Obama keeps new oil and gas taxes in his final 2010 federal budget

US President Barack H. Obama released his final fiscal 2010 federal budget on May 7. It included $31.5 billion of new oil and gas taxes over nine years which were part of the original request he submitted to Congress in February.

Collections would begin in fiscal 2011. The White House projects that through 2019, revenue would total $13.3 billion from denying oil and gas companies the tax deduction available to other US manufacturers, $8.3 billion from repealing the percentage depletion allowance, and $5.3 billion from placing an excise tax on new Gulf of Mexico production.

Another $3.3 billion would come from repealing expensing of intangible drilling costs, $1.2 billion from increasing independent producers' geophysical and geological amortization period to seven from five years, $62 million from repealing the tertiary injectants deduction, and $49 million from repealing the passive loss exception for interests in oil and gas properties.

It also repeals the enhanced oil recovery credit and marginal oil and gas well tax credit. OMB did not list revenues from either of these actions, probably because of price thresholds.

The budget also reinstates superfund taxes, which the White House Office of Management and Budget projects would raise $6.7 billion from 2011 through 2019. It establishes fees on non-producing federal leases (the so-called "use it or lose it" concept) and reinstates permit fees which the 2005 Energy Policy Act prohibited at the US Department of the Interior. OMB projects $574 million of revenue in the 2011-19 period from the first action and $171 million from the second.

A lobbyist said that only the tax on new Gulf of Mexico production remains in play. "Everything else looks final," he told OGJ Washington Pulse.

'Punishes gas production'

The new taxes and other provisions in the budget will make it more difficult to develop domestic energy, Independent Petroleum Association of America President Barry Russell said. "This budget does not recognize that in order to decrease our reliance on foreign oil, we need to increase our own American supplies of natural gas and oil. It also punishes American gas production, which could play a lead role in climate change discussions as our abundant, affordable clean-burning energy source," he maintained.

"From repealing existing tax provisions that encourage American production to new excise taxes on offshore production to new user fees that will go to pay for an already complex and costly permit process, this budget takes our natural resources and puts them further out of reach," Russell said.

Natural Gas Supply Association President R. Skip Horvath said that Obama's budget was bad news for American consumers and worse news for American jobs. "People don't appreciate how big the gas industry is in this country. Four million Americans depend on domestic gas for their livelihoods, both those who work directly in the industry as well as those in second jobs, such as steel and concrete, and retailing," he said.

He said that it was too soon to say definitively how many jobs would be lost, "but just a 10% decrease in direct natural gas jobs could wipe out the beneficial effects of a doubling of wind and solar jobs.

'Basic misunderstanding'

"Tax policies directly impact the decisions that are made regarding drilling, especially for smaller companies. More importantly, over 80% of the gas in the US is actually produced in this country. We are troubled that this administration has such a basic misunderstanding of how domestic gas markets will be impacted," said Horvath.

Marc Smith, executive director of the Independent Petroleum Association of Mountain States in Denver, found the White House's assertion in its budget that the oil and gas industry has tax loopholes absurd.

"The president's budget repeals the expensing of intangible drilling costs (IDCs), which are costs similar to those that all other manufacturing and production industries can expense. Without IDCs, the domestic gas industry would further contract and capital which otherwise would be reinvested in American energy would be reduced by 30-50%," he said on May 7.

"These tax increases will render many natural gas projects in the Rocky Mountain region uneconomic at today's prices, and will have the perverse effect of destroying thousands of green jobs that already exist in the natural gas industry," Smith warned.

Contact Nick Snow at nicks@pennwell.com

Related Articles

EPA delays proposal to regulate methane emissions until 2015

12/19/2014 The US Environmental Protection Agency is delaying plans to issue proposals to regulate methane emissions from oil and gas operations until 2015, O...

BLM starts process to consider new Nevada lease nominations

12/19/2014 The US Bureau of Land Management’s Battle Mountain, Nev., field office is seeking public comment on 197 parcels of public land, totaling 415,921 ac...

California Bay Area advances plan for enhanced refinery regulations

12/19/2014 California’s Bay Area Air Quality Management District (BAAQMD), the public agency responsible for regulating stationary sources of air pollution in...

IEA finds US energy policy improved in latest in-depth review

12/19/2014 US energy policies have come into sharper focus in the last six years, the International Energy Agency said in its latest periodic review. It speci...

Mexico uses PSCs in first Round One step

12/19/2014 Mexico is offering production-sharing contracts to companies incorporated in the country for exploration of 14 shallow-water areas in Round One bid...

Jewell names Maryland energy administrator BOEM’s new director

12/18/2014 US Interior Sec. Sally Jewell appointed Abigail Ross Hopper, who currently directs the Maryland Energy Administration, as the new director of the U...

Russia’s Turkey pipeline deal possibly may keep door to Europe ajar

12/18/2014 Russia’s memorandum of understanding to build a natural gas pipeline to Turkey after canceling its South Stream project could help keep the door op...

Moody’s: Mid-term elections dim federal fracing regulation prospects

12/18/2014 Results of 2014’s congressional elections have reduced the prospect of the federal government enacting its own hydraulic fracturing regulations, Mo...

Apache awarded Western Australia offshore permit

12/18/2014 A day after reporting its planned divestment of Western Australian and Canadian assets to Woodside Petroleum Ltd., Apache Corp. has been awarded a ...

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected