Energy Secretary James R. Schlesinger was bluntly told by Russell Long yesterday that the Senate Finance Committee will shoot down the oil tax centerpiece of President Carter's energy plan unless the proceeds are used to produce more energy.
Long (D-La.) the committee's chairman.
Without backing off from the administration's preference that the $14 billion a year tax be rebated to the public to avoid economic dislocations, Schlesinger offered to work with the committee to define the function of a government energy development agency that Long and other members want to set up. That agency would subsidize the energy industry's research and development costs.
At a final hearing before the committee starts voting Monday on tax portions of the President's energy-saving proposals, one member after another denounced the wellhead tax as proposed is to cut the use of oil by taxing its price up to world levels.
After each member had had his say, Long summed up:
"The way it looks to me this committee isn't going to vote for this tax unless the money can be used in a way t get more energy I think we'd be willing to vote the taxes to do what needs doing. I hope we can get together and produce a bill."
Senate Majority Leader Rober C. Bryd (D.W.VA.) sent a statement to the committee siding with Long in stating that the oil tax should be used to produce more energy and also improve the nation's rapid transit and railroad systems.
Long, Sen. Herman E. Talmadge (D-Ga.) and others said the government should embark on a crash program such as those that produced the atomic bomb and sent a man to the moon to develop new resources of energy such as extracting oil from shale and converting coal to gas. They want to use the $14 billion a year from the oil equalization tax and perhaps the $6 billion from a tax on industrial use of oil and natural gas to finance it.
Schlesinger said he could give no assurance that Carter would go along with their plan. "We don't want to subsidize everything," said the Secretary as he offered technical assistance in writing criteria as to how the proposed agency might operate.
Although Long and other committee talked only of developing new energy sources with the tax money , the oil industry has been working hard to get hold of part the oil tax to help finance ties exploration for more oil. When this was attempted in the House Ways and Means Committee, the administration denounced it as a rip-off of the public and it was killed.
Long wants something patterned on the $100 billion 10-year lending agency agency proposed two years ago by Nelson A. Rockefeller and dusted off by Rockefeller two days in testimony to Long's committee. The House rejected Rockfeller's plan in the last Congress.
The oil tax sailed thorugh the House without serious challenge except for an attempt to give a "blowback" payment to the oil industry. But in the Senate a coalition of industry and consumers has formed to oppose it.
They're going after it for different reasons, according to Schlesinger. Consumers want to avoid a price increase, while industry is opposed unless it can get part of the receipts for itself, he said. The tax would result and increase of up to 7 cents a gallon in the price of gasoline, Schlesinger continued.
Schlesinger insisted that the President's program contains a "handsome incentive" for producers to look for more oil by giving them a price of %14.40 a barrel, not subject to the tax, for oil pumped from new wells. That is 4 1/2 times the price producers were getting four years ago, he said.
The tax part of Carter's energy program is a collection of taxes, credits and rebates designed to reduce the use of oil and natural gas and encourage conversion to more abundant coal.
Sen. Harry F. Byrd Jr. (Ind-Va.) said he had read that by 1985 all the proposed taxes in the bill would have produced $96 billion, which would be the largest peacetime tax increase in history.
Schlesinger said the proposals would actually take in $125 billion by 1985. But $120 billion of that would be rebated to consumers, he said.
Not a work was uttered during yesterday's three-hour hearing aboout the proposed tax on purchase of gas guzzling automobiles or tax credits to encourage home insulation. The House approved both.