Hatch touts tax incentive measure to expand oil refineries
Hatch, R-Utah, said the bill would help the country deal with the energy crisis by making its supply more secure from "the attacks of Mother Nature and terrorists," but critics of the bill said there are better incentives than more tax breaks for oil companies.
"No one doubts that U.S. consumers and businesses will face another long, hot summer of too-high gas prices," Hatch said on the Senate floor. "And there is general consensus among experts that a major bottleneck in U.S. refining capacity is a big part of the reason prices are so high."
Hatch pointed to problems experienced after Hurricane Katrina in 2005 when 25 percent of the nation's refining capacity was taken offline due to damage by the storm as well as the overall strain on existing refineries in trying to keep up with the high demand for fuel.
"The government does not produce or refine oil in this country, but it obstructs private-sector efforts to do so," Hatch said. "While refiners would like to expand their capacity, they face prohibitive costs from regulations and other unfriendly economic factors that make expanding very, very difficult."
Refiners would be able to write off 100 percent of equipment costs if they commit to expand by 2008 or build a new facility by 2012 as well as recover their investment more quickly than under the current law. If investors wanted to build a refinery or expand capacity now, it would take longer to recover their investment, but if Hatch's bill became law, a company could recover its costs within the first year if it met certain requirements.
"Although this legislation offers tax incentives, over time it will not cost the U.S. Treasury any tax revenue," Hatch said. "It would allow refineries to change the timing of the depreciation of their equipment, but not the amount. Meanwhile, it would increase the size of our tax base by encouraging industry to build new refineries and increase capacity."
Hatch attempted the change during debate on the Energy Policy Act of 2005, but the final law only included 50 percent of the incentive instead of a 100 percent write-off.
Tyson Slocum, director of Public Citizen's Energy Program, said it would be "fiscally irresponsible" for the government to give tax breaks to what is already a profitable industry. He said the oil companies could build or expand refineries but it is in their financial interest not to because it keeps the fuel supply as tight as possible.
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