Congress Seeks to Quadruple Oil Barrel Tax to 32 Cents
In the wake of the BP oil spill in the Gulf of Mexico, Congress is preparing to increase its barrel tax on oil by 400% – to 32 cents a barrel – to create a fund to finance cleanup from oil spills. The tax would apply to both foreign and domestically produced oil. Revenue would be managed by the Coast Guard to be used if crises like the catastrophic spill off the Louisiana coast were to reoccur.
Regarding costs for cleaning up the April 20 spill in the Gulf of Mexico, President Barack Obama and congressional leaders have said they expect BP to foot the bill.
“Taxpayers will not pick up the tab,” Senate Majority Leader Harry Reid (D-Nev), said Monday.
Last week, BP executives told Congress they would pay all legitimate claims for damages.
BP estimates its costs for responding to the spill, deemed by many as the worst oil spill in American history, at about $760 million.
If the bill passes, the increase is expected to raise $11 billion over the next ten years. The Oil Spill Liability Trust Fund presently has about $1.5 billion available.
The American Petroleum Institute (API) has not taken a position on the tax increase, though a spokeswoman said Congress should study the ramifications before acting, according to the Associated Press.
“We understand we need to have an insurance policy in order to cover people in the event of a spill,” said API spokeswoman, Cathy Landry. “At the same time we need to have a vital oil and gas industry.”
The U.S. Chamber of Commerce criticizes the proposed tax increase as hastily put together, without adequate study. The proposed tax hike was raised on Thursday, despite the absence of any congressional hearings to analyze its impact.
“I have seen no analysis on how this would impact energy security, how this would impact domestic production, how this would impact the overall economics in the country,” said Christopher Guith, vice president of the chamber’s energy institute. “There hasn’t been any sort of deliberation on this.”
Guith claimed that the tax could be passed on to consumers, if the oil industry manages to raise gas prices in response to a tax increase.
Guith further alleges that the tax hike is designed to offset budget increases unrelated to oil that are part of the bill. The overall bill includes one-year extensions of several tax breaks that expired in 2009 which could add up to $134 billion to the federal deficit.
The impact on the deficit could make it difficult for the bill to pass.
Bill proponents hope to complete their work by the end of the week before Congress begins a week-long break. On Monday, the White House issued a statement supporting the bill.