Congress Eyes Tax Break for Oil Refiners as Paris Talks Heat Up

(Bloomberg) — As diplomats in Paris try to secure an
international agreement to rein in carbon pollution from fossil
fuels, lawmakers in Washington are pushing a tax break for oil
refiners as part of a compromise allowing unfettered crude-oil
exports for the first time in 40 years.

Senator Tom Carper, a Delaware Democrat, proposed a tax
credit of up to $3 a barrel to independent refiners that would
be harmed if Congress abolishes U.S. crude-export restrictions.
A separate proposal would increase the manufacturing tax credit
refiners can collect. Critics say the idea would double-up
benefits to the oil industry, when Congress should instead be
taking steps to curb the production and use of the fuel.

“This would be a major giveaway to the oil industry at the
same time the rest of the world is working diligently to forge a
deal to combat climate change,” Lena Moffitt, Washington-based
director of Sierra Club’s Beyond Dirty Fuels Campaign, said in a
phone call Friday. “We need to be moving away from, and not
underwriting, fossil fuels.”

The negotiations signal that Democrats are willing to
consider the possibility of oil exports, a policy goal long
sought by oil producers including ConocoPhillips and Continental
Resources Inc. In return, Democrats are also seeking long-term
extensions of tax breaks for renewable energy such as solar and
wind.

Congressional leaders plan to continue their talks through
the weekend as they consider adding the crude-export provision
to legislation to fund the federal government before current
spending authority expires December 16.

‘Give Away’

Environmentalists say aid to the oil industry is bad
policy, especially as negotiations are winding down in Paris for
an accord to slow global warming. Envoys at the United Nations
climate talks are negotiating into Saturday, a day beyond
schedule, as India warned of divisions that may thwart a deal
address climate change.

Lukas Ross, a climate and energy campaigner at Friends of
the Earth, called the refiners-for-exports idea “a comedy of the
absurd.”

“Trying to make the refiners whole is sort of missing the
bigger picture,” David Turnbull, campaigns director for Oil
Change International, said in an interview from the talks in
Paris. Lifting the crude-export ban “would absolutely undercut
the message the Obama administration is trying to send” in
Paris, he said.

Renewable Energy

Senator Edward Markey, a Massachusetts Democrat, said
Wednesday than any agreement to lift the export ban would have
to include renewing tax breaks for wind and solar energy for at
least 10 years and should be “tied in terms of size and scope”
to benefits that oil companies receive from lifting the ban.

Assistance for refiners may help secure the support of
lawmakers in mid-Atlantic states like New Jersey and
Pennsylvania, where Delta Air Line Inc.’s Monroe Energy LLC and
PBF Energy Inc. have a presence.

“Democrats keep upping the price” for lifting the export
ban, John Cornyn of Texas, the Senate’s number-two Republican,
said Thursday. “Senator Carper has some ideas along those lines
that cause me some concern, but everything is in play.”

Costly Credit

Senator John Hoeven, a North Dakota Republican, said the
refiners’ credit would cost $7 billion over 10 years — maybe
too expensive to win the support of his party. The American Fuel
& Petrochemical Manufacturers, a Washington-based industry
group, said it opposed Carper’s proposal, which wouldn’t help
about 35 percent of U.S. refiners. The industry group also
opposes linking crude exports and renewable energy tax credits.

An alternative proposal floated Friday would increase the
manufacturing tax credit to 9 percent from 6 percent for
refiners, people familiar with the discussions said.

Even if Congress lifts the export ban, producers may not
see any immediate benefit because U.S. crude isn’t significantly
cheaper than international oil — a trend that will probably
continue next year, Bloomberg Intelligence analyst Gurpal
Dosanjh said Thursday on a call with reporters.

President Barack Obama has opposed legislation to lift the
ban and called instead for ending tax breaks for oil drillers
and using the cash to invest in solar and wind energy. But the
administration is now leading the talks with Republicans on this
issue, Senate Minority Whip Richard Durbin said Thursday.

While House

Obama spokesman Josh Earnest said Friday said the White
House is “in the loop” on the talks but wouldn’t share details.

The intense lobbying now underway on Capitol Hill come
after two years of congressional and industry focus on the U.S.
crude-export restrictions, put in place to counter the energy-supply shortages of the 1970s. Advocates of repeal hope to
secure a deal this year, since campaigns for the U.S.
presidential election in 2016 will force any any controversial
political decisions to grind to a halt.

“There’s a view that this is the last chance,” said Kevin
Book, managing director at ClearView Energy Partners LLC in
Washington, adding that he didn’t necessarily agree with that
perspective. “There’s an almost certain bite at the apple at the
end of next year in a post-election lame duck session.”

Book said the longer lawmakers are willing to extend
renewable-energy tax credits, the more likely a deal may be.
“It’s good cover for everybody on both sides, even if it’s hard
to swallow,” he said.

Even that may be a high bar to clear. AFPM, the refiners’
organization, opposes linking crude-exports and renewable tax
credits, as do environmental groups including the Sierra Club
and Friends of the Earth.

“I still think the whole thing will crater,” said Michael
McKenna, a lobbyist working for Koch Industries Inc., a company
opposed to the negotiations. “It’s the worst deal I’ve ever
seen.”

— With assistance from Bloomberg BNA’s Ari Natter

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To contact the reporters on this story:
Brian Wingfield in Washington at bwingfield3@bloomberg.net;
Jonathan N. Crawford in New York at jcrawford47@bloomberg.net

To contact the editors responsible for this story:
Jon Morgan at jmorgan97@bloomberg.net
Mark Drajem

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