Obama Budget Seeks To End Oil, Natgas Tax Breaks
Date: 27-Feb-09
Country: US
Author: Ayesha Rascoe
WASHINGTON - President Barack Obama's budget outline on Thursday called for eliminating substantial tax breaks and increasing fees for the oil and natural gas industry, while boosting funding for cleaner fuel development.
Obama has made transforming the way Americans use energy a priority for his presidency. He has pledged to double U.S. renewable energy production in three years and wants 10 percent of electricity to come from clean energy sources by 2012.
His budget includes more than $50 million in increased funding for the Interior Department to conduct environmental studies to assess alternative energy resources and bolster clean energy development.
Obama's plan, which must still be approved by Congress, would levy an excise tax on Gulf of Mexico oil and natural gas, raising $5.3 billion in revenue from 2011 to 2019.
This new 13 percent tax on all oil and gas production in the Gulf would only affect those companies that are currently not paying any royalties due to a loophole, said an Interior Department official. The official said producers who already pay royalties will receive a tax credit.
The proposal would also place a $4 per acre annual fee on energy leases in the Gulf that are designated as non-producing, another Interior official said. The budget proposal expects the fee to generate $1.2 billion from 2010 to 2019.
Democratic lawmakers have often complained that oil and gas companies lobby to open more land to energy development, but are not developing the nearly 68 million acres (28 million hectares) of land they already hold.
The tax breaks Obama intends to repeal for the oil and natural gas include: the manufacturing tax credit, the enhanced oil recovery tax credit and the marginal well tax credit.
Oil industry representatives criticized the tax hikes.
"With America in the midst of an economic recession, now is not the time to impose new taxes on the nation's oil and natural gas industry," American Petroleum Institute President Jack Gerard said in a statement.
Laura Henderson, a spokeswoman for the Institute for Energy Research, said the tax increases would kill American jobs and increase the cost of energy.
The budget also projects that the government will raise $646 billion in revenue from 2012 to 2019 from a system that would limit emissions from large industries. Companies would be required to buy and sell permits for greenhouse gases released into the atmosphere.
Some of the funds generated by the cap and trade program would pay for $150 billion in clean energy investments over 10 years and toward a "making work pay" tax credit.
Obama's plan would also scale back money allocated to the planned U.S. nuclear waste dump at Yucca Mountain in Nevada to only "those costs necessary to answer inquiries from the Nuclear Regulatory Commission."
The Obama administration said it will work toward developing another strategy for nuclear waste disposal.
(Editing by Marguerita Choy)