Divisions form over oil, gas provisions in Obama budget

INTERESTING READ.

Divisions form over oil, gas provisions in Obama budget

Nick Snow
OGJ Washington Editor
WASHINGTON, DC, Feb. 27 -- Sharp divisions have formed over the Obama administration's budgetary proposals to eliminate "oil and gas company preferences" worth an estimated $31.48 billion over 10 years and raise other taxes on the industry.
A budget that would eliminate tax mechanisms crucial to capital formation for drilling, such as expensing of intangible drilling costs (IDC), drew immediate criticism as "a devastating blow to the American oil and gas industry" from Independent Petroleum Association of America Pres. and Chief Executive Officer Barry Russell (OGJ Online, Feb. 26, 2009).
President Barack Obama unveiled the $3.6 trillion budget for the fiscal year beginning Oct. 1 on Feb. 26.

In addition to eliminating IDC expensing, the budget would repeal the manufacturers' tax deduction for oil and gas companies and the percentage depletion allowance, which is important to small independent producers.
The budget also would repeal the enhanced oil recovery credit, the marginal well tax credit, the deduction for tertiary injectants, and the passive loss exception for working interests in oil and gas properties.
It also would impose an excise tax on Gulf of Mexico production and by reducing royalty relief beginning in 2011. It also would increase the geological and geophysical amortization period for independent producers from 5 to 7 years.
Separately from the section on tax "preferences," the budget would charge producers user fees for processing permits to drill on federal lands and reform royalties and adjust rates to increase revenue.
And it would reinstate the Superfund tax on refiners and petrochemical manufacturers, envisioning receipts beginning at $1.2 billion in 2011 and phasing up to $2.3 billion in 2019, totaling $17.2 billion in 2011-19.
Congress created the Superfund tax with the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) to fund cleanup of abandoned hazardous waste sites.
Superfund taxation authority expired in 1995. Since expiration in 2003 of a trust fund established by CERCLA and expanded by the Superfund Amendments and Reauthorization Act of 1986, Superfund activities have been funded by congressional appropriations from general revenues.
New responses
National Petrochemical and Refiners Association Pres. Charles T. Drevna criticized elements of budget including repeal of the manufacturers' tax deduction for oil and gas companies.
Congress created the deduction for all US manufacturers when it passed the American Jobs Creation Act of 2004. Drevna said denying its use to refiners "would only weaken, not strengthen, our nation's energy security by stifling both the well and ability to increase domestic oil and gas production."
The manufacturers' deduction encourages refinery capacity expansions, he said. "With demand for gasoline continuing to grow each year, US refining capacity is already significantly strained despite multibillion-dollar reinvestments by the industry to expand it. Under normal economic circumstances, most refineries operate at more than 90% capacity throughout the year (except during maintenance season), which is significantly higher than the normal industrial average of about 75-80% of capacity."
Because US refiners compete in a global market, the manufacturing tax deduction helps them compete internationally and bolster national energy security by reducing the need for oil product imports, he said.
Congressional energy leaders' responses to the budget's oil and gas tax provisions generally followed party lines.
US House Natural Resources Committee Chairman Nick J. Rahall (D-W.Va.) essentially welcomed them. "The president's proposal places a major emphasis on ensuring that taxpayers receive a fair return for the extraction of oil and gas resources on public lands and presses wealthy oil companies to diligently develop the leases they already possess on the Outer Continental Shelf," he said.
"Last Congress, I introduced legislation to reform the royalty collection program, encourage the diligent development of federal oil and gas leases, and require energy companies to pay their fair share for the use of public resources. I am heartened that the president's budget includes all of these initiatives and also correctly identifies our public lands as an immense potential resource for the development and deployment of domestic alternative energy," Rahall said.
'Punitive provisions'
But US Sen. Lisa Murkowski (R-Alas.), the Energy and Commerce Committee's ranking minority member, expressed concern not only about the billions of dollars of additional taxes, fees, and other expenses for oil and gas producers but also about so-called "use it or lose it" requirements for federal lessees. "These punitive provisions will raise revenue for the federal government, but they won't increase the energy security of the United States," she said.
"This represents an attempt to drive the oil industry overseas through a combination of breaching past agreements the government has made with oil and gas producers and making future production more difficult and expensive. Instead of declaring war on the domestic production of conventional energy, as I believe the president's budget does, we need to focus on how we can use our abundant domestic resources of oil, natural gas, and coal in the cleanest, most environmentally friendly way possible for the sake of our nation's economy, our nation's security, and the world's environment," Murkowski said.
Sen. Mary L. Landrieu (D-La.), who is on the Energy and Natural Resources Committee, called the budget proposal "an honest and balanced blueprint for America's future" that "emphasizes high-return investments and makes significant strides in restoring fiscal responsibility and deficit reduction."
But she expressed concern about changes it would make in the oil and gas tax regime.
"In these tough times, we must make sure that we do not disadvantage our domestic energy industry, which is critical to the nation's security, against foreign competitors. This industry provides good-paying jobs and plays a critical role in helping us reduce our dependence on foreign oil," Landrieu said.
After expressing his concerns about carbon cap-and-trade provisions of the president's proposed budget, Sen. James N. Inhofe (R-Okla.), the Environment and Public Works Committee's ranking minority member, said the budget's proposed oil and gas tax increases would potentially eliminate tens of thousands of domestic jobs in the industry, increase fuel costs for consumers, and make the nation even more dependent on foreign oil.
"In the United States, there are nearly 6 million Americans directly and indirectly employed as a result of the oil and gas industry. Tax increases of this magnitude will significantly curtail the operating budgets of all exploration and production companies, big and small. Every marginal well operator in the country should be gravely concerned that these proposals will force the premature plugging of low-production marginal wells. And, despite the rhetoric, America's oil companies are already paying taxes at the highest rates," he said.
Nonindustry responses
Nonindustry groups also responded to the proposals.
Thomas J. Pyle, president of the Institute for Energy Research, said they were not economic development but "a sure-fire way to send America's businesses either to bankruptcy or overseas."
He said, "It's alarming enough that the administration's plan to balance its books relies on funds it hopes to receive from a policy it hopes to someday enact. But what's truly appalling is that it's attempting to sneak this huge stealth tax into the budget at a time when so many Americans are facing unprecedented economic constraints."
David Holt, president of the Houston-based Consumers Energy Alliance, said that while Obama's proposed budget takes unprecedented steps to develop new alternative energy sources, it also takes unprecedented steps to make producing affordable energy from traditional sources more difficult and expensive. "The realization of an alternative energy future will not be achieved by making a reliable energy present impossible. My fear is that a number of the provisions in this budget would do precisely that at precisely the wrong time for struggling consumers and a flagging economy," he said.
Environmental organizations expressed the opposite view. "Today's budget announcement makes clear that the oil and gas industry will not continue to enjoy a taxpayer-funded feast at the expense of America's public lands and waters," Wilderness Society Pres. Bill Meadows said. "Following his strong statement on climate when he addressed Congress on Tuesday night, the president today offered further confirmation that it's not business-as-usual in Washington when it comes to fighting global warming pollution."
Erich Pica, domestic programs director for Friends of the Earth, said, "The days of Big Oil earning record profits while feeding at the taxpayer trough are coming to an end. President Obama's decision to put an end to these giveaways is a huge victory for taxpayers and the planet."

