Tax Relief Extension Reconciliation Act of 2005

TAX RELIEF EXTENSION RECONCILIATION ACT OF 2005

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MOTION TO INSTRUCT CONFEREES

Mr. WYDEN. Mr. President, I send a motion to the desk and ask for its immediate consideration.

The PRESIDING OFFICER. The clerk will report the motion.

The assistant legislative clerk read as follows:

Mr. WYDEN moves that the managers on the part of the Senate at the conference on the disagreeing votes of the 2 Houses on the Senate amendment to the bill H.R. 4297 (to provide for reconciliation pursuant to the concurrent resolution on the budget for fiscal year 2006 (H. Con. Res. 95)) be instructed to insist on a provision that repeals accelerated depreciation for geologic and geophysical costs for oil and gas exploration by the 5 major oil companies for the following reasons:

(1) In April 2005, President Bush stated that ``With $55 oil, we don't need incentives for oil and gas companies to explore.''. On February 10, 2006, oil futures trading on the New York Mercantile Exchange closed at $61.84 per barrel.

(2) At a November 9, 2005, joint hearing of the Committee on Energy and Natural Resources and the Committee on Commerce, Science, and Transportation, the Chief Executives of ExxonMobil, ChevronTexaco, ConocoPhillips, BP, and Shell all testified that the new tax breaks in the Energy Policy Act of 2005 were unnecessary for their companies to explore for oil. Accelerated depreciation for geologic and geophysical costs for oil and gas exploration is one of the new tax breaks provided by the Energy Policy Act of 2005.

(3) The Joint Committee on Taxation estimates that this special interest tax break for major oil companies costs the taxpayers and the United States Treasury more than $100,000,000 over the next 5 years and almost $300,000,000 over 10 years. The United States taxpayers will have to pay higher taxes to provide this tax break for big oil companies.

(4) In 2005, the 5 major oil companies whose Chief Executives testified before the joint hearing of the Committee on Energy and Natural Resources and the Committee on Commerce, Science, and Transportation reported net profits of more than $111,000,000,000.

(5) At a time of record high oil company profits and high Federal budget deficits, hardworking American taxpayers should not have to provide record subsidies to major oil companies. Congress should eliminate this special interest tax break for the largest oil companies that even these oil companies say is not needed.

Mr. WYDEN. Mr. President, I thank, particularly, the distinguished Senator from Montana, who is on the floor, Mr. Baucus, and Senator Grassley, for working very closely with me on this issue because I think this illustrates something the Senate is going to have to tackle aggressively in the days ahead. This, at least, makes a modest step in the right direction.

At a time when the oil companies have been making record profits and often charging record prices at the pump, it does not seem, to me, they ought to be receiving record subsidies from the taxpayers.

What this amendment does--and this would mean for the first time in, as far as I can tell, 20 years--the Congress would actually be rolling back a subsidy to the oil industry. This would limit one of the new tax breaks that the major oil companies received in last year's Energy bill.

The reason I feel so strongly about this, colleagues, is we had the major oil companies before the Energy Committee recently, and I asked the CEOs of the five largest oil companies if they agreed with the President's statement--and I quote here--``With $55 oil, we don't need incentives for oil and gas companies to explore.''

The CEOs of ExxonMobil, ChevronTexaco, ConocoPhillips, BP, and Shell all agreed that the new tax breaks for exploration in the Energy bill were unnecessary. In fact, ExxonMobil CEO Lee Raymond said:

When you add it all up that energy legislation is zero in terms of how it affects ExxonMobil.

So what we have is the bizarre situation where the Congress sends billions of dollars of new subsidies to the oil companies when the oil companies actually show up at congressional hearings and say they do not even need these subsidies that the Congress is sending them.

