COULD BE GOOD NEWS - SEE SECTION ON NATURAL GAS

Democrats see drawbacks to proposed oil fees
By JENNIFER A. DLOUHY Copyright 2009 Houston Chronicle
March 24, 2009, 11:34PM

WASHINGTON — More than a dozen House Democrats on Tuesday warned that President Barack Obama’s proposal to raise taxes and levy new fees on the oil and gas industry could curb domestic energy production.

The group, led by Rep. Gene Green, D-Houston, and including fellow Texas Democratic Reps. Sheila Jackson Lee, Al Green, Charlie Gonzalez and Henry Cuellar, made their pitch late Tuesday, a day before the House Budget Committee was set to take the first steps in considering the Obama administration’s $3.6 trillion budget proposal.

In a letter to Budget Committee Chairman John Spratt, D-S.C., the group warned that proposals in the budget to slash tax incentives used by oil and natural gas developers could increase the costs of energy production and reduce energy supplies.

Barring deductions
The lawmakers — most from energy-producing states — also huddled late Tuesday with representatives from the federal Office of Management and Budget to raise concerns about the budget plan.

“Green and others expressed concern with the impact of the budget on our nation’s energy producers and our domestic supply of energy,” said Brenda Arredondo, Gene Green’s spokeswoman.

Obama’s budget would bar deductions for intangible drilling costs, block oil and natural gas companies from claiming domestic manufacturing deductions and repeal the percentage depletion for wells. It also would impose new use-it-or-lose-it style fees on inactive drilling leases on public lands.

Administration officials have argued that the incentives encourage reliance on polluting fossil fuels while reducing federal revenue.

‘Clean-burning’ gas
The lawmakers said in their letter that they support Obama’s goals to “end our addiction to foreign oil, invest in clean, renewable energy and transition to a low-carbon economy,” but that a comprehensive energy policy must recognize the role of natural gas and oil.

And they are concerned that some of the proposed tax increases could affect small and independent producers disproportionately.

“Clean-burning natural gas is required to make energy-efficient products, make wind turbine blades and solar panels, provide backup power to renewable energy projects and run biomass facilities,” the group wrote.

“If we make it more expensive or difficult to produce natural gas domestically, it will hinder our ability to meet our clean energy goals while also increasing natural gas prices for all Americans.”

Clout in Congress
The group could be influential as Congress begins debating a nonbinding measure that sets the parameters for budget legislation later this year.

After House and Senate committees mark up the budget resolution this week, the full chambers will consider the legislation.

Facing resistance from Democrats in the House and Senate, congressional leaders already have abandoned a plan designed to ease passage this year of an administration proposal to cap carbon dioxide emissions and allow businesses to trade pollution permits.

Congressional leaders had weighed including provisions in the budget resolution that would allow the Senate to pass legislation creating the so-called cap-and-trade plan on a simple majority later this year.