Letter Opposing Cloture on S. 3044, the "Consumer-First Energy Act of 2008"

June 9, 2008

TO THE MEMBERS OF THE UNITED STATES SENATE:

The U.S. Chamber of Commerce, the world’s largest business federation representing more than three million businesses and organizations of every size, sector, and region, strongly urges you to oppose cloture on S. 3044, the “Consumer-First Energy Act of 2008.” Although the stated goal of S. 3044 is to place consumers first, few provisions in the bill will ease Americans’ pain at the gas pump, and several will have the exact opposite effect.

S. 3044 imposes a 25 percent windfall profits tax on crude oil. A windfall profits tax will reduce both the rate of return and flow of capital into the oil industry, adversely affecting the domestic supply of crude oil and increasing demand for imported oil. According to the Congressional Research Service, the crude oil windfall profits tax imposed from 1980 to 1988 reduced domestic oil production by as much as eight percent, while dependence on imported oil grew between three and 13 percent. It was also a revenue-raising failure, generating only 20 percent of the gross receipts it was projected to produce. Most importantly, the tax failed to ease oil prices in any material way. If the true goal is lower gas prices for American consumers, a windfall profits tax is hardly the vehicle to get there.

The bill would also resurrect a patchwork of misguided and failed policies from the past. The denial and limitations of the section 199 deduction for oil and gas companies could discourage energy investment, result in lost jobs and ultimately decrease supply and increase energy costs for businesses relying on oil and gas. Furthermore, the proposed modification of the foreign tax credit rules for oil and gas companies would place domestic firms at a competitive disadvantage to foreign oil and gas manufacturers.

The “No Oil Producing and Exporting Cartels Act” (NOPEC) provisions would waive sovereign immunity and subject OPEC nations to federal antitrust laws, a move that could strain international relations, spur retaliatory efforts and force those nations to stop selling oil to the United States. Finally, price controls on oil and gas companies under the guise of  “price gouging” protections could distort market price signals that act to efficiently allocate fuel. This could exacerbate shortages, result in gasoline lines and generally make consumers worse off.

Sincerely,
R. Bruce Josten