Arco and Unocal Backing Clinton on BTU Tax Plan : Energy debate: Two Southern California companies dissent from the oil lobby’s all-out opposition.
In the expanding debate over Bill Clinton’s economic plan, two Southern California-based oil companies have parted company with other energy firms by supporting the President’s proposed energy tax.
Most out of sync with other companies is Atlantic Richfield Co., which vigorously supports a tax on energy--in clear opposition to the American Petroleum Institute, the industry’s main lobbying group. Arco Chairman Lodwrick M. Cook even appeared with Clinton this week at a Washington press conference, where he termed the proposal a “gutsy step” and said it “deserves our support.”
Meanwhile, in Los Angeles, Unocal Corp. Chairman Richard J. Stegemeier was saying: “If the President has decided that a BTU tax is the vehicle he is going to use, I’m not going to sit here and bang my head against the wall.”
Stegemeier believes that the Clinton tax proposal needs substantial “tuning up” to avoid inequities to refiners of different kinds of crude, and that the tax would unwisely encourage gasoline imports and increase reliance on coal, the dirtiest of the fossil fuels. Stegemeier also takes pains to say that he agrees with API’s concerns as well.
Yet Arco and Unocal clearly prefer a non-confrontational exchange with the new Administration. “It’s harder when you’re perceived as being only critical,” said Arco spokesman Al Greenstein.
API and most of the other oil companies have taken a harder line, rejecting any form of a BTU tax.
“Mobil does not support the enactment of energy taxes of any type, since they are narrowly based and will adversely affect the economy and America’s competitiveness worldwide,” said Mobil Corp. Chairman and Chief Executive Allen E. Murray. Exxon said that a competitive disadvantage would fall on energy-intensive industries such as aluminum, chemicals, steel, agriculture and lumber.
Yet API President Charles J. DiBona has raised some eyebrows in the industry with his strenuous opposition to Clinton’s plan. He has disputed Clinton’s arithmetic--saying such a tax would hit consumers in their wallets far harder than the President is letting on--raising $33 billion a year instead of the $22 billion the Administration has estimated--and cost 700,000 jobs in the United States. On a CNN television debate, a feisty DiBona bet Clinton’s secretary of energy, Hazel O’Leary, $1,000 that the Administration’s figures are wrong.
“It’s moot to me whether the number is $22 billion or $33 billion,” Stegemeier said, “though I think if there is a difference it has to be explained.” He would rather see the debate focus on federal spending cuts and on potential inequitable effects of the Clinton energy tax.
One possible effect that worries Stegemeier is a fuel switch from oil to coal by big energy users whose circumstances allow, since oil would be taxed at a higher rate than coal. The Clinton plan would tax oil uses at 59.9 cents per million British thermal units, compared with only 25.7 cents per million BTUs for coal, natural gas, nuclear and hydroelectric power.
The tax scheme also fails, says Stegemeier, to distinguish between heavy and light crude oils, which break down into products of different values in relation to the tax.
California’s predominantly heavy crudes, for example, yield per barrel more low-value asphalt and coke--and less high-value gasoline, diesel and jet fuels--than the lighter crudes from Texas or the Middle East. This means that light-crude refiners will be able to spread the tax costs they pass on to consumers over more gallons of gasoline per barrel of oil refined, giving them a competitive advantage.
Similar technical problems could encourage sales of imported gasoline over domestically refined gasoline, Stegemeier added.
Arco seems to be marching to a different drum for other reasons.
“They have consciously followed a contrarian strategy to differentiate themselves from Big Oil,” said J. Robinson West, president of Washington-based Petroleum Finance Co. Ltd. “Whereas other companies have resisted change, Arco has consciously embraced change and tried to benefit from it. I think it’s a very smart strategy, frankly.”
The fact is, said Douglas R. Bohi at Resources for the Future, a conservative Washington think tank: “Energy taxes don’t hurt the oil companies all that much. . . . It’s nice to see someone like Arco come out like this at a time when DiBona over at API is running around screaming that the industry is being throttled in some way.”
