of 1969 chairman Mills said that the 27.5% was a "symbolic" figure and could be slightly
trimmed.
In July, the Ways and Means Committe reported out a measure to cut the depletion
allowance to 20%. Congressman Vanick was happy to have something to show for his
efforts: "We've really got a reform bill now," he told the press. Bush was going along
with the 20%, but defended the principle of a substantial depletion allowance. According
to Bush, "unrefuted" expert testimony had proven that a tax incentive was necessary for
oil and gas exploration "due to the serious gas reserve shortages in this country."
"Depletion," said Bush, "has become a symbol to some people and without examining the
reasons for its existence or its fundamental importance to this country, some want to slug
away at it." [fn 18]
On August 28, 1969 Congressman George Bush and Texas Senator John Tower flew to
San Clemente to meet with President Nixon on this issue. Nixon had said during the 1968
campaign that he favored the 27.5% allowance, but he was willing to play ball with the
oil cartel. Nixon, Bush and Tower were joined in San Clemente by Treasury Secretary
David Kennedy, who was preparing to testify on oil taxes before the Russell Long's
Senate Finance Committee. Tower and Bush instructed Nixon that the oil cartel was
willing to accept some reduction of the depletion allowance, and that the Administration
should merely state that it was willing to accept whatever the Congress approved.
According to one historian of the oil industry, "This was the first step in preparation for
the 'sting.' But there was one slight stumble before the con men got their signals worked
out perfectly." [fn 19]
Kennedy got confused by the 20% figure that had been bandied about in the public
debate. He told the Senate that while Nixon would prefer to keep the 27.5% figure, he
was also willing to come down to 20%. This was more than the token concession that the
oil cartel had been prepared to make. On October 7 the House passed the 20% figure by a
vote of 394 to 30, with Bush voting for the cut. This entailed very little risk, since Senator
Russell Long of the Senate Finance Committee, himself an oil producer through his
participation in the Long family Win or Lose Corporation, was unwilling to reduce the
depletion allowance below 23%. Nixon's deputy White House counsel Harry S. Dent
wrote a letter to a county judge in Midland, Texas, of all places, which stated that
Treasury Secretary Kennedy had been in error about Nixon seeing two alternatives,
27.5% or 20%, and that "the President will abide by the judgment of Congress." An aide
of Senator Proxmire complained: "If the committee cuts back the depletion allowance by
a modest amount--say to 23%--it may represent a low enough profile that Senate liberals
will have a more difficult time cutting it further." The 23% figure was the one that was
ultimately accepted, and the reduction in the depletion allowance thus accomplished was
calculated to have increased the tax bill of the domestic US oil and gas companies by the
trifling sum of $175 million per year. The issue had been defused, and the cartel could
resume its normal operations, thanks in part to the stewardship of George Bush.
By the time of the House Ways and Means Committe vote of July, 1969, referenced
above, the New York Times was already touting Bush as a likely Senate candidate, and