Repeal of Tax on U.S. Oil Profits Urged

Oil state senators and an Energy Department official joined Friday in urging repeal of the windfall profit tax on domestic production as a way to reduce U.S. dependence on Middle East oil.

Because of current low oil prices, the tax is no longer being collected.

“There just aren’t any windfall profits left,” said Sen. Lloyd Bentsen (D-Tex.), adding that it still leaves producers with the burden of filing “complex and burdensome” tax forms.

Repeal of the tax was urged by witnesses appearing before a Senate finance subcommittee headed by Sen. David L. Boren (D-Okla.), who has introduced legislation calling for its repeal.

Drain Cited

The Oklahoma Democrat said the tax had “drained over $77 billion away from our domestic energy industry in just 5 1/2 years.”

“It is high time that we repeal this onerous and destructive tax,” he said.

Although the tax currently produces no revenues, Deputy Energy Secretary William Martin said it would have “a major and negative” impact if oil prices rise above $19 per barrel.

He said 70% of any increase over $19 would be diverted away from potential reinvestment in additional reserves. In addition, he said, the tax discourages investment in oil and gas exploration.

‘Highest Priorities’

“One of our highest remaining priorities in the tax area is removal of the windfall profit tax,” Martin said. “If there was ever a time to remove this tax it is now, while the domestic industry is battling for survival.”

Senators urging repeal of the tax included Pete V. Domenici (R-N.M.), Jeff Bingaman (D-N.M.) and Don Nickles (R-Okla.)

Domenici called for an oil import fee as well as repeal of the windfall profit tax.

While industry spokesmen joined in urging repeal of the tax, a consumer spokesman took a different approach.

Mark Cooper, research director for the Consumer Federation of America, said efforts to “somehow produce our way out of dependence on the world oil market . . . . will inevitably fail and render the U.S. even weaker and more vulnerable to future supply shocks.”

“We believe that short-term energy vulnerability can be reduced only through sufficient stockpiling to ensure that oil is available during disruptions,” Cooper said.