The Obama administration's proposed tax law changes would seriously damage a domestic gas industry which is hurting already, the Natural Gas Council warned in a Mar. 17 letter to members of Congress.

The group, which is comprised of trade associations involved in the US gas industry from wellhead to burner tip, explained that investments in new US gas production come from three funding sources: selling the gas, obtaining credit from lenders and securing private and institutional investors willing to commit capital to high risk ventures.

"Unfortunately, new U.S. natural gas projects are at risk. Dramatic reductions in natural gas prices this past year have reduced cash flow to producers, while the credit crunch has limited access to capital and investors are more cautious than ever," the letter continued.

It said that the White House's tax proposals, outlined in its proposed fiscal 2010 federal budget, would radically shift incentives for developing domestic gas, some of which have been in place since 1913.

"If these taxes are imposed on the industry, not only will prices rise for consumers, but tax and royalty revenues to the federal and state treasuries will diminish and well-paying American jobs will be eliminated," the group warned.

Such results would run counter to the Obama administration's stated strategy of developing cleaner energy and reducing US reliance on foreign oil, it continued. "We urge you to reject these unjustified changes to energy tax policy. Congress must develop rational national energy strategies [which] rely on American energy first, including clean-burning, abundant American natural gas," the NGC's letter said.

The letter was signed by Independent Petroleum Association of American President Barry Russell, Natural Gas Supply Association President R. Skip Horvath, Interstate Natural Gas Association of America President Donald F. Santa and American Gas Association President David N. Parker.