Summary
On May 7, 2008, Senator Reid
introduced S. 2991, the Consumer-First Energy Act of 2008,
which would create a tax on "windfall
profits" of the major oil companies
at a special supplemental rate of 25 percent; repeal the Section 199 deduction
for the major oil and gas companies and tightens the rules restricting the use
of foreign tax credits on oil and gas related income; suspend filling of the
Strategic Petroleum Reserve (SPR); punish price gouging; limit excessive
speculation in the oil markets; and crack down on the Organization of the
Petroleum Exporting Countries (OPEC). The "windfall profits" tax would
not apply to profits of oil companies that are invested in clean, affordable
and domestically produced renewable alternative fuels, expanded refinery
capacity and utilization, or renewable electricity production.
Major Provisions
Title
I - Tax Provisions Related to Oil and Gas
The Consumer-First Energy
Act of 2008 would create a tax on "windfall profits" of the
major oil companies at a special supplemental rate of 25 percent. This tax would not apply to the windfall profits of oil
companies invested in clean, affordable and domestically produced
renewable alternative fuels, expanded refinery capacity and utilization, or
renewable electricity production, which would all help lower consumers
energy bills. The bill would also would repeal the deduction for domestic
production for the major oil and gas companies for their income on the sale,
exchange, or other disposition of oil, natural gas, or any primary product
thereof. Additionally, the legislation would also tighten the rule restricting
the use of foreign tax credits on oil and gas related income. All revenue
collected from the windfall profits tax and repeals of the tax deductions
would be deposited into an Energy Independence and Security Act Trust Fund.
Title
II - Price Gouging
America's heavy reliance on
petroleum products leaves our nation and citizenry vulnerable
to crippling price increases and volatility, much of which is
unrelated to supply disruptions or normal market factors. Title
II of the Consumer-First Energy Act of 2008 would provide the President,
the Federal Trade Commission, and state Attorneys General with the tools
necessary to investigate potential price gouging during energy
emergencies. Specifically, the legislation would:
- Give the President the authority to declare a
temporary national energy emergency in instances where the President
determines that a threatened or existing disruption of oil, petroleum, or biofuel supplies or significant pricing
anomalies constitute a danger to the health, safety, welfare, or
economic well-being of the citizens of the United States. This is
similar to the emergency authority provided to Governors under many
individual state statutes; and
- Upon declaration of an energy emergency, price
gouging is prohibited and punishable by federal civil and criminal
penalties. This provision is modeled after state anti-price gouging
legislation in at least 30 states. The legislation would also
empower state Attorneys General with the authority to bring a civil action
on behalf of citizens for price gouging during an energy emergency.
Title
III - Strategic Petroleum Reserve
The Bush Administration's
policy of taking oil off the market and putting it underground in the Strategic
Petroleum Reserve (SPR) is a contributing factor to current high energy prices.
As the SPR's capacity already exceeds our
International Energy Program commitments to maintain at least 90 days of oil
stocks in reserve, it makes no sense to store oil underground when oil is
trading at prices that have soared beyond $120.
Title III would require the
Secretary of Energy to suspend acquisition of petroleum for the SPR through
2008, including through the direct purchase or royalty-in-kind contracts.
It allows the Secretary to resume filling if the price of petroleum falls to
$75 per barrel.
Title
IV - No Oil Producing and Exporting Cartels
Title IV of the Consumers-First
Energy Act of 2008 would amend the Sherman Antitrust Act and allow
the Attorney General to bring enforcement
actions against any country or company that is colluding in setting the price
of oil, natural gas or any petroleum product. Additionally, Title IV would
seeks to address OPEC state claims that their anti-competitive behavior has
sovereign immunity from U.S. courts due to a court ruling in 1979. Title IV
would not authorize private lawsuits against OPEC.
Title
V - Market Speculation
Excessive
speculation by financial traders, without adequate oversight and consumer protection,
has likely increased energy prices for consumers. Today, speculators can avoid
all U.S. market oversight or reporting requirements by routing their trades
through the IntercontinentalExchange (ICE) in London
instead of the NYMEX in New York. The Consumer-First Energy Act of 2008 would
amend the Commodity Exchange Act to limit the price impacts of excessive
speculation by preventing traders of U.S. crude oil from routing their
transactions through off-shore markets in order to evade speculation limits and
also impose reporting requirements.
Additionally,
the bill would require the Commodities Futures Trading Commission to
substantially increase the margin requirement on crude oil future trades within
90 days to limit excessive speculation and protect consumers. The current
margin requirement varies between five and seven percent which essentially
means that a commodity trader can control $10 million worth of future oil
contracts by only putting $500,000 to $700,000 down.
Legislative History
The Consumer-First Energy
Act of 2008 will be introduced by Senator Reid on May 7, 2008. Pursuant to
Rule XIV, Senator Reid will place the bill on the Senate calendar.
Expected Amendments
The DPC will distribute
information on amendments as it becomes available.
Administration Position
At the time of publication,
the Bush Administration had not yet released a Statement of Administration
Position on the Consumer-First Energy Act of 2008.
