Obama Oil Tax Proposal Dead on Arrival for Republicans

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DALLAS -- Oil industry executives and congressional Republicans denounced President Obama's long-shot proposal to jump-start development of a clean and green transportation system with a $10 per-barrel tax on crude oil, while environmentalists and infrastructure advocates hailed the $300 billion plan.

The proposal outlined on Feb. 4 by Transportation Secretary Anthony Foxx and Jeff Zients, director of the White House National Economic Council, will be included in Obama's fiscal 2017 executive budget, which is set for release on Tuesday.

The per-barrel fee, which would be levied on imported as domestically produced crude oil, would be passed along to motorists by the oil companies, Zients said. The tax would be phased in over five years.

"This is a per-barrel fee on oil paid for by oil companies," Zients said. "We recognize that oil companies will likely pass on some of these costs."

Kevin Book, managing director of the Washington-based research group ClearView Energy Partners, said the crude oil tax would translate into a 23.8 cent per gallon increase in gasoline prices when fully implemented. The federal tax on gasoline of 18.4 cents per gallon has not been increased in more than 20 years.

The average U.S. refinery converts a 42-gallon barrel of oil into 19 gallons of gasoline and 12 gallons of diesel, according to the American Petroleum Institute. The U.S. consumes 19 million barrels of oil every day, according to the federal Energy Information Administration.

The 21st Century Clean Transportation System proposal would allocate $20 billion per year for new transit options, including high speed rail, $10 billion per year to improve regional transportation systems, and $2.4 billion for development of autonomous vehicles and low- and no-emission cars, trucks, and trains.

The proposed new fee on oil is a fraction of the cost that carbon imposes on the environment, said Jason Kowalski, policy director at the environmental advocacy group 350.org.

"The plan opens the door to more creative ways to get the fossil fuel industry to finally pay up for wrecking our climate," he said. "The move should send a clear signal to investors: Get out of fossil fuels and start investing in a clean energy future."

But the crude oil tax plan is "dead on arrival" in Congress, said Sen. Jim Inhofe, R-Okla., chairman of the Senate Environment and Public Works Committee.

Inhofe was a chief sponsor of the five-year, $305 billion Fixing America's Surface Transportation (FAST) Act that President Obama signed into law in early December.

"I'm unsure why the president bothers to continue to send a budget to Congress," Inhofe said. "His proposals are not serious."

House Speaker Paul Ryan, R-Wisc., said the $10 tax is Obama's latest regulatory salvo against the energy industry.

"The president should be proposing policies to grow our economy instead of sacrificing it to appease progressive climate activists," Ryan said. "The good news is this plan is little more than an election-year distraction."

Former Transportation Secretary Ray LaHood, co-chair of the infrastructure advocacy group Building America's Future, applauded Obama's proposal and called on Congress to debate the oil fee as part of the fiscal 2017 budget process.

"If passed, the president's plan will make up for the shortfall in the recently passed transportation bill and put thousands of people to work fixing the approximately 61,000 deficient bridges across the country, our transit systems, and enable cities to fix potholes and states to improve America's interstates," he said.

Sen. Barbara Boxer, D-Calif., the ranking Democrat on Inhofe's committee who will retire at the end of the year, is a long-time proponent of replacing the federal tax on gasoline and diesel with a sales tax on oil wholesalers.

Rep. Peter DeFazio, D-Ore, the senior Democrat on the House Transportation and Infrastructure Committee, sponsored a bill in 2014 to replace federal fuel taxes with refinery-based crude oil tax that would begin at $6.75 per barrel and then be adjusted annually for inflation.

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