In the Monday Morning Report for Jan. 23 from the California Independent Producers Association and California Natural Gas Producers Association, the lead article was about Democrats from Ohio, California, Rhode Island and Michigan co-sponsoring the Gas Price Spike Act (House Resolution 3784). Yes, our Congress is once again after a windfall profits tax. This is the latest effort from people who wouldn’t know a balanced budget if it bit them and would find ways to fritter away any income from such legislation. The bill would apply a windfall tax of 50% to 100% from profits on sales of oil and gas when those profits are between 100% and 102% of a “reasonable profit.” The tax would escalate to 75% when profits are between 102% and 105% of reasonable. And above 105% of reasonable, kiss it all good bye. Dennis Kucinich (D-OH) is leading the charge to control oil company profits. John Conyers Jr. (D-MI), Bob Filner (D-CA), Marcia Fudge (D-OH), Jim Langevin (D-RI) and Lynn Woolsey (D-CA) are also behind the effort. Here is one of the major industries creating jobs in the U.S. and Congressional Democrats are out to hamstring that industry. According to Kucinich, the tax revenues would be used to fund alternative transportation programs when oil and gas prices spike. What exactly would alternative transportation be? The money would be used to fund a tax credit to purchase a fuel-efficient cars and a grant program for mass transit programs. The bill would set up a “Reasonable Profits Board” to determine what would be a “reasonable profit.” Of course, the legislation provides no specific guidelines for determining that magical number. The board would consist of three members nominated by the president. Each member would serve a three-year term. There would be no nominees from Congress. Now, that’s a relief. No industry representatives or anyone who has a financial interest in the oil and gas industry would be allowed to determine reasonable profits for that industry. The Congressmen don’t know how big the grants would be or how much money might be collected from the tax. You can bet they will be licking their chops on how to get their hands on that money to spend on their pet projects. The original intent will be lost. It makes you wonder if they actually do understand what that kind of legislation would do to oil and gas prices. Without reinvestment in exploration and production, there will be less domestic oil and gas, and those oil and gas price spikes will be even worse. Given the investment in the shale plays, natural gas price spikes have been few and far between recently. In listening to President Barack Obama’s State of the Union message on Jan. 24, there is greater acceptance in the current administration about the contribution the oil and gas industry is to job creation and economic growth. Lower natural gas prices, for example, will certainly boost his goal for bringing manufacturing back to the U.S. Could the oil companies pay more taxes? That is probable. But a windfall profits tax is not the way to do it. The oil companies wouldn’t be able to make the investment to tap into that 75% of federal offshore acreage the president said his administration was going to open up. Contact the author, Scott Weeden, at email@example.com.
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