The government is involved so a tax is disguised as a fee.

Congress seeks to jack up fees on home heating oil in midst of frigid winter

Congress‘ mammoth farm bill restores the imposition of an extra fee on home heating oil, hitting consumers in cold-weather states just as utility costs are spiking.

The fee — two-tenths of a cent on every gallon sold — was tacked on to the end of the 959-page bill, which is winding its way through Capitol Hill. The fee would last for nearly 20 years and would siphon the money to develop equipment that is cheaper, more efficient and safer, and to encourage consumers to update their equipment.

It’s just one of dozens of provisions tucked into the farm bill, which cleared the House on a bipartisan 251-166 vote last week and faces a key filibuster test in the Senate on Monday. It is expected to survive and face final passage Tuesday before heading to President Obama’s desk.

Taxpayer groups say the bill could increase spending over the previous version and that it’s crammed with favors for individual lawmakers, such as rules legalizing industrial hemp.

The heating oil fee was backed by Northeast lawmakers who said it would fund important research to benefit consumers.

“The National Oilheat Research Alliance (NORA) has long benefitted low- and middle-class families and small businesses throughout the Northeast and other cold weather states,” Rep. Leonard Lance, New Jersey Republican, said in a statement. “The program improves energy efficiency and lowers heating bills at no cost to the U.S. taxpayer.”

The bill prohibits oil companies from passing the fee on to consumers, but taxpayer advocates said that’s a sham and that the money has to come from consumers.

“To say they can’t pass on the cost, are they supposed to take it out of their kid’s college fund?” said Diane Katz, research fellow in regulatory policy at the Heritage Foundation. “It’s kind of silly because of course the costs are going to get passed on. Money is fungible. There’s no way it’s not going to get passed on to the consumer.”

Steve Ellis, vice president of Taxpayers for Common Sense, agreed that it’s unrealistic to think the fee won’t be passed on to consumers and said violations would be impossible to prove.

“It just makes people feel good to say that, but doesn’t really translate in reality to how it will actually happen for consumers,” he said.

Congress established the National Oilheat Research Alliance in 2000 to try to expand the oil heat market. Almost 70 percent of oil heat users live in the Northeast, a Government Accountability Office report found, because a lack of infrastructure in the region restricts access to natural gas. This winter, Massachusetts residents are projected to spend about $3,400 on more than 900 gallons of heating fuel per household, according to Massachusetts Energy and Environmental Affairs. This means the fee could add about $1.80 to fuel costs for a house over the winter.

But the oil heat fee expired in 2010, and the industry says it needs the government to reimpose it to get the program up and running again.

“Technician training has degraded over time and we haven’t been as responsible developing new fuels as we should have been,” said John Huber, president of the National Oilheat Research Alliance. “All technical training stopped in 2010, and we haven’t been upgrading and training on new technologies that have been entering the industry.”

Because the program expired, work stopped on developing environmentally friendly biofuels, a priority for Northeasterners who put a premium on green energy, he said.

He disputed the claim that consumers would end up facing price hikes, saying a number of factors go into that calculation and that the law prohibits the fee from being passed on to customers.

“When they price, they’re looking at market competition, looking at their margins, looking at what services they provide to the customer, how far away the customer is,” he said. “Adding two-tenths of a cent, they can’t do under the law.”

Mr. Ellis said other businesses work to improve their products without government mandates.

“If companies and the industry want to innovate, that’s great,” he said. “But we shouldn’t be in the business as the federal government of propping it up and creating this overall system.”

The National Oilheat Research Alliance has faced other problems. A 2010 Government Accountability Office audit found it was spending the majority of its money on marketing and was neglecting research.

The farm bill requires that a majority of funding go to research and development of more efficient oil heat technology and other environmentally friendly fuel initiatives.

Lawmakers in the House and Senate sponsored bills to try to renew the National Oilheat Research Alliance, but the legislation got bottled up in committee. The farm bill offered them a chance to short-circuit the usual legislative process and avoid the kind of scrutiny that accompanies a stand-alone bill.

Indeed, it was not raised at all during the debate on the House floor last week.

Rep. Henry A. Waxman of California, the ranking Democrat on the House Energy and Commerce Committee, did not want the program to be slipped into the massive bill without more scrutiny. He said the GAO audit raised questions that needed answers.

“In the past, NORA has used the funds it has collected primarily to run public relations campaigns,” he wrote in a Jan. 23 letter to the committee’s chairman. “The committee should carefully examine the value of these efforts before subjecting the consumers of heating oil to additional costs.”

Ms. Katz said hiding a piece of legislation in the farm bill that could not pass on its own is not the right way to move legislation and could end up hurting the oil heat provision by tying the Energy Department initiative to future farm bills that could face political trouble.

“They couldn’t get this passed since 2010, so they reverted to sort of hiding it in the farm bill. There’s already enough junk in the farm bill that shouldn’t be in there. This just adds to that,” she said.