Now, ExxonMobil recently announced it had posted an all-time record profit of $36 billion in 2005. That huge amount is not just the highest profit ever for an oil company, it is the highest profit ever for any company. And ExxonMobil is not the only oil company to post a record-high profit in 2005. ConocoPhillips reported its profits shot up 66 percent to $13.5 billion, while ChevronTexaco's profits jumped to more than $14 billion. The five largest oil companies in the country had combined profits of more than $110 billion.

So I would only say to the Senate today, it is one thing to talk about new tax breaks to the oil companies and to look at them, as we are doing today, and to particularly say: Do the oil companies need these tax breaks in order to promote exploration and secure the energy our country needs? What we now have is the situation where the oil companies themselves have come to the Congress and have said, publicly, before the Congress, they do not need these kinds of tax breaks.

At a time when they make record profits and consumers have recently paid record-high prices, the Federal Government simply should not record record-high subsidies to these companies.

The Senate tax reconciliation bill includes an amendment I had the opportunity to work with Chairman Grassley and Senator Baucus on to eliminate one of the new tax breaks for the oil companies to explore. This is exactly the type of incentive the major oil company CEOs and President Bush have said they do not need.

The special-interest tax break I was able to see eliminated from the Finance Committee bill would cost taxpayers about $300 million over 10 years. The taxpayers, in effect, would have to pay higher taxes to provide this big break for major oil companies, when the price of oil is over $60 per barrel. That is $7 per barrel higher than the price at which the President said they
do not need incentives. At these high prices, it is my view we ought to take back this unnecessary tax break and save our citizens hard-earned tax dollars.

Now, there are some in the industry who may argue the five major oil companies' CEOs do not speak for the entire industry. They may argue the small producers still need more incentives to explore.

I want to emphasize this amendment does not affect the small producers. This amendment is about the large oil companies, the people who came to the Senate and said they do not need new subsidies.

This amendment is about making sure these major firms don't get a tax break they now have testified they don't need. The fact is, over the past 2 years, oil companies have already increased their drilling operations as the price of oil has skyrocketed from $45 per barrel to over $70 per barrel. The number of rigs in operation and the amount of drilling have also been increased by a third since 2003. Most of this increased drilling occurred before the new tax break went into effect.

What it comes down to is Congress should not provide more subsidies to major oil companies that make record profits to do what they are already doing, especially at a time when our consumers are getting hammered at the pump. Unless the Congress accepts this measure that the Finance Committee accepted when I offered it through the support of the chairman and Senator Baucus, the major oil companies would be getting a significant new tax break that other major industries don't get.

Instead of having to write off some of their capital costs over a number of years, major companies would get accelerated writeoffs for what is called geological and geophysical exploration costs. According to the Joint Committee on Taxation, the IRS and the Federal courts have ruled that these costs are capital costs which should properly be depreciated over the entire period the oil well is producing, which can be a decade or longer.

The President's budget calls for scaling back this special treatment of oil and gas exploration costs by extending the depreciation period for what are called G&G costs from 2 to 5 years. The Senate bill takes a little different approach by repealing accelerated depreciation of these costs for the biggest oil companies.

I wish to emphasize this, particularly since I see my friend from Mississippi who has discussed the energy issue in a very thoughtful way in committee. The Senator from Mississippi and others have stressed how important these incentives are to the independents and small producers. This is something with which I am sympathetic.

I have indicated to Chairman Grassley and others that I believe we ought to be taking a comprehensive look at the Tax Code as it relates to the energy field to make sure we can reconfigure these tax breaks so that when they are needed by the small companies and the independents, they can get them, but we don't keep sending them out the door to the big oil companies and then have these big oil companies in effect embarrass the Congress by coming to a hearing and saying: Look, we don't need these breaks.

Tax breaks such as the accelerated writeoffs for these costs also clutter up the Tax Code and distort capital markets. It is not the place to discuss it today, but my Fair Flat Tax Act would give us a bipartisan opportunity to remove some of that clutter from the Tax Code. At least we can make a start at reform today by eliminating the special interest tax break for the oil industry which the companies say they don't need.

