In unveiling his $3.8 trillion spending plan for the U.S. government on Wednesday, President Barack Obama revived his longstanding attack on oil industry tax breaks and formally launched a plan to pay for alternative vehicle research with drilling dollars.
While the tax plans are dead on arrival on Capitol Hill — where lawmakers have rejected similar proposals many times before — they drew outrage from oil and gas industry leaders who said Obama was seeking to use the sector as a piggy bank.
The fiscal 2014 budget proposal aims to raise $2.5 billion over the next decade by raising the royalty rates for oil and gas produced on federal lands and waters, with the revenue steered toward a new Energy Security Trust for research in alternative fuels and vehicles.
American Petroleum Institute President Jack Gerard said the move is shortsighted, especially since a single sale of offshore drilling leases can net more than $1 billion just in bids to buy drilling rights — even before the royalty payments from oil and gas that might be produced on the acreage.
"What we're seeing come out of the president again is the same old tired approach that he's taken before," Gerard said. "The president is talking about jobs and revenue, yet the proposals related to energy hurt job creation and limit revenue by discouraging the very activity that generates revenue."
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The administration says Obama's budget would save $39 billion over the next 10 years by eliminating "fossil fuel tax preferences" geared toward oil, gas and coal. Items on the chopping block include the oil industry's ability to claim a domestic manufacturing deduction broadly available to other sectors, and write off "intangible drilling costs" such as site preparation, hauling supplies and fluids used in the process.
Virginia Lazenby, chairwoman of the Independent Petroleum Association of America, said the proposed tax changes would pare the capital oil and gas companies can invest in new wells.
""Independent oil and natural gas producers currently reinvest 150 percent of their capital budgets into new energy projects, and by doing so, they keep the economy moving," said Lazenby, who is also the CEO of Nashville-based Bretagne LLC. "The tax treatment is crucial to the business decisions of these companies."
And Rep. Gene Green, D-Houston, insisted it was unfair to single "out the oil and gas industry for tax hikes (that) would only stifle job creation and drive up imports of crude oil from foreign nations that are hostile to us."
But advocates of the president's proposal say the oil and gas tax incentives — some nearly 100 years old — have outlived their usefulness.
"These companies earned billions of dollars in recent years due to high oil and gasoline prices and do not need additional support from taxpayers," said Daniel J. Weiss, the director of climate strategy at the Center for American Progress. "Now that the oil and gas industry is fully developed and mature, President Obama's budget would end this center of largess."
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The administration also proposed establishing new "use-it-or-lose-it" style fees on undeveloped oil and gas leases, while shortening the duration of those contracts.
A separate proposal for new user fees on federal oil and gas leases is designed to offset some $40 million in federal inspection of work on those tracts.
Under Obama's proposal, $672 million would be devoted to oil and gas programs at the Interior Department, including $169 million for the Bureau of Ocean Energy Management and $222 million for the Bureau of Safety and Environmental Enforcement — the two agencies that oversee offshoree leases and development.
rest http://fuelfix.com/blog/2013/04/10/obama-budget-would-end-oil-industry-tax-breaks-hike-royalty-rates/
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