The House yesterday approved $18 billion of renewable energy tax incentives, including authorization for $5.6 billion of taxable tax-credit bonds, in spite of a threat from President Bush to veto the bill.
Prior to approval of the bill, by a 236-to-182 vote, House Speaker Nancy Pelosi, D-Calif., said it will "put us on a path towards energy security and energy independence in a fiscally responsible way," by repealing $18 billion of tax breaks to oil and gas producers and spending that amount on green energy tax breaks.
Other supporters of the legislation cited the high price of gasoline and the nearly $41 billion in record profit Exxon Mobil Corp. reaped in 2007 as reasons to approve the measure.
"Do the American people continue to subsidize the big oil companies while they are making record profits or do we shift investment to cleaner renewable fuels?" Rep. Kathy Castor, D-Fla., asked. "I know the White House does not like this, but we are not going to give up."
House Republicans and Bush opposed the measure, in part, because of the proposed repeal of the $18 billion in tax breaks currently available to the oil and gas industry that would offset the cost of the tax package. They argued that rescinding the tax breaks will increase gas prices and reduce domestic exploration.
"Removal of these incentives will drive up prices to American consumers further and increase our dependence on foreign suppliers," Rep. Lincoln Diaz-Balart, R-Fla., said during debate on the measure.
His comments echoed those made by the Bush administration in a veto threat issued late Tuesday.
Other Republican opponents of the bill noted the measure would repeal the special domestic manufacturing tax deduction for major integrated oil companies, but that Venezuelan-owned Citgo Petroleum Corp. would get to keep the tax break since it does not produce crude oil itself and would not be considered a major integrated oil company. The Venezuelan government, led by Hugo Chavez, who has been sharply critical of Bush and American foreign policy, controls Citgo.
Rep. Philip S. English, R-Pa., called Chavez a "tin-horn leftist dictator that has threatened to sever energy supplies to the U.S."
The legislation now goes to the Senate, where a Republican filibuster last year managed to derail a similar energy tax package. But House and Senate Democrats are reportedly exploring the possibility of including the tax bill, or parts of it, in a budget reconciliation bill, which cannot be filibustered. However, no firm decisions on the issue are likely to be made before next month.
Under the House-approved tax package, municipal utilities and electric cooperatives would be allowed to issue up to $2 billion of clean renewable energy bonds for projects that generate electricity from wind, biomass, or other renewable sources. Public power providers would issue 60% of the $2 billion and cooperatives the remaining 40%.
CREBs were created in 2005 and Congress has authorized $1.2 billion of them to date. Tax-credit bonds provide the holder with an income tax credit in lieu of tax-exempt interest payments.
The CREBs provision in the tax bill, which is estimated to cost $640 million over 10 years, would differ from previous CREB authorizations, which were divided between governmental entities and electric cooperatives with no separate category for public power utilities.
The tax legislation also includes authorization of $3.6 billion for energy conservation bonds that would be issued by states, localities, and tribal governments to finance initiatives to reduce greenhouse gas emissions. That proposal is estimated to cost $1.9 billion over 10 years.
The bill's opponents also raised concerns over two green energy tax-credit bond programs, including allowing the tax credit to be stripped from the bond principal and sold separately, which they claim could result in wasting taxpayer dollars.
"The administration has serious concerns about proposals to allow stripping and separate sales of Federal tax credit benefits, which would run counter to efforts to deter tax motivated transactions and improve tax compliance," Bush officials said in a statement of administration policy.
Republicans also opposed a provision in the bill that would require projects financed under the bond programs to pay prevailing wages, in accordance with the Davis-Bacon Act, a Depression-era labor law mandating that prevailing wages be paid on federally funded construction projects.