The United States House of Representatives passed legislation last month that would lower tax breaks and other subsidies that the United States government grants the oil industry. Subsidy Watch talks to Friends of the Earth and Taxpayers for Common Sense for their take on new bill.

The bill, entitled the Creating Long-Term Energy Alternatives for the Nation Act, (aka, the CLEAN Energy Act) is intended to raise billions of dollars that will be funneled toward energy conservation and renewable energy, by eliminating certain tax deductions and credits given to oil and gas companies, as well as raising royalty payments for oil drilled on government lands.

A preliminary study released by the non-partisan Congressional Budget Office (CBO) estimates that the bill would cut direct government spending by about USD 6.3 billion between 2007 and 2017. Meanwhile, the Joint Committee on Taxation estimates that government revenue would increase by USD 7.7 billion over the same period.

Subsidy Watch spoke to Eric Pica of the Washington-based non-profit Friends of the Earth, who supported the measure for what he saw as a significant first step toward lowering the large subsidies received by the oil and gas sector in the United States. He acknowledged, however, that the cut represented a relatively small percentage of the direct subsidies the oil and gas industry receives.

A report issued last November by Friends of the Earth estimated that the oil and gas sector actually received over USD 6 billion annually in direct assistance.

Mr. Pica was also supportive of the new renewable energy fund, although he worried about how the fund would be deployed. In particular, Mr. Pica warned against increasing support for corn-based ethanol due to the amount of chemical and energy inputs it requires. In his opinion, the money would be better spent on research and on promoting other alternative fuels, such as cellulose-based ethanol, wind and solar power, and geo-thermal energy.

Steve Ellis of the non-partisan budget watchdog, Taxpayers for Common Sense (TCS) agreed that the proposed legislation was a positive step, although incomplete. "At the end of the day, what the Democrats didn't tackle are some of the more long-established subsidies, such as the percentage depletion allowance and some other subsides that have been in law for over ninety years," said Mr. Ellis.

The TCS supports the fazing out of all subsides to the energy sector, including those to renewable energy sources. "Generally, the renewable [energy] folks have always been outmanned and outgunned by the big oil and gas companies so they would do better with a level playing field than with the subsidies arms-race," he said.

The bill will now move to the Senate for approval, where it may face some changes. If it is eventually approved by that body, it could still run into a presidential veto. In that case, the current support shown by the House vote would fall short of the two-thirds support from both houses that is needed to override a veto.