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Obama's budget isn't just change; it's derangement

Bob Tippee
Editor

Change is nearly always good. The same can't be said for derangement. President Barack Obama, who ran for office as the high priest of change, has crossed this line.

He must believe the wildest energy delusion of his party's leftmost fringe: that the US can subsidize its way off oil and gas and run the economy on alternative energy forms.

It can't do so anytime soon. But it can go broke trying.

The budget Obama sent Congress on Feb. 26 would demolish capital formation by the US oil and gas industry.

It proposes to raise $31.5 billion over 11 years by eliminating "oil and gas company preferences" in taxation (OGJ Online, Feb. 26, 2009).

It would levy an excise tax on Gulf of Mexico production.

It would repeal the expensing of intangible drilling costs by producers and the manufacturing tax deduction for oil and gas companies.

It would increase the geological and geophysical amortization period for independent producers to 7 years and repeal percentage depletion for oil and gas.

It also would repeal the enhanced oil recovery credit, marginal well tax credit, deduction for tertiary injectants, and passive exception for working interests in oil and gas properties.

For an additional $17.2 billion, the budget would revive the "Superfund" tax to pay for cleanup of abandoned hazardous-waste sites.

Many of these and other proposals, such as use-it-or-lose-it lease stipulations and increased fees for operating permits, resurrect bad ideas considered but rejected by Congress.

Revenue projections associated with them are illusory, obviously assuming levels of oil and gas activity that would be impossible if the changes were enacted.

This nest of economic snakes isn't the usual, sophomoric slap at "Big Oil." The imperiled drilling preferences are crucial to small operators. Percentage depletion, in fact, is available only to independent producers and restricted for all but the smallest of them.

This is a broadside attack on US oil and gas in general. It makes Obama's talk about cutting dependency on foreign oil and reviving the economy laughable but sobering.

The president and the country he leads need a quick dose of reality.

(Online Feb. 27, 2009; author's e-mail: bobt@ogjonline.com)


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