon good for the country?

House Speaker Nancy Pelosi and others in Washington have asserted that the oil industry doesn't necessarily need extra tax credit right now.

The United States should instead invest the tax credits in renewable resources that will reduce dependence on foreign oil and stoke the creation of jobs.

"We'll have all kinds of new jobs built around these new green technologies," Pelosi said in an interview last week.

Proponents of the Renewable Energy and Energy Conservation Act of 2008 said that it would help safeguard as many as 116,000 jobs and $19 billion in clean-energy investment.

The measure comes as oil companies continue to take heat for huge profits tied to eye-popping oil prices.

On the presidential campaign trail, Sen. Barack Obama is chastising Exxon Mobil specifically and corporate lobbyists in general for allegedly stacking the deck against ordinary Americans.

"It's a game where lobbyists write check after check and Exxon turns record profits, while you pay the price at the pump and our planet is put at risk," he said in a speech last month.

Others are championing the cause of the oil companies, such as conservative columnist Ben Stein. He argued that pension funds from mom-and-pop investors are the biggest shareholders in Exxon Mobil, and that its profits trickle down through dividends, higher stock prices and the more intangible benefit of having a steady river of gas at the pump.

"Big Oil is big us. And we need us," Stein wrote this week.

Original here