A Republican-led filibuster blocked Senate consideration today of a bill that would end “tax breaks for the five largest oil companies: Exxon Mobil, Shell, BP, ConocoPhillips and Chevron.” Click here for more detail on tax breaks that would be eliminated. The 52 to 48 vote in favor of proceeding with the “Close Big Oil Tax Loopholes Act” failed because 60 votes are needed to overcome a filibuster. The roll call shows that Iowa’s Chuck Grassley voted against the motion to proceed, as did all but two Senate Republicans. Tom Harkin voted for considering the bill, as did all but three Democrats.

I’m all for ending oil company subsidies, but this bill was about optics rather than good energy policy. Andrew Restuccia wrote in The Hill,

Democrats’ pledge to continue pushing the bill signals that they view the effort as a winning political issue amid $4-a-gallon gas, soaring oil company profits and growing concern about the deficit. […]

Democrats say the bill would save $21 billion over the course of 10 years, savings that can be used to reduce the deficit at a time of increased belt-tightening.

Those talking points would be more convincing if party leaders had genuinely tried to end oil subsidies when Democrats controlled the U.S. House and had close to 60 votes in the Senate. It also makes no sense to focus this bill on the biggest oil companies, rather than the sector as a whole. Democrats apparently wrote the bill that way because of those companies’ large profits in the first quarter of this year.

Senate Majority Leader Harry Reid told journalists today that he will press for ending oil companies’ tax breaks as part of legislation on raising the debt ceiling. The U.S. hit its current debt ceiling yesterday and won’t be able to pay all its bills if Congress does not act to raise the ceiling by August 2. I believe President Barack Obama and Congressional Democrats are playing a losing game by making budget negotiations part of a deal on raising the debt ceiling. When it was time to raise the government’s borrowing limit in 1995, President Bill Clinton wisely refused to let Republicans use the occasion to “backdoor their budget proposals.”

Share any relevant thoughts in this thread.

UPDATE: After the jump I’ve added a statement Grassley released on May 17, calling on Secretary of State Hillary Clinton to approve the proposed Keystone XL Canadian pipeline project. Grassley depicts that project as a way for the Obama administration to help reduce the cost of gasoline. But an analysis commissioned by the U.S. Department of Energy earlier this year suggested that building this pipeline might cause oil and therefore gasoline prices to rise in the Midwest. Environmental groups have raised many objections to the Keystone XL project as well.

SECOND UPDATE: I’ve also added below excerpts from a report by the Congressional Research Service on “the extent to which proposed tax changes on the oil industry are likely to affect domestic gasoline prices.” The report briefly explains the five tax breaks that would be repealed under the bill senators filibustered.

Press release from Chuck Grassley’s office:

Tuesday, May 17, 2011

Grassley Urges Action for Keystone Pipeline with Canada

Senator Says the Decision is Important for American Consumers Paying High Gas Prices

           WASHINGTON – Senator Chuck Grassley is urging Secretary of State Hillary Clinton to make a prompt decision on the international Keystone XL pipeline project.

“Consumers need action on high gas prices, and we ought to move forward on this project.” Grassley said about his letter to Clinton.  “Canada is a steady and reliable neighbor.  The pipeline needs to be built safely and responsibly.  And, whether or not the United States approves the project, the oil will be produced in Canada, and if it doesn’t come to the United States, then China likely will get it.  So, this project is one thing the administration can be doing and should be doing to increase the supply of energy and thereby reduce prices at the pump for consumers.”

The Keystone XL pipeline was approved more than a year ago by the Canadian National Energy Board.  It would provide 830,000 barrels of crude oil a day and help to counteract both insufficient domestic oil supplies in the United States and reduce dependence on less reliable foreign sources, including Venezuela, Libya or OPEC members.

Congressional Research Service memo, May 11, 2011, on “Tax Policy and Gasoline Prices”:

The Section 199 deduction for the oil industry is a 6% deduction from net income, capped by limitations of payroll size. For the purpose of economic analysis, the repeal of the Section 199 deduction is equivalent to an increase in the tax on corporate profit. It is widely accepted that a proportional change in taxes on profit affects neither the firm’s incremental costs or revenues, and therefore does not change its behavior with respect to output. Since output does not change, there is little reason to believe that the price of oil, or gasoline, consumers face will increase. […]

Repeal of the immediate expensing of intangible drilling costs provision and replacement with a form of cost amortization more consistent with depreciation methods common in other industries likely will have no effect on current U.S. oil production, and hence no effect on current gasoline prices. The purpose of the expensing provision is to enhance the investment returns for investors in what has historically been a risky activity: exploring for, and developing hydrocarbon resources. Since the provision has little effect on wells already in production, available output and prices should be unaffected if the provision is repealed and replaced with less favorable amortization procedures. […]

The oil industry has benefited from the ability to deduct very broadly defined foreign income tax payments from their U.S. tax liability since the 1950s. If the definition of what constituted an actual income tax payment were tightened and foreign governments did not reduce their charges correspondingly, the industries’ domestic, as well as total income tax burden would likely increase. However, this provision again is a tax on profit, and in line with the economic theory of taxation, should have no effect on the firms output or pricing decisions, and therefore no effect on the price of gasoline. […]

The percentage depletion allowance was repealed for the major oil companies by the Tax Reduction Act of 1975 (Pub.L. No. 94-12). Percentage depletion remains generally in effect only for the independent oil companies. As a result the percentage depletion allowance should no longer be a factor in investment, output and pricing decisions by the five major oil companies. […]

Costs associated with the use of tertiary injectants are currently treated as deductible expenses. Expensing of these costs encourages their use and enhances oil production levels. For smaller, independent exploration and development firms the cost incentive could be important. However, the five major oil companies, to which repeal would apply, earned over $32 billion in net income in the first quarter of 2011. Repeal of the deduction for the industry is estimated by the Obama administration to yield only $6 million in revenue in 2012. Only a part of the $6 million revenue estimate would be paid by the five major oil companies.