Democrats plan to attack oil subsidies in sequester fight

Jim Parkin/

Top Senate Democrats plan to intensify their calls to repeal billions of dollars in subsidies enjoyed by oil and natural gas companies, this time as part of a strategy to soften the looming across-the-board sequester cuts to military and domestic programs.

“We believe that there are different ways of doing sequestration,” Majority Leader Harry Reid told reporters on Tuesday, going on to say, “What we think would be a better effort would be to move forward and, on short increments, pay for the sequestration.”

And of ways to pay for that? Reid offered: “There are many low-hanging pieces of fruit out there that Republicans have said they agreed on previously. I'm not going to go into detail, but one of them, of course, is deal with oil companies.”

Reid said Senate Democrats will get a specific presentation on “dealing with sequestration” at their issues retreat next week, which Senate aides said has been set in Annapolis, Md.

The so-called “sequestration” cuts that were delayed as part of the fiscal cliff deal are now set to hit March 1. They would amount to about $85 billion divided between defense and domestic discretionary programs.

Although many lawmakers in both parties dislike the sequester, there are some sharp differences in how to replace it, and that has led to doubts that any agreement can be reached. Replacing some of the cuts with new taxes or revenues is something most Republicans oppose, and Democrats are opposed to replacing the military cuts solely through reductions in other programs.

But in his comments on Tuesday, Reid indicated that Senate Democrats at their private conference next week will focus not only on paying off the sequester in increments, but that they also will focus on potential new revenues with which to do so, including “dealing with oil companies.”

The idea of repealing tax breaks for oil and gas companies is nothing new.

Obama and Senate Democrats have been calling for such repeals, with Obama having proposed them as a way to invest in alternative energy to reduce the nation’s dependence on foreign oil.

Republicans--including the party's own 2012 presidential candidate, Mitt Romney--have at times seemed willing to consider repealing some of these breaks. Other Republicans have suggested at least some oil and gas tax breaks would likely be eliminated as part of the overall corporate tax reform that Congress hopes to tackle.

But defining that term has been a bit squishy. An Energy Information Administration report from 2011 says that the oil and gas industry gets about $2.8 billion in tax deductions a year. Obama and some environmental groups put that number closer to $4 billion, in large part because they include a manufacturing tax credit that goes to a wide range of industries, including the oil and gas sector.

Whatever the math, Senate Democrats are apparently gearing up to publicly pit these breaks against the prospect of what some see as devastating sequester cuts.

“Remember, the American people still believe, by an overwhelming margin, that the rich should contribute to this. They believe that Medicare shouldn't be whacked. They believe domestic discretionary spending has been hit very hard already,” said Reid on Tuesday. “They believe that there could be a better way of dealing with defense than this meat cleaver that sequestration does.”

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