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Capital Hill Watch Alert

CLEAN Energy Act of 2007' (H.R. 6)

On Thursday, January 18, 2007, The U.S. House of Representatives is expected to vote on CLEAN Energy Act of 2007' (H.R. 6)   [To view the Full Text of the legislation visit: Full Text of Legislation  ].

Tax Increases for energy producers.

Related to the development of federally owned resources, particularly oil and natural gas in submerged lands on the Outer Continental Shelf (OCS), the bill would make several changes.

On oil or gas produced from certain OCS deepwater leases unless contractual agreements require royalties to be paid when market prices exceed specified thresholds, this measure would impose a “conservation of resource fee.” Also, a conservation of resource fee on all non-producing oil and gas leases in the Gulf of Mexico would be imposed by the legislation.

The provision in the Energy Policy Act of 2005 (Public Law 109 – 58) that precludes the Bureau of Land Management from collecting certain fees; provides additional royalty relief for oil and gas produced from the OCS from ultra-deep wells, very deep water, and Alaska: and authorizes the Secretary of the Interior to modify the terms of oil and gas leases in the National Petroleum Reserve in Alaska would be repealed by the bill.

The availability of certain tax deductions for production activities involving oil and natural gas would be changed by the measure. Income that derives from the sale, exchange, or other disposition of oil, natural gas, or any associated primary products would no longer qualify for the income tax deduction allowed for income attributable to domestic production activities under the bill. Currently, major integrated oil companies are allowed a five – year amortization period for geological and geophysical expenditures, but that period would be increased to seven years by this measure.

Subsidies for renewable energy. The use of energy-efficient products and conservation.

The measure calls for subsidies for uncompetitive renewable energy as well as promotes the utilization of energy-efficient products and practices as well as conservation. Government subsidies and preferences for alternatives to fossil fuels have failed to make these technologies competitive and are unlikely to do so in the future. Natural resource economists indicate that long-term programs to conserve energy or increase efficiency do not result in lower energy consumption but just the opposite. Energy consumption increases as a result of greater efficiency. Since increased efficiency lowers cost, demand is increased because goods are more affordable.

One way to reduce the nation's reliance on foreign oil, Democrats in Congress as well as others have promoted the use of alternative energy such as ethanol. However, one reason for the increase in gasoline recently is that ethanol which is produced mostly from corn costs more than gasoline and adds to the final cost of the product. Furthermore, more than double earlier government predictions, U.S. factories producing ethanol for automobiles may consume as much as 50 percent of the nation's corn crop next year which will create competition for grain stocks that could increase supermarket prices for cereals, meat, eggs, and dairy products. Price hikes will be passed on to consumers who purchase anything from milk to pork chops as a result of the growing competition for corn. Such actions will only add further to the cost of living for the American consumer.

Measures Effect.

Modifying the current tax code will do nothing to curb the recent increases in energy prices and over the long-term would be counterproductive. Erroneous is the assertion that the domestic energy sector is under taxed. Actually higher than the market average are the sector's overall effective tax rates by some measures. As a result, a comparative advantage would be given to Organization of Petroleum Exporting Countries ( OPEC ) and other foreign suppliers that are not subject to such provisions as U.S. companies are. Furthermore, in the long-term, tax increases on energy companies will discourage investment in new domestic production of gas and oil. In the coming years, the US needs more domestic oil and natural gas production because this nation's energy demand with its economy is growing.

Since the energy industry would be left with less after-tax revenue to reinvest, new exploration and production would be discouraged as a result of higher taxes. Ultimately, higher prices for consumers would result. The increased taxes would lead to lower domestic supplies of oil and gas and a greater dependency on imports to meet the nation's energy demands.

Energy tax increases can backfire and hurt consumers by reducing domestic energy supplies as was the case of the infamous windfall profit tax on oil imposed under the Carter administration in 1980. In 1988, it was repealed under the Reagan administration. Americans learned a hard lesson in their pocket book that this approach does not benefit them as was the case in 1980 when punitive actions resulted from the anger over high prices and Big Oil.

What Can You Do?  

Urge your representative to NOT SUPPORT   CLEAN Energy Act of 2007' (H.R. 6).

Contact Information:      

Capitol Hill Switchboard Numbers: 202-225-3121 or 202-224-3121 (Those numbers will direct you to the Capitol Hill operator. Ask for your representative's office.)  

To go to your representative's website, find his E-mail or to find out who your representatives are... http://www.house.gov/house/MemberWWW.html    

To electronically mail your U.S. House of Representative, go to http://www.house.gov/htbin/wrep_findrep .    

Addressing Correspondence:    

The Honorable (full name)
United States House of Representatives
Washington, DC 20515  

Dear Representative (last name):  

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