Top Democrat proposes killing tax breaks for overseas oil production

Sen. Martin Heinrich will introduce a bill, shared exclusively with CNBC, to end tax breaks for U.S. oil and gas companies that operate overseas while the industry reaps massive profits as the war with Iran spikes oil prices.

The bill comes days after President Donald Trump ripped major U.S. oil and gas producers for making "too much money" amid the conflict that has raised gasoline prices, and warned that companies like ExxonMobil and Chevron are going to have to "give some of that back to the public, and they better cut the retail price, the consumer price." Trump has, at the same time, pushed U.S. oil and gas companies to invest in Venezuela after he ousted the country's former president, Nicolás Maduro.

Heinrich, D-N.M., who is the top Democrat on the Senate Energy and Natural Resources Committee, said the bill would "help put American energy development on an even playing field with energy development that's happening in the Middle East or anywhere else."

"Oil majors shouldn't get a tax break for going overseas to produce energy, but that's essentially what our current tax policy does," he said. "At a time when oil majors are making billions in profits per quarter, they can afford to pay their fair share."

According to Heinrich's office, the bill would eliminate preferential tax treatment for overseas oil and gas extraction income, shifting the tax code so overseas fossil fuel profits are treated the same as other foreign business income.

It would also close tax code provisions that allow companies to generate additional foreign tax credits from shale oil and tar sands development by including them as combined foreign oil and gas income.

The bill would also amend foreign tax credit rules to prevent oil and gas companies from misclassifying payments to foreign governments as taxes rather than royalties so they can reduce their U.S. tax liability, Heinrich's office said.

Major oil and gas companies around the world posted monster second-quarter profits last week amid the Iran conflict's surge in crude prices.

Chevron's net income spiked to $12 billion, a nearly 400% increase compared with $2.5 billion in the same period last year. Exxon, meanwhile, posted profit of $14.5 billion, more than doubling from about $7.1 billion in the same quarter last year.

Gas prices in the U.S., meanwhile, were $4.06 per gallon on Thursday, according to AAA — a major source of voter discontent heading into November's midterm elections.