Our consumers already pay more at work, they pay more at home, and they pay more as they drive everywhere in between. Let's give them a break in their personal energy bills. We can give them a break by ensuring that those folks who are getting hammered with high energy bills at home won't have to subsidize profitable oil companies when they pay their taxes.

I urge my colleagues to support fiscal responsibility by supporting my motion to urge the conferees to support the Senate position, eliminate this special tax break for the major companies. This does not apply to the small companies. It doesn't apply to the independents. I have worked closely with Chairman Grassley and Senator Baucus to ensure that will be the case.

I hope we will be back in this Chamber for a more comprehensive discussion of the Tax Code and energy policy in the days ahead. My own sense is, in the last energy bill, we subsidized an awful lot of people to do the wrong thing. Getting a new energy policy is arguably the most red, white, and blue issue the Congress could possibly take up. I think about our soldiers in Iraq and Afghanistan, these individuals who honor us every day with their courage and valor. I want to make sure their kids and grandkids are not off in the Middle East fighting a war and Congress is still dallying on oil.

This is a step in the right direction. I suspect other colleagues want to discuss this issue. I reserve the remainder of my time.

In fact, how much additional time do I have on this motion?

The PRESIDING OFFICER. The Senator has 18 1/2 minutes.

Mr. LOTT. Mr. President, will the Senator from Oregon yield for a couple questions?

Mr. WYDEN. Absolutely.

Mr. LOTT. I wanted to make sure I understood what the Senator was advocating.

Is the Senator proposing a motion to instruct that would basically say that the Senate should insist on the position it had in our version of this reconciliation tax package in conference?

Mr. WYDEN. The Senator is correct. I am asking that we insist on what we did in the Finance Committee and what Chairman Grassley and Senator Baucus have worked closely with me on. It is our feeling that we do need to have a broader and more comprehensive discussion about this down the road, but we took a modest step in the right direction in the Finance Committee. That is what I wish to preserve with this motion.

Mr. LOTT. And that language was retained in the full Senate?

Mr. WYDEN. Right.

Mr. LOTT. Let me just say to the Senator from Oregon that regardless of whether Senators agree or disagree, this is an appropriate motion to instruct. This relates to the bill at hand. Obviously, it is not going to buy any conferees. I hope I will be a conferee. Certainly, it won't buy me. But at least it speaks to the substance of the bill before us. The Senator has his right to do this, and it certainly is appropriate.

Most of these other motions to instruct we are going to be dealing with don't really deal with the bill; they are purely partisan hit amendments or motions to instruct. And what we are going to do on this side is respond in kind. It is the kind of partisan political ``gotcha'' which has caused this institution to deteriorate to the nadir where we are. It is unfortunate, and I am sad about it. But if that is the way we are going to proceed, I am going to join in the fun and games before the day is done.

At least in the case of the Senator from Oregon, he is dealing with a subject in the bill. I commend him for that. He is very thoughtful in this, as in most subjects. His motion to instruct is an appropriate one.

Mr. WYDEN. Mr. President, to respond briefly, I thank the Senator from Mississippi. I am interested in working with him on the Finance Committee. This discussion does need to be part of a longer debate.

The Senator from Mississippi has drawn an important distinction that a number of us have talked about as to the difference between the small firms and the independents and the big firms. What we tried to do in this bipartisan amendment is to preserve it. Frankly, in a sense, we ought to do this just to prevent the embarrassment of the Senate. When you have these big oil companies show up in broad daylight and say they don't need these tax breaks, and the Congress has just been sending out billions of dollars, that ought to be a wake-up call for both sides of the aisle, Democrats and Republicans, to work together to rethink this. I hope this will be the beginning of such an effort. It is a modest step. It will save $300 million over 10 years--clearly, not what we need to do to deal with the hemorrhaging of the Federal budget, but at least it is a step in the right direction.

I thank the distinguished Senator from Mississippi and reserve the remainder of my time.

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