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Energy Companies Say Support for Oil Industry May Lessen in New Congress


Energy companies are looking for a tougher environment in Washington when the new Democrat-controlled Congress goes into session in January.

Democratic leaders have said one of their top priorities next year will be to roll back some of the benefits accorded to the oil and gas industry and direct more funding to research and development of alternative energy. Republicans have been considered more friendly to the energy industry, but even some prominent Republican leaders were critical of the industry when high world oil prices started producing record-breaking profits for major companies in the past year.

But Democrats may not go as far as their rhetoric might indicate when it comes to changing energy policy. David Pursell, an analyst with Houston-based Pickering Energy Partners, says voters in the midterm election rejected state initiatives that represented a more radical approach to energy.

"The two most visible initiatives were Proposition 87, in California, which was going to tax oil to fund alternative energy development and that sounds very good, but it did not pass," he noted. "In Alaska, there was a tax [proposal] on North Slope gas that has yet to be developed and that, overwhelmingly, did not pass."

Pursell says the failure of such proposals will restrain lawmakers from pursuing anything extreme when it comes to the oil and gas industry. One thing Democrats have promised is a cutback in what they estimate to be $33 billion in tax breaks and other incentives to the industry that they say are not necessary at a time when oil prices are high. But David Pursell says there may not be much for them to do with that, either.

"The vast majority of tax relief has provisions in there such that the provisions only kick in [take effect] if prices are low, so I think it is rhetoric and there is not much substance to the argument," he added.

But Pursell says it is also unlikely that President Bush and Republican leaders will succeed with their plan to open more areas of the Gulf of Mexico to offshore oil development during the interim period before the new Congress begins in January. He says it is all but impossible to accomplish in the next six weeks what they failed to do over the past two years.

"The energy industry, the Republicans had a chance, Congress had a chance, in 2005 to pass some energy legislation that really had some teeth," he explained. "It did two things, it opened access, both in the lower 48 [states] and Alaska, to improved supply. They also had an opportunity to do some things to curb demand, some conservation measures, et cetera, and the bill was 1,800 pages of nothing. They had a chance, prices were high, they had broad support, and they got nothing done."

The tone of the new Congress will be set by the Democrats who assume committee chairs in January. Environmentalists are hoping to see Democrats take a more aggressive role in investigating oil industry dealings, but industry spokesmen say they are prepared to deal with members of both parties to ensure a reliable supply of energy for the nation