Date: 07-Apr-10
Country: US
Author: Richard Cowan
 

Details of an oil industry tax are being filled in Congress as part of an upcoming U.S. climate control bill, sparking a spirited lobbying campaign this week over how the revenues from that tax would be used.

A Senate source familiar with the draft legislation told Reuters that the new fee "will be assessed at the terminal rack," -- where refined oil products await shipment to retail gasoline stations and other end points.

But the source added that no final decisions had yet been made on whether revenues from the tax would be deposited into the Highway Trust Fund and whether they would be earmarked for specific "green" projects or road and bridge repairs that the highway fund normally handles.

Currently, an 18.4 cent tax on each gallon (3.79 liters) of gasoline sold in the United States is deposited in the trust fund, which is perpetually at risk of going broke, largely because of increased fuel efficiency in cars.

The new oil industry tax, aimed at encouraging better fuel efficiency in the transportation sector, would be part of a compromise global warming bill being written in the Senate that could be unveiled by the end of April.

The centerpiece of that bill would be steps to achieve a 17 percent reduction in U.S. emissions of carbon dioxide and other greenhouse gases by 2020, from 2005 levels.

To attract wider Senate support for the controversial legislation, it also would increase offshore oil and natural gas exploration and drilling, which would do nothing to control dangerous carbon pollution. Government funds for expanding the U.S. nuclear power industry also would be included.

The U.S. oil industry so far is split over whether to support climate legislation Democrats in Congress are trying to pass with the help of some Republicans and independents.

A transportation tax on refined oil would likely be passed on to consumers, who could see gasoline prices rise by around 15 cents a gallon. But the actual increase would be linked to the price of pollution permits electric power companies would have to buy under a cap and trade scheme in the bill that also is aimed at reducing carbon emissions.

Senator Thomas Carper and seven of his fellow Democrats on Monday expressed concerns over how the transportation tax revenues might be used.

In a letter to the three main authors of the climate change bill -- Democrat John Kerry, Republican Lindsey Graham and Independent Joseph Lieberman -- the eight senators highlighted the energy efficiencies generated by high-speed rail and other mass transit.

"Transportation revenue should be reinvested into infrastructure strategies that will reduce transportation emissions and oil consumption," they wrote.

Meanwhile, a group of 27 transportation, industry and labor groups also wrote Kerry, Graham and Lieberman to complain that some of the oil tax revenues could be used for clean-energy research or subsidies for hybrid cars.

"Any proposal to divert user fees from motor fuels while our roads, bridges and transit systems are neglected is not sound policy," they said.

Even if Kerry, Graham and Lieberman introduce a climate bill in coming weeks, there are widespread doubts the Senate will be able to pass it this year amid a tight legislative schedule and reelection campaigns for some senators who may hope to avoid a tough vote on a bill that could raise energy prices.

If the Senate does debate a bill, it likely would be in June or July, when U.S. gasoline prices typically rise during the high-driving summer season. The government on Tuesday said prices likely would average $2.92 per gallon this summer, up from $2.44 last summer. Those price increases could make it more difficult for politicians to debate a climate bill.

(Additional reporting by Lisa Lambert, Editing by Sandra Maler)