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THE NEW YORK TIMES: G.O.P. Senators Hurry to Quell Furor Over Gas

G.O.P. Senators Hurry to Quell Furor Over Gas

Published: April 28, 2006

WASHINGTON, April 27 — Senate Republicans tried on Thursday to get the upper hand in the escalating political battle over high gasoline prices by proposing a $100 rebate for taxpayers and by suggesting that they might increase taxes on oil-industry profits.

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Senator Bill Frist, the majority leader, took questions from reporters after announcing a legislative plan to combat high gasoline prices.

The Republican proposal also called for opening the Arctic National Wildlife Refuge to oil production, a provision sure to draw opposition from many Democrats and even some Republicans.

“The American consumer is the one that needs the break today, and we need to be taking steps to make sure that they aren't emptying their wallet every time they fill their tank,” said Senator John Thune, Republican of South Dakota, as the leadership unveiled its legislative response to an issue quickly taking over the Congressional agenda.

The Republican plan includes a provision that could levy a significant tax on oil company profits, a provision that President Bush promised to veto when a version appeared in a Senate bill last year. The proposal came on a day when Exxon Mobil reported a 7 percent gain in its first-quarter earnings.

Greeting surprised customers at a BP service station in Biloxi, Miss., on Thursday, Mr. Bush compared rising gasoline prices to a new tax. In brief remarks there, confronting an issue that is adding to his political woes, he endorsed one aspect of the Senate proposal by encouraging Congress to give him the same authority to set standards for gasoline mileage of cars as he has over light trucks, sport utility vehicles, pickups and minivans.

The president also promised to curb price gouging, increase refinery capacity and support alternative fuels.

“One of the things we've got to do is make these trucks run on ethanol and batteries that won't require gasoline,” he said. “That's what the future is going to be.”

Democrats quickly dismissed the new Republican approach as a backdoor effort to overcome deep-seated opposition to drilling in the Arctic refuge.

“Americans are struggling to pay the rising cost of gas,” said Senator Harry Reid of Nevada, the Democratic leader, “and they are not interested in handouts to help oil companies make more money by letting them drill in wildlife refuges.”

Democrats pressed their own ideas, including a proposal by Senator Robert Menendez, Democrat of New Jersey, for a 60-day suspension on the 18.4-cent-per-gallon federal tax on gasoline and 24-cent diesel tax.

“It is direct relief at the pump,” Mr. Menendez said.

Some Republicans, including Mr. Thune, have also endorsed a suspension of those taxes.

Senator Ron Wyden, Democrat of Oregon, tied up the Senate for almost five hours on Thursday in an effort to force a vote on his proposal to prohibit oil companies from escaping federal royalties for drilling on public lands when oil prices exceeded $55 per barrel. (Prices recently rose above $75 a barrel.) But Republicans blocked that effort.

“You cannot get a vote up or down in the United States Senate on a rip-off of taxpayer money,” Mr. Wyden said.

The exchanges in the Senate and elsewhere on Capitol Hill illustrated both the political dangers and potential opportunities presented by the rise in gasoline prices and the accompanying consumer discomfort.

“This gas price issue is huge,” said Senator Susan Collins, Republican of Maine.

Democrats say they believe that the public unhappiness will play into their efforts to regain control of the House and Senate this fall as they try to convince voters of the close ties between Republicans and oil companies and remind voters of industry-friendly legislation advocated by Republicans.

“High gas prices are going to be the final nail in the G.O.P.'s coffin this election year,” said Senator Charles E. Schumer of New York, chairman of the Democratic Senatorial Campaign Committee.

But Republicans say they believe that their new proposal, which is promoted as an eight-point plan and which was announced at a news conference attended by several senators facing re-election this year, could strike a public chord, particularly with its promise of a $100 check to millions of taxpayers.

It is unclear when the Senate might move forward on the issue or how the Bush administration and the House, where Republicans and Democrats have their own ideas circulating, will respond.

But a chief aide to Senator Bill Frist of Tennessee, the majority leader, said the midterm elections would be a catalyst for Congressional action.

“The political will is there,” said Eric Ueland, chief of staff to Mr. Frist. “The need is very real. And the urge to help constituents directly and quickly is omnipresent.”

The price tag for the Republican package had not been calculated, but aides said it would cost less than $20 billion. The proposed rebate was patterned after a refund sent to taxpayers early in Mr. Bush's first term as a down payment on an initial set of tax cuts.

The $100 payment would not be tied to gasoline consumption but would be sent to taxpayers at the end of the summer, going to single-filing taxpayers with adjusted gross incomes below $145,950, and to couples earning less than $218,950. The Finance Committee estimated that at least 100 million taxpayers would qualify.

Republican authors of the plan said opening the Arctic refuge to drilling was essential because it could provide federal revenue to pay for the initiative as well as increase domestic oil production.

“We need to open up the reserve of oil and gas that we have in this country,” said Senator Jim Talent of Missouri, one of the Republicans up for re-election. “With all due respect, I cannot understand what coherent political philosophy cuts its own country off from oil.”

The Republican package would also ease environmental regulations and provide other incentives to add to oil refinery capacity, outlaw unjustifiable price increases and increase tax breaks for owners of hybrid vehicles.

In a proposal expected to draw significant opposition from the oil industry and perhaps the business community at large, the Republican plan would repeal a method of accounting for inventories, known as last in first out, or LIFO. The method, which is used in many industries, gives oil companies a chance to avoid some large capital gains taxes through its accounting of sales from inventory.

The Senate had previously considered a similar provision that would have prohibited major oil companies from using the LIFO method for one year. It was expected to raise about $5 billion, but it generated a storm of opposition from oil companies and Mr. Bush threatened to veto the bill unless lawmakers rejected it.

The new proposal would prevent all companies from using the LIFO method, not just oil companies, and the prohibition would be permanent, instead of limited to one year.

On the fuel-economy issue, federal transportation officials say they need new authority to set higher standards for cars. as they did for trucks last month. The Senate bill would give them that ability.

But any change in federal standards for mileage would be a long-term fix since automakers are required to have 18 months' notice of any change and creating the new rule would involve a process that would take months in itself.

At the White House, a spokeswoman said the administration would consider the Congressional proposals but would make no commitments.

“We are taking all options into account that seek to relieve what is certainly the burden of high gasoline prices on American consumers,” said the spokeswoman, Dana Perino.

Ms. Perino said the president remained focused on solving the fundamental problem of supply and demand “so that we can end a vicious cycle.”

Lawmakers were grappling for other ways to contend immediately with gasoline prices and oil industry profits. On Thursday, the Senate Judiciary Committee quickly passed legislation that would make it a violation of antitrust laws to manipulate oil supplies to drive up prices.

In the House, Republicans, voting largely along party lines, rejected a symbolic effort by Democrats to urge House tax negotiators to support the Senate on rolling back tax breaks for oil companies.

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