POLITICS:

In right's energy-subsidy clash, shades of Koch vs. Pickens

T. Boone Pickens' blurb recommending Charles Koch's 2007 book, "The Science of Success," reads like the fondest compliment that one energy billionaire can pay to another.

"Evaluating the success of an individual or company is a lot like judging a trapper by his pelts," Pickens wrote. "Charles Koch has a lot of pelts." But as conservatives on and off Capitol Hill debate how to define energy subsidies -- and how best to limit them -- Pickens' prized plan to curb oil imports could stall, becoming a pelt for the free-market Koch philosophy that opposes it.

At issue is a proposal, backed by 185 lawmakers in both parties, to give tax incentives to buyers and makers of natural gas-powered vehicles and related infrastructure. The bill would be a big leap toward Pickens' strategy for slashing oil use by boosting natural gas and wind power, but it is running into a wall of criticism from influential voices on the right that want the government out of the alternative fuel-promotion business.

"If you can put a name to a piece of legislation, it's probably not a sound idea," anti-tax activist Grover Norquist said Friday about the bill's broad association with Pickens. Norquist's Americans for Tax Reform joins a litany of conservative groups, from Americans for Prosperity to the Heritage Foundation to the Competitive Enterprise Institute (CEI), in lambasting the natural gas vehicles plan as a form of market distortion.

Any "targeted tax credit to tell people, 'use one energy [source] versus another'" should run afoul of conservatives, added Norquist, who said he recently had dinner with Pickens. "We ought to be treating them all the same."

But it is not lost on the bill's backers that many of the right-leaning groups who blast the legislation as a giveaway to Pickens have received funding in recent years from foundations or other entities connected to Charles Koch and his brother David.

"I understand that some of the opposition is arising from the Koch brothers, and others that have alternative interests or interests in oil," Rep. John Larson of Connecticut, House Democratic caucus chairman and a major proponent of the natural gas proposal, said late last week.

Pickens himself subtly acknowledged his critics during an appearance last month with Ted Turner. "The Koch interests, and also the Heritage Foundation, are not for me," he said at the time.

In fact, Koch Industries, the privately held energy giant steered by the brothers, is against the natural gas vehicles bill for reasons that align with those cited by conservative activists.

"We oppose this bill in the same way that we oppose other government grants, mandates and incentives," Philip Ellender, president of government and public affairs at Koch Cos. Public Sector LLC, said through a spokeswoman. "Corporate welfare distorts markets and ultimately hurts consumers and taxpayers."

Pickens' spokesman Jay Rosser countered conservative groups' depiction of the natural gas bill as a subsidy by identifying one of his own. "The talk about subsidies ignores the real fiscal irresponsibility, which is our dependence on foreign oil," Rosser said in a statement. "We're sending hundreds of billions of taxpayer dollars overseas every year and subsidizing terrorists and dictators in the process."

Taking broad steps to cut foreign oil imports for vehicle fleets "will immediately begin reducing our dependence on OPEC [the Organization of the Petroleum Exporting Countries] and keep more taxpayer money here in America," Rosser added.

Larson acknowledged that the unrest on the right could spark a "struggle within the Republican caucus, but at the end of the day, there are so many strong supporters on both sides of the aisle."

One of those co-sponsors, Rep. Steve Pearce (R-N.M.), withdrew his name Wednesday to cheers from CEI, which mocked the natural gas bill as the "Boonedoggle Bandwagon." Yet Rep. John Sullivan (R-Okla.) and other lead sponsors signed up five new backers -- three Republicans and two Democrats -- over the ensuing two days.

In interviews last week, Sullivan described the opposition from Koch-funded groups as "a little perplexing" though not "a devastating blow" to the bill's prospects. Broadly speaking, he defended critics' right to speak out but questioned whether some groups were "demagoguing" the plan.

"I just want them to be informed ... they say that it's chock full of subsidies and mandates and all that -- well, it's not," Sullivan said.

The Oklahoman contrasted his bill, which would sunset in 2016, with a 2008 version offered by former Rep. Rahm Emanuel (D-Ill.) that included a 10-year horizon for the tax incentives and federal mandates for the installation of natural gas fuel infrastructure. A senior member of the House Energy and Commerce Committee, Sullivan added that he has spoken with panel Chairman Fred Upton (R-Mich.) about a hearing that would focus on the vehicles legislation.

Sponsors previously had eyed a House floor vote before the August recess, but Sullivan on Friday said that time frame would be "pretty ambitious."

What's in a subsidy?

As anyone watching Democrats rip into the GOP over oil tax breaks can attest, natural gas is not the only energy sector powering a heated debate over how much federal support it needs (see related story).

The Senate is set to take up a likely doomed repeal of tax benefits for major oil companies Wednesday, and Norquist's recent battle with Sen. Tom Coburn (R-Okla.) over rolling back ethanol supports continues to make waves in conservative circles (E&E Daily, March 30).

Into that circular firing squad among oil, ethanol, and gas supporters last week marched Rep. Mike Pompeo (R-Kan.), a former natural gas equipment salesman whose district includes Koch Industries' headquarters. He and two fellow Republicans proposed a House resolution Friday that calls for "no new energy subsidies" and the "eliminat[ion of] existing energy subsidies" -- while specifically and cautiously defining the S-word.

According to Pompeo's resolution, which was endorsed by Norquist and the chief of the Heritage Foundation's affiliated advocacy arm, "deductions and cost-recovery mechanisms available to all energy sectors are different than credits, loans and grants, and are therefore not taxpayer subsidies." In addition, the measure exempts "cost recovery with respect to timing" from its anti-subsidy push.

Those exceptions appear to apply to several of the oil-industry tax benefits targeted by Democrats, including the percentage depletion allowance and immediate expensing of capital costs.

However, a recent Heritage Foundation paper on oil subsidies named percentage depletion as a nonsubsidy "special tax treatment" that Congress should tap an independent organization to re-examine.

Opening for tax reform

Amid the back-and-forth on both sides of the aisle over what constitutes a subsidy, the rhetoric from both parties suggests at least a chance of future cooperation on the question of which energy tax benefits should survive the current season of fiscal austerity.

House Speaker John Boehner (R-Ohio) on Thursday echoed other GOP leaders in stating that he would consider ending sector-specific tax breaks for oil companies as part of broader corporate tax reform. Senate Finance Chairman Max Baucus (D-Mont.) sounded a similar note as his panel probed the oil tax breaks last week, noting that "we have to take a hard look at every subsidy and every spending program to be sure we are using our dollars wisely."

Rep. Ed Whitfield (R-Ky.), chairman of the Energy and Commerce subpanel with jurisdiction over the natural gas vehicles bill, said that he has not had time to look at it in detail during the current run of frequent U.S. EPA oversight.

But Whitfield was not ready to rule out the prospect of a bipartisan charge to revamp energy tax benefits across the board. "It's possible," he said, "because we know we've got serious financial issues."

Reporter Jeremy P. Jacobs contributed.