Energy tax proposal fuels protests Transportation industry unhappy CLINTON'S ECONOMIC PROGRAM

February 19, 1993|By Suzanne Wooton | Suzanne Wooton,Staff Writer

President Clinton's broad-based energy tax plan will disproportionately hurt the nation's transportation industry, particularly airlines, and could push struggling companies over the edge, industry representatives said yesterday.

The plan outlined by Mr. Clinton Wednesday evening would increase the cost of natural gas, electricity, coal and oil through a tax applied to the energy content of all fuels, as measured by the British thermal unit, or Btu.

The proposed tax would be more than twice as high on petroleum products, such as gasoline and diesel fuel, as on other energy sources. That is significant to consumers as they fill their cars' gas tanks and to trucking, railroad and airline companies that burn millions of gallons each day.

"This is not truly a broad-based, fair tax applied equally to all energy sources," said Christopher L. Chiames, a spokesman for the Air Transport Association, which represents most of the nation's airlines.

Under the Clinton plan, producers, refiners and transporters of coal and natural gas would be taxed at 25.7 cents for each million Btu they handle, and oil would be taxed at 59.9 cents. Oil would be taxed more partly because it pollutes more, the administration says. The tax would not be imposed directly on consumers but could be passed along in higher retail prices.

Overall, Mr. Clinton opted for the energy tax because it encourages conservation, reduces pollution and would not hurt any geographic region more than another. The tax would not apply to the sale of renewable sources of energy such as wind, solar or geothermal power.

Representatives of the transportation industry said yesterday that they are unable to conserve the way ordinary consumers can by cutting back or switching to other forms of energy.

"We can't install hydroelectric converters or coal-burning mechanisms. We can only use fuel oil," Mr. Chiames said. Airplanes use a kerosene-like petroleum product.

Every 1-cent increase would cost the airline industry $150 million a year, he said. By the time the tax plan was fully implemented in July 1996, the industry would be paying an additional $1.5 billion a year, he said.

The American Trucking Association said the tax -- on top of the 2.5 cent-a-gallon increase Mr. Clinton proposed extending beyond 1995 -- would add $3 billion to the industry's fuel bills over the next three years.

"Consumers can go to mass transit, ride the bus, take a bike or car pool, but for the trucking industry, there's no alternative," said Ron Roth of Transportation Technologies, a Fredericksburg, based transportation consulting firm.

And Ken Simonson, an economist with the trucking association, said that though trucking companies can pass their costs along to shippers -- and ultimately to consumers -- small companies would go out of business. "Mom and pop companies will have to park their rigs for good," he said.

Railroad officials reacted cautiously to the president's plan yesterday but expressed concern about its impact on export coal.

If a Btu tax is imposed on coal, it would prompt most foreign users to shift to other coal sources, the Association of American Railroads warned. Coal, it said, is the country's second-largest export commodity, adding $5 billion a year to the export side of the trade balance.

John Larkin, transportation analyst at Alex. Brown Inc. of Baltimore, said trucking and rail companies would pass the increased fuel costs along to shippers in the form of surcharges. Some surcharge provisions are already included in their contracts with shippers.

But the highly competitive airline industry, which has lost $8 billion in the past three years, has no similar mechanism for passing along costs and would be hard-pressed to cover them through increased fares alone. In 1990, the airlines lost about $4 billion when fuel prices skyrocketed after the Iraqi invasion of Kuwait.

The Department of Transportation joined congressional leaders this week in proposing legislation to create a commission to recommend ways of strengthening the aviation industry.

The Dow Jones transportation average fell 11.89 points yesterday, to 1486.67. Airline stocks were the biggest losers. United Airlines stock declined $3.50 a share, to $115.75, while AMR Corp., the parent of American Airlines, was off $2.625, to $57. USAir dropped 75 cents, to $14.875.

In the trucking industry, Roadway Services Inc. was off $2 a share, to $67.25.

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