Senate GOP blocks tax on oil companies

WASHINGTON -- The outcome of the vote was hardly a surprise. Democrats knew they probably couldn't overcome a Republican filibuster on a plan to tax billions of dollars in windfall profits by the country's biggest oil companies.

Still, plenty of anger was on display. After all, the bill was meant to respond to what has the nation fuming -- gasoline costing $4 a gallon and going up.

Republican leaders refused to even debate a proposal to address "the biggest problem confronting the American people," said Sen. Claire McCaskill, D-Mo.

"That takes nerve," she said.

Democratic leaders fell nine votes short of the 60 needed to take up the energy package. Its centerpiece was a 25 percent tax on Big Oil's windfall profits and the stripping away of tax breaks the oil companies have enjoyed. The tax could be avoided if the money were put into alternative fuel projects.

"The American people must be wondering what in God's name is going on in their nation's capital," said Sen. Bernie Sanders, an independent form Vermont.

The GOP senators argued that punishing big oil companies won't do a thing to lower prices at the pump. They also said it could curtail domestic oil production and maybe even cause prices to go up, not down.

On world markets, oil prices retreated a bit Tuesday but remained above $131 a barrel. Gasoline prices edged even higher to a nationwide record average of $4.04 a gallon.

The proposed windfall tax would have been triggered on any "unreasonable" profits of the five largest U.S. oil companies, which together made $36 billion during the first three months of the year. The bill also would have given the government more power to address oil market speculation, opened the way for antitrust actions against countries belonging to the OPEC oil cartel, and made energy price gouging a federal crime.

Democratic leaders needed 60 votes and they got only 51 senators' support, including seven Republicans who bucked their party leaders. Sen. Mary Landrieu of Louisiana, a state tied closely to the oil industry, was the only Democrat opposing the bill.

"Americans are furious about what's going on," declared Sen. Byron Dorgan, D-N.D. He said they want Congress to do something about oil company profits and the "orgy of speculation" on oil markets.

But Republican leaders said little was to be gained by imposing new taxes on the five U.S. oil giants: Exxon Mobil Corp., Chevron Corp., Shell Oil Co., BP America Inc. and ConocoPhillips Co. While these companies may be huge, they don't set world oil prices and raising their taxes would discourage domestic oil production, the Republicans said of the Democrats' plan

"In the middle of what some are calling the biggest energy shock in a generation ... they proposed as a solution, of all things, a windfall profits tax," Republican leader Mitch McConnell of Kentucky chided the Democrats. He called their proposal "a gimmick" that would not lower gasoline prices and only hold back domestic oil production.

"The American people are clamoring for relief at the pump," agreed Sen. Pete Domenici, R-N.M., but "they will get exactly what they don't want" under the Democrats' plan -- higher prices and an increase in oil imports.

Shortly after the oil tax vote, Republicans blocked a second proposal that would extend tax breaks that have either expired or are scheduled to end this year for wind, solar and other alternative energy development, and for the promotion of energy efficiency and conservation. Again Democrats couldn't get the 60 votes to overcome a GOP filibuster.

Neither Republican presidential candidate John McCain nor his Democratic rival, Sen. Barack Obama, were in Washington to cast votes on the energy issue on Tuesday.

Obama, in a statement, said Republicans had "turned a blind eye to the plight of America's working families" by refusing to take up the energy legislation. Obama has supported additional taxes on the oil companies. McCain is opposed to such taxes and has proposed across-the-board tax reductions for industry to help revive the economy.

Election-year politics hung over the debate. Democrats know their energy package has no chance of becoming law. Even it were to overcome a Senate GOP filibuster -- a longshot at best -- and the House acted, President Bush has made clear he would veto it.

In addition to the proposed windfall profits tax, the Democrats' bill also would have rescinded tax breaks that are expected to save the oil companies $17 billion over the next 10 years. The money would have been used to provide tax incentives for producers of wind, solar and other alternative energy sources as well as for energy conservation.

In an attempt to dampen oil market speculation, the legislation would require traders to put up more collateral in the energy futures markets and would provide authority to regulate U.S.-based trading in foreign markets. And it would make oil and gas price gouging a federal crime, with stiff penalties of up to $5 million during a presidentially declared energy emergency.