Politics & Policy

Speaker Pelosi’s First Tax Hike?

The "Clean Energy Act of 2007" would raise taxes on both domestic oil producers and American consumers.

Fifteen days into the new Democratic Congress, the party that ran on the platform of increasing our energy independence from foreign oil has introduced the “Clean Energy Act of 2007” (H.R. 6), which aims to raise taxes on domestic energy production. This was to be expected. The last time the Democrats controlled Congress, they had run on a platform to help American families, only to abandon that plan when they realized it translated into less money to fund government expansion and more social-engineering projects.


The clean-energy bill represents an effort to hinder American energy independence and raise taxes on both domestic oil producers and American consumers. The House is preparing to force a vote today on the bill, which will increase the cost of domestic production by $10 billion, and use the revenue for a new pork-barrel slush fund — the so-called “Strategic Energy Efficiency and Renewable Reserve.” The last such fund, created by the Carter administration, went bankrupt after a few years.


Claiming that “Big Oil” owes $6 billion in royalty fees for production in federal waters, House Speaker Nancy Pelosi has implied that oil companies got away with murder after Hurricane Katrina sent oil prices skyrocketing past $70 a barrel. In a Wall Street Journal editorial Tuesday, however, the exact nature of the leases that allowed for that production was revealed. The leases, signed by the Clinton administration’s Interior Department in 1998, made no stipulation about royalty payments. Even after the lessees inquired about the lack of royalty payments, the Interior Department signed the contracts anyway. 


Nonetheless, the new Democratic majority intends to violate binding contracts, forcing domestic producers to accept a $9 per barrel royalty fee from the leases. If they do not except, they lose the right to bid for federal property in the future.


This measure is a violation of the Taxpayer Protection Pledge, signed by 197 House members and 43 senators — public officials who have pledge to their constituents to “oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.” By eliminating the manufactures’ deduction and reducing the geological and geophysical expenditures amortization period without an offsetting tax cut somewhere else, H.R. 6 clearly violates the pledge.

It also exposes the hypocrisy of its backers.


The increased revenue that the bill would produce is said to be for the development of alternative energy sources — such as ethanol, solar power, and windmills. However, when presented the opportunity to support such development in the 2005 energy bill, which provided incentives for investment in alternative energies such as ethanol and oil production in the Gulf of Mexico, Democrats opposed the bill on the principle that the investment capital did not come from federal coffers, but from tax incentives.

Or witness the duplicity of environmental activist Bobby Kennedy, Jr., and his uncle, Sen. Ted Kennedy (D., Mass.). They worked hard to defeat a plan to erect windmills ten miles off the coast of Cape Cod, claiming that a tiny speck on the horizon would occlude their view from the Kennedy compound in Hyannisport. And now they plan to tax companies in order to fund that which they opposed.

This isn’t the first time royalty fees on oil have been proposed. Former President Gerald Ford imposed a $3 per barrel fee on all oil, helping create the oil crises that continued during the Carter administration. As you may recall, consumers went ballistic.

While gas prices are creeping back down to $2 a gallon, Democrats are devising a plan to manipulate the energy markets, despite the disastrous consequences. The oil-tax increase will, by the laws of economics, decrease domestic energy production and provide a boost for OPEC producers — thereby increasing our energy dependence.

Despite their idealistic belief that oil-company profits will decline drastically along with prices at the pump, Democrats fail to realize that behind their obnoxious economic egalitarianism are the makings of another oil crisis and increased prices at the pump.

– Grover Norquist is president of Americans for Tax Reform.


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