Political Calculation Seen in Lopsided Vote to Debate Energy Tax

Democrats and Republicans, at odds on energy policy, share a certainty their positions will appeal to voters this November.

The Senate showed rare bipartisanship in voting 92-4 to debate a Democratic-sponsored bill repealing $24 billion in tax breaks for the five largest oil companies operating in the U.S., including Irving, Texas’s Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX) in San Ramon, California.

Almost every Republican who voted to take up the bill opposes its passage, making the odds long that it will attract the 60 votes needed to pass. The Senate is scheduled to vote on it today after rejecting a similar bill in May.

“It’s stopping the milk truck so the dog can catch it,” Kevin Book, managing director at ClearView Energy Partners LLC, a Washington-based policy-analysis firm, said in an interview. “Republicans can point out something obvious, which is if you raise the cost of production there’s a good chance some of that raises the price of consumption.”

Democrats have used the repeal of the tax breaks to portray Republicans as defenders of an oil industry that makes tens of billions of dollars as they propose cuts to social programs to pay down the deficit.

Energy has emerged as a major issue in the presidential campaign, with candidates debating the merits of a Canada-to- U.S. crude oil pipeline and expanded offshore drilling. Gasoline (3AGSREG) prices rose to $3.911 a gallon this week, more than 32 cents higher than a year ago, according to AAA.

Political Focus

That’s forced politicians to focus on energy policy, which normally isn’t a priority, said Bruce Oppenheimer, a Vanderbilt University professor who has written on energy and politics.

Whether gasoline remains an issue in November depends on whether prices recede, he said.

“When prices drop back down, maybe because of something the government did or more likely not because of anything the government did, the American attention to it drops off almost immediately,” Oppenheimer said in an interview.

Neither side seems willing to bet on a decline. Republicans said the Democratic proposal would worsen the situation, as they also criticize President Barack Obama for blocking TransCanada Corp. (TRP)’s Keystone XL oil pipeline, restricting offshore production, and supporting solar-panel maker Solyndra LLC, which filed for bankruptcy protection about two years after winning a $535 million U.S. loan guarantee.

Energy Policy Differences

Republicans are “happy to use this opportunity” to talk about differences in energy policy, Senate Minority Leader Mitch McConnell, a Kentucky Republican, said.

Majority Leader Harry Reid, a Nevada Democrat, said, “The country deserves to hear the truth about double dipping by oil companies: they take taxpayer money with one hand and raise prices at the pump with the other hand." Photo: T.J. Kirkpatrick/Getty Images Close

Majority Leader Harry Reid, a Nevada Democrat, said, “The country deserves to hear the... Read More

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Majority Leader Harry Reid, a Nevada Democrat, said, “The country deserves to hear the truth about double dipping by oil companies: they take taxpayer money with one hand and raise prices at the pump with the other hand." Photo: T.J. Kirkpatrick/Getty Images

Majority Leader Harry Reid, a Nevada Democrat, said that, “The country deserves to hear the truth about double dipping by oil companies: they take taxpayer money with one hand and raise prices at the pump with the other hand.”

Senator Ben Cardin, a Maryland Democrat, said oil and gas production has increased, repeating a point made by Obama.

No policy advanced by the Democrats or Republicans will have much consequence to Americans squeezed by high gasoline costs, Guy Caruso, a senior adviser for the Center for Strategic and International Studies, a Washington-based group, said in an interview.

“There’s virtually nothing that Congress can do” to lower gasoline prices, said Caruso, the former director of the Energy Information Administration, which tracks and analyzes energy information for the U.S. “Most of the federal legislation would typically have a much longer time frame.”

Asian Growth

He blamed the price rise on a lack of capacity in the system as Asian economies grow, as well as logistical bottlenecks to U.S. East Coast markets and investors betting that crude prices will remain high as contributing factors.

The legislation, introduced by Senator Robert Menendez, a New Jersey Democrat, would repeal about $24 billion over 10 years in tax breaks to the five oil companies, which also include London’s BP Plc (BP/), Houston’s ConocoPhillips and Royal Dutch Shell Plc (RDSA), based in The Hague.

Of the total repealed, about $11.7 billion would be used for energy efficiency and renewable energy credits, and what’s left over would help pay down the federal deficit.

The Senate debate followed Obama’s two-day, four-state swing last week to promote his “all-of-the-above” strategy that includes both clean energy and more domestic production.

The president visited Cushing, Oklahoma, where he said he was seeking to expedite approval of the southern leg of the Keystone pipeline to connect Cushing to the Gulf Coast refineries.

‘Flat-Earth Society’

Obama said congressional Republicans were members of the “flat-earth society” for opposing incentives for clean-energy development while defending tax breaks for oil companies.

“Every time you fill up at the pump, they’re making money,” Obama said at a stop at a solar project in Boulder City, Nevada, on March 21. “They are doing just fine.”

Mitt Romney, the leading Republican candidate for president, has criticized Obama for denying the Keystone pipeline, which would cross six U.S. states.

Former Pennsylvania Senator Rick Santorum, Romney’s challenger for the Republican nomination, has said Obama hasn’t done enough to develop domestic oil resources.

A poll the Pew Research Center for the People and the Press released on March 19 shows attitudes on energy are changing.

While Americans view development of alternative energy sources as a higher priority than more production of oil, coal and natural gas, the gap has narrowed as gasoline prices have increased, according to the poll.

Wind, Solar Support

Fifty-two percent of respondents favored more wind, solar and other alternative sources, while 39 percent wanted more fossil fuels. Last year, the split was 63 percent to 29 percent, according to Pew.

The differences in Washington on energy are reflected in voter opinions. About 89 percent of Republicans favor more offshore drilling, versus about half of Democrats.

Democrats and independents are far more likely to favor more spending for alternative energy research and higher fuel efficiency standards, according to Pew, which is based in Washington.

“The partisan gap on the question has grown,” said Leah Christian, a senior researcher at Pew.

If the oil tax bill ultimately fails, it will join a list of energy-policy proposals that haven’t cleared either the Senate led by Democrats or the House controlled by Republicans.

Senate Democrats have blocked proposals from the Republican-led House to expand offshore drilling or open the Arctic National Wildlife Refuge to production.

Democrats have been unable to overcome Republican opposition to climate-change legislation or a requirement that utilities get more electricity from cleaner sources, such as wind and solar power.

The tax bill is S. 2204.

To contact the reporter on this story: Jim Snyder in Washington at jsnyder24@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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