By Lauren Gardner, CQ Staff

Hours before the Senate turned back a Democratic effort Tuesday to repeal a number of tax breaks enjoyed by the largest oil companies, Majority Leader Harry Reid signaled where he wants to see the provisions resurface.

“I am confident that before we finish our budget negotiations here in anticipation of raising the debt ceiling, that that will be part of it,” the Nevada Democrat said before the chamber rejected, 52-48, a motion to proceed to the bill (S 940). “There is no justification for giving these companies that are making so much money ... there’s no justification for continuing that, and I am confident that in the final budget negotiations that will be in there.”

However, Minority Leader Mitch McConnell, R-Ky., has already dismissed the notion.

“That’s not the kind of thing we’re going to be dealing with here in connection with the serious talks that are going on with the vice president’s group,” he said May 15 on CNN, referring to talks led by Vice President Joseph R. Biden Jr. with six members of both parties and chambers

The Senate Democratic bill is effectively dead, as it fell short of the 60 votes needed to advance Tuesday.

Three Democrats crossed party lines to oppose the legislation: Mark Begich of Alaska, Mary L. Landrieu of Louisiana and Ben Nelson of Nebraska. Maine’s senators, Susan Collins and Olympia J. Snowe, were the only Republicans to support it.

A competing GOP oil production bill (S 953) — set to receive a test vote Wednesday with a 60-vote threshold — is also likely to be rejected, though it could attract some Democratic support from oil-state senators.

The Republican measure contains provisions similar to those included in offshore drilling bills (HR 1229, HR 1230, HR 1231) that the House passed earlier this month. The bill would direct the Interior Department to conduct previously scheduled lease sales in the Gulf of Mexico and off the coasts of Virginia and Alaska. It also would extend for a year leases that were stalled by a drilling moratorium that the Obama administration imposed after last year’s oil spill in the Gulf of Mexico.

The Senate GOP legislation also would impose new deadlines for the Interior Department to act on drilling permit applications — a provision intended to address complaints about the slow pace of permitting since the spill.

Democrats Focus on Deficit Impact

Supporters of the Democratic measure say that given the need to reduce the deficit, the approximately $21 billion in tax breaks for oil and gas companies no longer are warranted and should be eliminated. To drive the point home Tuesday, Claire McCaskill, D-Mo., and Senate Democratic leaders called on the Federal Trade Commission to begin an investigation into the possibility of price fixing by oil refiners.

The White House issued a policy statement Tuesday supporting the Democratic bill, saying that the nation “cannot afford to maintain these wasteful subsidies.”

The bill would end the applicability of a number of tax code provisions — including a 6 percent domestic manufacturing deduction and a deduction for intangible drilling costs — to the oil and gas industry. Republicans have argued that singling out one industry is unfair when the tax code has so many other incentives geared toward specific business sectors. Some suggest that the measure could cause a rise in gas prices.