The Senate on Thursday thwarted Democratic plans to strip billions of dollars in tax breaks from the largest oil companies, just an hour or so after President Obama urged the chamber to kill off the deductions. 

Lawmakers voted 51-47 to move forward with Sen. Robert Menendez’s (D-N.J.) bill. Sixty votes were needed to advance the measure.

Two Republicans — Sens. Susan Collins and Olympia Snowe, both from Maine — crossed party lines and voted to repeal the tax breaks. Four Democrats — Sens. Mark Begich (Alaska), Mary Landrieu (La.), Ben Nelson (Neb.) and Jim Webb (Va.) — voted against the bill.

{mosads}The outcome of the vote was not a surprise, given that a similar plan failed 52-48 last May. But the decision to take another shot at passing the bill— and the decision by the White House to wade into the fight — underscore the political salience of rising gasoline prices in an election year.

Obama has sought to deflect blame for high gas prices, in part by casting Republicans as allies of big oil companies. He used a Rose Garden speech to urge lawmakers to back the plan.

“Today, members of Congress have a simple choice to make,” Obama said. “They can stand with big oil companies, or they can stand with the American people.”

The vote Thursday followed several days of tactical maneuvering on both sides of the aisle. Republicans oppose the Menendez plan but unexpectedly voted Monday to allow debate on the bill, saying they welcomed the chance to pit their energy plans against those of Democrats.

But Senate Majority Leader Harry Reid (D-Nev.) cut debate on the bill short, blocking consideration of a handful of GOP amendments, including a proposal to dramatically expand offshore oil-and-gas leasing.

The Menendez plan would prevent the “big five” oil companies — Exxon, Chevron, BP, Shell and ConocoPhillips — from claiming several tax deductions. The bill, unlike the proposal defeated in May, would have also extended lapsed or soon-to-expire tax incentives for renewable power projects, biofuels production, electric cars, energy-efficient homes and others.

Republicans alleged the Democratic proposal would hit struggling consumers.

“That was their brilliant plan on how to deal with gas prices: raise taxes on energy companies; when gas is already hovering around $4 a gallon, then block consideration of anything else, just to make sure gas prices don’t go anywhere but up,” Senate Minority Leader Mitch McConnell (R-Ky.) said on the floor.

Sen. David Vitter (R-La.) said the bill “is not a policy that will do anything but increase the price at the pump and decrease supply.”

“That is the opposite of what we need,” Vitter said on the floor ahead of the vote.

But Obama and Democrats say oil companies — especially at a time when they have been earning handsome profits — do not need the incentives, and that the revenues should fund green-energy incentives and help pay down the deficit.

Menendez called the continued oil industry tax breaks “insanity.” He argued the money is better spent on boosting green-energy technologies that provide alternatives to petroleum and help the U.S. become a leader in emerging industries.

“It is time we stop trusting Big Oil to do the right thing with our money, and use it for things that actually make sense,” Menendez said.

The Joint Committee on Taxation estimates that removing the
incentives would raise $24 billion over 10 years, while extending the
green-energy and efficiency incentives would cost $11.7 billion over the
same period, according to Menendez’s office.

The plan would prevent major integrated oil companies from claiming
deductions on certain drilling costs, strip their ability to claim a
lucrative deduction on domestic manufacturing income that’s available to
a suite of industries, and nix several other incentives as well.

Opponents of stripping the incentives have highlighted a March 2011 Congressional Research Service report that says a wide-ranging repeal of oil industry tax breaks could raise oil prices “on what would likely be a small scale.”

But a separate May 2011 Congressional Research Service report that analyzed legislation similar to the Menendez bill found that the repeal of five key oil-industry tax breaks would have little to no impact on gasoline prices.