By Dina Cappiello and Richard Rubin, CQ Staff

The House passed legislation Wednesday to boost production of renewable energy despite criticism from Republicans that it would allow a Venezuelan oil company to retain a tax benefit being stripped from U.S. companies.

The tax package (HR 5351), which passed 236-182, repeals subsidies for five major oil and gas companies to offset $13.7 billion of the $18.1 billion in renewable-energy tax breaks contained in the bill.

Meanwhile, Citgo Petroleum Corp. would continue to receive a 6 percent deduction for domestic manufacturing that the largest firms would lose.

Citgo, which refines oil and markets and transports gasoline in the United States, is owned by a subsidiary of the government-owned Petróleos de Venezuela, S.A., or PDVSA. Because Citgo does not drill for oil and gas domestically or abroad, it does not fall under the bill’s definition of companies that will lose a major tax break.

The five big companies targeted by the bill — Chevron, BP, ExxonMobil, Shell and ConocoPhillips — all produce and refine oil and sell gasoline in the United States, and therefore under the bill would lose the domestic manufacturing deduction they received as part of a corporate tax law in 2004 (PL 108-357).

GOP lawmakers Wednesday argued that such a policy runs counter to the Democrats’ goals for the bill — to reduce dependence on foreign oil and increase national security — by providing a tax break to a company owned by a country whose head of state just weeks ago threatened to stop oil sales to the United States.

“This bill raises taxes for U.S. oil and gas production . . . while giving more American dollars to a dictator that has threatened to take away U.S. energy supplies,” said Republican Phil English of Pennsylvania.

In 2006, the United States imported 518 million barrels of oil from Venezuela, a country that ranks fourth behind Canada, Mexico and Saudi Arabia in supplying oil to the United States, according to the Energy Department. Citgo’s three U.S. refineries process 300,000 barrels of Venezuelan crude daily, according to the firm’s Web site.

Republicans also used the Citgo example to drive home their argument that the bill unfairly selects winners and losers when it comes to energy policy.

“You leave out one of the biggest oil companies in the world, which is Citgo, owned by Hugo Chavez and Venezuela,” said Devin Nunes , R-Calif.

Trading Blame

The criticism clearly irked Democrats, who argued on behalf of the bill. When Republican Wally Herger of California went so far as to describe retaining the deduction to Citgo as an intentional “carve out,” it led to a terse exchange with Democrat Earl Blumenauer of Oregon.

“It is very clear . . . that the bill does not have a carve out for Hugo Chavez,” Blumenauer replied.

House Ways and Means Committee spokesman Matthew Beck said that the biggest offset in the bill was limited to the big five energy companies after GOP lawmakers complained that broader language would unfairly affect smaller U.S. producers and refineries, including Citgo.

“Republicans have searched high and low to come up with arguments to protect the record $40 billion profits of ExxonMobil, but they can’t have it both ways while their constituents are stuck paying the price at the pump,” Beck said.

The Ways and Means Republican staff issued a press release saying the continued break for Citgo “is no accident; as this issue has been raised several times during debate in the House and in the Senate.”

Senate Still an Obstacle

The GOP-sponsored 2004 corporate tax law created the controversial break for domestic manufacturers to replace an illegal export subsidy. It allowed oil and gas extraction to be considered manufacturing.

The Venezuela debate is likely to have little effect on the bill’s advancement in the Senate. On several occasions during this Congress, that chamber has not invoked cloture on similar measures targeting oil and gas subsidies as a way to raise revenue to comply with pay-as-you-go budget rules.

“We continue to move legislation that targets [the oil and gas] industry, and we expect different results,” said Rep. Gene Green , D-Texas, speaking against the bill.

One possibility being considered is to include reconciliation instructions on the energy tax provisions in the fiscal 2009 budget resolution, a process that would provide a way around the Senate’s 60-vote hurdle for ending a filibuster.

But Senate Finance Chairman Max Baucus , D-Mont., said Wednesday that “these are decisions that . . . have not been made yet.”

An energy tax lobbyist said the Senate has not made any decisions about the energy bill and may wait until April at the earliest to advance it.