Bucking Big Oil Companies, U.S. House Condemns Carbon Tax

  • Toothless resolution has symbolic value for future tax debates
  • Issue splits oil industry, with majors favoring tax approach

Congressional Republicans approved a non-binding resolution to condemn the idea of a carbon tax, putting lawmakers on record opposing an approach to combating climate change favored by Exxon Mobil Corp. and other large oil companies. 

The House strategy, pushed by Majority Whip Steve Scalise, a Louisiana Republican, and backed by Koch Industries Inc., used the symbolic measure to lock in votes against a tax on carbon dioxide emissions blamed for climate change. The tactic was designed to weaken the ability of a future president and Congress to levy one to help pay for a broad overhaul of the U.S. tax code, said Republican strategist Mike McKenna.

“The more you vote on something, the harder it is to vote the other way," McKenna said.

The House last touched the issue in 2013, when it voted 237-176 to adopt a Scalise-sponsored amendment requiring the administration to receive approval from Congress before implementing a carbon tax. By contrast, the measure the House passed 237-163 Friday is a stand-alone resolution asserting that "a carbon tax would be detrimental to American families and businesses, and is not in the best interest of the United States."

Regulatory Replacement

Some big oil companies disagree with the Republican effort. That includes Exxon Mobil, which hasn’t taken a formal position on the Scalise resolution but has lobbied on Capitol Hill for a revenue-neutral carbon tax to take the place of an array of environmental regulations that raise the cost of fossil fuels. 

A revenue-neutral carbon tax would "ensure a uniform and predictable cost of carbon, allow market forces to drive solutions, maximize transparency to stakeholders, reduce administrative complexity, promote global participation and easily adjust to future developments in climate science and policy," said Exxon Mobil spokesman Alan Jeffers. "In order to set a uniform cost of carbon across the economy, a carbon tax has to replace all the other patchwork of regulations that are designed to put a price on carbon.”

Several other large integrated oil companies also favor a tax on carbon, which could have the effect of shifting some environmental costs to the consumers of fossil fuels. For instance, BP Plc says a well-constructed carbon tax or cap-and-trade system would encourage energy producers and consumers to reduce emissions. Royal Dutch Shell Plc Chairman Charles Holliday calls a carbon tax the most effective and practical way to reduce greenhouse gas emissions.

Dividing Industry

But the issue divides the oil industry, pitting those integrated companies against many independent producers (which lack refining operations) that are vigorously fighting a carbon tax. 

Harold Hamm, the chairman and chief executive officer of Continental Resources Inc., calls it a bad idea. "That’s been something that’s failed in the past, I think it will fail in the future here in this country," Hamm said in an interview with Bloomberg News on Thursday. "Government shouldn’t be picking winners and losers. They ought to let industry and the market work."

Refiners joined in Friday, with the American Fuel and Petrochemical Manufacturers trade group coming out in favor of Scalise’s resolution. “A carbon tax, or consumer energy tax, is bad for American consumers and business," AFPM President Chet Thompson said in a statement. "And this resolution makes that clear."

Gaining Traction

The industry split may be one reason the American Petroleum Institute declined to weigh in on Scalise’s carbon resolution. "We are not taking a position on a carbon tax," spokewoman Sabrina Fang said by e-mail. The group wasn’t wary of opining on another measure that hit the House floor Friday: a resolution opposing President Barack Obama’s proposed $10-per-barrel fee on oil. That idea "is bad energy policy," anti-consumer "and will hit everyone in the wallet," Fang said.

Scalise’s carbon tax resolution comes as the idea is gaining traction in some circles. Long favored by some economists as the most straightforward way to put a cost on carbon dioxide, it has gained some high-profile Republican evangelists. For instance, former South Carolina congressman Bob Inglis is now pushing the idea as a free-market solution to climate change.

Koch Lobbyist

In a letter to House members Thursday, Koch lobbyist Phillip Ellender endorsed the Scalise resolution. "Raising taxes on the energy that American families and businesses rely on every day will not help any hardworking citizens improve their lives," said Ellender, president of government affairs at Koch Companies Public Sector LLC.

Because a carbon tax could generate big money for the treasury, it’s a tantalizing idea for lawmakers eager to balance the budget or offset cutting taxes elsewhere.

The Senate, which voted last year to adopt an amendment barring the U.S. government from putting a tax or fee on carbon dioxide emissions, is not expected to take up Scalise’s resolution.

But Thomas Pyle, president of the American Energy Alliance, said the vote was still critical to put House members on the record on a carbon tax months before the election, even though "there’s no immediate threat."

"It’s an orphan issue, but it’s always out there lingering because there is far too much revenue involved," Pyle said. 

"It’s an issue that gets bandied about quite a bit, but it’s not quite as simple as some people would have others believe," said Daniel Kish, senior vice president of policy at the Institute for Energy Research, a free-market oriented non-profit. "This would ultimately be passing costs off to the consumer and taxpayer."

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