Views: 94

Reply to This

Replies to This Discussion

So, Jim. Are you saying that you think Obama is on the right path?
HEY JIM:

THIS BS THAT OBAMA WANTS WILL PUT EVERBODY IN THE DOMESTIC E&P BUSINESS OUT OF BUSINESS ON THE EXPLORATION SIDE IN TWO YEARS!!

Somebody mentioned that you were a landman? If so, you need to get straight on what this thing will do from somebody whose opinion you will respect.....this thing is a DISASTER.

BTW. GEORGE BUSH was NOT a CONSERVATIVE. Conservatives were very critical of many of his decisions and politices as pertained to his domestic agenda. He was just dead wrong on some stuff....ending with the bank bailouts at the end of his term....that was an AWFUL IDEA!! You need to check out the gonzo Obama Stimulus Bill that Nancy Peolosi wrote and no R's (save 3) voted for...GET SOME PERSPECTIVE MAN you are coming across like one of those broken record DEM LIBS "Bush lied people died." types. Cheeze. What a crock.

He did keep us safe for eight years however and I have NO FAITH that this Bozo Obama is equipped to do likewise.

JM
wow
JHH:

You are wasting your breath. Libs like this are impervious to the facts.

Oh hec, why not give it a whirl.

Here goes.

Jim:

I suppose you are pretty happy with the Bamster's porkulus spending bill, right?

Have you been curious at all how the money that's coming to Louisiana is divvied up???

No? Well here's the split:

The Times reported on 2/14/09 that Louisiana will get $3.302 billion. The biggest slice, $1.995 billion, or 60% of the total, goes to people on public assistance. State “stabilization” will receive $717 million (isn’t it comforting to know the state will be stable) and $56 million will go to weatherization grants, a/k/a free money. Also, if you take the bus, count on a new ride because we are going to spend $77.3 millions on new ones.

What a deal. My children’s children’s children will be servicing this debt so that Democrat constituency groups can get greased.

And finally, $456 million goes to roads and bridges, which is 14% of the total. I’m sure I-49 will be finished in two or three years, right Senator Landrieu?

That's it Jim, that look OK to you?
Thanks Jim ... like I said 60% goes to peeps on public assistance. We've go the same #'s. Do the math..:-)

So, you are defending the Porkulus Bill and think it was swell, therefore, I have no interest in further discourse with you, because I have learned you can't fix stupid.

JM
Jay Murrell,

I have no interest in further discourse with you, because I have learned you can't fix stupid.

I can't imagine why anyone of any stripe would want to have further discourse with you.

You have nothing other than insult since you have joined the site. Well other than your first post being a solicitation in violation to the rules that you agreed to.

Many of us have had disagreements with each other, some of which were rather heated, but I have never come across anyone that is so hard to find any common ground with as you.
The democrats have been in charge of congress for more than two years and running. The economy started going down when they took over and i recall both parties voted to approve the rise in the deficit ($750 billion bailout) before last November's presidential election... including Mr. Obama.
JHH:

You are wasting your breath. Libs like this are impervious to the facts.

Best,

Jay
jay:
i know... but you gotta keep trying... plus it keeps them busy. hopefully the screw is turning in congress. i hear some democrats are starting to speak against the new "omni-bust" budget. jhh
true statement....there are 13 or so of them.
Parker...I probably shouldn't be getting in to the fray either...but...he's just so chapped! It's a helpless feeling when you see your country going so far in the opposite direction that you feel is good. Jay...I understand the outrage. I've read a lot of your points and I couldn't agree more. From another conservative.
Sarah,

If I'm having a bad day, I don't try to make everyone around me have a bad day as well. I just try to do what is within my power to make it better.

And I learned as a child not to call others names. Some of us grew up beyond kindergarten I guess. I make mistakes like everyone else, but I don't exhibit a pattern of rude behavior to everyone that I disagree with.

RSS

Support GoHaynesvilleShale.com

Not a member? Get our email.

Groups



© 2024   Created by Keith Mauck (Site Publisher).   Powered by

Badges  |  Report an Issue  |  Terms of Service