OGJ Washington Editor
WASHINGTON, DC, Feb. 1 -- The Obama administration proposed $36.5 billion of new oil and gas taxes as it released its proposed fiscal 2011 budget. The proposed levies—which it framed as removing tax preferences to help balance the federal budget and promote clean energy—were essentially the same as the ones it presented a year earlier.
“Oil and gas subsidies are costly to the American taxpayer and do little to incentivize production or reduce energy prices,” the budget request said. The White House Office of Management and Budget estimated that the $36.5 billion of new taxes over 10 years would represent about 1% of total projected domestic oil and gas revenue, it added.
Between Jan. 1, 2011, when they would take effect, and the end of 2020, OMB estimated that repealing the percentage depletion allowance would raise $10 billion, doing away with expensing of intangible drilling costs would generate $7.8 billion, and increasing independent producers’ allowed geological and geophysical amortization would bring in $1.1 billion of new revenue.
The single biggest bite would be downstream, with the proposed repeal of the domestic manufacturing tax deduction for oil and gas companies. That would raise $17.3 billion over 10 years if enacted, OMB said. It also would make US refiners the only domestic business not covered by the manufacturing tax credit, which Congress enacted in response to foreign governments’ subsidies of industries in their countries.
Other proposed oil and tax incentive repeals in the latest proposed budget include the exception to passive lost limitations for working interests in producing properties, which OMB said would generate $180 million over 10 years, and the deduction for tertiary injectants, which it said would bring in $67 million.
The White House also proposed repealing the enhanced oil recovery credit and the credit for production from marginal oil and gas wells, but did not project additional revenues from these moves.
The proposals drew immediate fire from oil and gas groups. “With American still recovering from recession and 1 in 10 Americans out of work, now is not the time to impose new taxes on the nation’s oil and gas industry,” American Petroleum Institute Pres. Jack N. Gerard said. “New taxes would mean fewer American jobs and less revenue at a time when we desperately need both.”
Contact Nick Snow at email@example.com.
Obama renews call for oil taxes in proposed 2011 budget