Proposed Oil Tax Targets Companies
TWO proposals in Congress to tax oil company windfall profits would not affect the companies that gained the most in percentage terms from high oil prices last fall. During the fourth quarter of 1990 major oil companies, which are targeted by the proposed tax, experienced a 77 percent increase in profits. But independent oil producers saw profits rise 378 percent, according to an analysis released last week by the Energy Information Agency (EIA).
Last month Rep. Paul Kanjorski (D) of Pennsylvania introduced a House bill to reinstate the oil company windfall profits tax, which raised $77 billion for the US Treasury from 1980 until its 1988 repeal. His bill is designed to ``differentiate from major multinational companies and small, independent companies.''
Similarly, an ``excess'' oil company profits tax proposal in the Senate targets companies that the Department of Energy defines as ``major'' - those that control 1 percent or more of US oil production or reserves or refining capacity or product sales. Currently, 23 companies fit that description.
In introducing his bill this month, Sen. Howard Metzenbaum (D) of Ohio said that big oil companies were not using profit increases to drill in the United States, but instead were increasing dividends to shareholders, buying proven acreage from other companies, and drilling overseas.
An Exxon Corporation spokesman answers that his company had average capital and exploration expenditures of $8.9 billion over the past five years, while net income averaged $4.78 billion. As to drilling overseas, the oil industry has long said that the US has been heavily explored already, and says the best remaining US acreage has been put off limits for environmental reasons.
``I don't know if that's true,'' Mr. Metzenbaum responds. ``I don't know enough about drilling for oil.'' Joseph Lieberman (D) of Connecticut and William Cohen (R) of Maine co-sponsored the Senate bill.
The EIA report will do little to improve the chance of passing a windfall profit tax aimed at major oil companies. For instance, it found that the majors' profits as measured by return on shareholder equity was only slightly above the US oil industry average in 1990. Last year was the first since 1983 that the majors did better than the average, it added.
The tax proposals have been referred to their respective tax-writing committees: Ways and Means in the House, and Finance in the Senate. Partly because the bills face likely opposition by committee members from energy-producing states, the sponsors rate the chance of passage as slim to nonexistent.
Rep. Bill Archer of Houston is the House committee's ranking Republican, while Lloyd Bentsen of Texas chairs the Senate Finance Committee. Mr. Bentsen led the fight in the Senate to repeal the last windfall profit tax. Beyond them is another Texan who wields veto power - President Bush.
``There's no question that those are very significant hurdles, and that's pretty much why we have to count on American public opinion,'' an aide to Mr. Kanjorski says.
But though the sponsors wrapped their bills in allegations of ``scurrilous profiteering,'' they haven't been able to pry Americans' attention from the war. Besides, prices at the gas pump have fallen to pre-August levels. ``If they remain down, I don't think there's any chance of passing'' the tax, Mr. Metzenbaum says.
Oil industry lobbyists in Washington agree that ``there's little pressure coming from the public. The congressmen, therefore, have little or no interest in the bills.''
These lobbyists add that, with the country in a recession, Congress doesn't want to send any further negative signals to industry. And with issues facing Congress like deficits, the savings and loan bailout, an overall energy bill, and the war, a tax on the oil industry is ``so low on their agenda it almost doesn't exist.''
But most of those issues involve shortage of cash in the federal Treasury. ``I really think whether or not [windfall profits tax legislation] goes anywhere will be dictated by our revenue needs this year,'' a legislative aide to Mr. Archer says. The only catch is with oil prices back to last summer's levels, there may be no large profits to tax.