Lobbyists Win Changes in Energy Tax Proposal : Revenue: Administration says some industries would get exemptions. Burden would shift closer to consumers.

The Clinton Administration, under pressure from powerful interest groups, said Thursday that it has restructured its proposed energy tax to reduce the impact on selected industries and shift the burden more directly to consumers.

In its first detailed discussion of the controversial energy tax, the Administration disclosed that it has granted exemptions to a wide array of industries that have lobbied furiously for special treatment.

And after initially insisting that the tax would be levied as close to the source of energy production as possible, the Administration said Thursday that it will seek to impose the tax closer to consumers instead.

For example, instead of having natural gas producers or pipeline operators pay the tax, it will be paid by utility companies at “the city gates,” after the fuel has been transported across the country.

The energy tax is one of the biggest revenue-raisers in President Clinton’s long-term economic package, and the Administration has conceded from the beginning that the new tax would hit middle-income Americans harder than any of its other tax proposals. The latest changes are intended to ensure that individual consumers bear the brunt of the new levies.

“If the tax is to effectively promote energy conservation, it must be borne by the ultimate consumer,” Treasury Secretary Lloyd Bentsen said in a written statement. “The Administration is continuing to explore methods of assuring that the tax is, in fact, passed through to those who use the energy.”

Yet the decision to hit consumers more directly also means that less of the burden will be borne by businesses in highly competitive industries that otherwise might be forced to absorb the cost of the tax to keep prices down.

To further ensure that the costs of the energy tax are borne by consumers, the Administration is proposing to take away certain tax credits from utilities in states where regulators do not allow the utilities to fully pass through the costs to ratepayers. That provision seems to make certain that most consumers will see a separate new charge on their electric bills for the federal energy tax.

Some industries have been exempted from the tax altogether, including petrochemical firms and plastic makers that use crude oil as a raw material, steelmakers that use coal and coke in steel production, international airlines that use jet fuel and producers of ethanol, methanol and other alternative fuels. In California, oil producers that use natural gas to help extract heavy oil from wells will also get an exemption.

In addition, the Administration said it is proposing to “index” the energy tax to account for inflation, beginning in 1998. That means the levy would automatically increase over time to keep pace with living costs, ensuring that the government can count on the tax as a major source of revenue far into the future. If approved by Congress, the energy tax would take effect July 1, 1994.

When it first announced the broad outlines of its energy tax proposal in the Clinton economic plan in February, the Administration said the tax would raise $70 billion between 1994 and 1998 and would be a major component of Clinton’s long-range deficit reduction program.

Thursday, the Administration refused to provide updated revenue estimates for the energy tax, saying only that it will still raise close to the $70-billion projection.

Lobbyists indicated that the exemptions represent major savings for key industries. For U.S. chemical manufacturers, for instance, the exemption for all petroleum products used as raw materials for chemical production rather than as energy will save the industry $1.2 billion, said the Chemical Manufacturers Assn., an industry trade group.

One important exemption was given to consumers in the Northeast, where home heating oil is an important--and expensive--source of energy. The Administration said it will impose the energy tax on home heating oil at the same rate as natural gas and coal, which will put it at a lower rate than other oil products.

Under the Clinton plan, oil is taxed at a higher rate than all other forms of fuel. During last year’s presidential campaign, Clinton talked of imposing a type of energy tax called a carbon tax, which would have hit coal and coal-producing states and coal-using utilities harder than other industries. But confronted with strong opposition from Sen. Robert C. Byrd (D-W.Va.), Clinton relented and restructured the tax to lessen the impact on coal.

The Administration also released new figures Thursday to show that the energy tax would not hit any region much harder than any other and that its total price can be easily borne by key energy-consuming groups like agriculture and heavy industry.

Despite the compromises, many industrial groups continued to argue that the Administration had not gone far enough to move the energy tax onto consumers and vowed to fight to change the levy in Congress.

The airline industry, for instance, was happy that international flights were exempted but displeased that the tax on domestic flights will cost the industry $900 million a year.

Energy producers and distributors were not satisfied either.

“The energy tax proposal issued today by the Administration is a major blow to the natural gas industry,” American Gas Assn. President Michael Baly said.