Sunday, February 26, 2006

GOP's Synthetic Fuel Scam Revealed

Time takes a hard look at how this scam loophole works and how it got added to Iowa Sen Charles Grassley's bill, the Tax Relief Act, which was meant to provide aid for Hurricane Katrina victims & set new policies for tax-exempt groups. Surprise (Not), Santorum seems to be the one behind the sneak provision.

Time: A Magic Way to Make Billions
EXCLUSIVE HOW LOBBYISTS ARE PULLING OFF A SYNFUEL SCHEME WITH HELP FROM KEY LAWMAKERS--AND YOU'LL PAY
The wording is so bland and buried so deep within a 324-page budget document that almost no one would notice that a multibillion-dollar scam is going on. Not the members of Congress voting for it and certainly not the taxpayers who will get fleeced by it. And that is exactly the idea.

With Washington reeling from the Abramoff lobbying scandal and Republicans and Democrats alike pledging to crack down on influence peddling, with one lawmaker already gone from Capitol Hill because he traded favors for cash, you're probably guessing this isn't the best time for members of Congress to dispense a fortune in favors to their friends.

Guess again.

Buried in the huge budget-reconciliation bill, on which House and Senate conferees are putting the final touches right now, are a few paragraphs that accomplish an extraordinary feat. They roll back the price of a barrel of crude oil to what it sold for two years ago. They create this pretend price for the benefit of a small group of the politically well connected. You still won't be able to buy gasoline for $1.73 per gal. as you did then, instead of today's $2.28. You still won't be able to buy home heating oil for $1.60 per gal., in place of today's $2.39. But a select group of investors and companies will walk away with billions of dollars in tax subsidies, not from oil but from the marketing of a dubious concoction of synthetic fuel produced from coal and dependent on government tax credits tied to the price of oil. (...)

Last November the lobby scored a remarkable coup. Buried deep in a bill called the Tax Relief Act of 2005, passed by the Senate on Nov. 18, was Section 559, titled "Modification of Credit for Producing Fuel from a Nonconventional Source."

Section 559 begins on page 317 of the bill and is written in the obscure jargon of all special-interest tax breaks--almost impossible to decipher, so bewildering is its language. At first glance, it looks like nothing more than a technical amendment to clarify some arcane section of tax law. But one clause offers a clue. It says the synfuel credit will be based not on current oil prices--the yardstick used in the past--but on "the amount which was in effect for sales in calendar year 2004."

In 2004 oil prices were safely below the line to allow synfuel producers to claim the maximum credit. The stealth amendment would roll back the calendar. (Sort of like your missing the deadline for your mortgage payment, then backdating your check to avoid a late charge. But much more lucrative.) The backdating clause was in a larger bill introduced in the Senate by Charles Grassley, the Iowa Republican who heads the Senate Finance Committee. It was inserted in the Tax Relief Act, which provides aid for Hurricane Katrina victims and sets new policies for tax-exempt groups. With so many higher profile issues at stake, the clause on synfuels sailed right through with no discussion. Many lawmakers, if not most, don't even know it's there.

When asked about the provision's origins, Senate Finance Committee aides at first said they did not know, only that it did not "originate" with Grassley. One aide noted that the Senator "ultimately is responsible for everything in [the bill], but routinely with such bills, other committee members propose certain ideas, and he accepts them or rejects them as he sees fit."

Asked again by TIME to identify the author, the Senate Finance aide later wrote in an e-mail, "the provision originated as an amendment from Sen. [Rick] Santorum*
[a Pennsylvania Republican]. Sen. [Gordon] Smith [an Oregon Republican] had a similar amendment co-sponsored by several other Senators, Republicans and Democrats. Chairman Grassley accepted the Santorum amendment ... It's routine for him to accept non-controversial provisions that way rather than have the committee vote on each amendment ... So now the Santorum amendment is in the bill." When contacted by TIME, Santorum's staff had no comment...(more) (*emphasis mine)

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