For the oil and gas industry, President Barack Obama’s state of the union speech on Jan. 27 contained one carrot and two heavy sticks.
The carrot: “Making tough decisions about opening new offshore areas for oil and gas development.”
The first heavy stick: “Passing a comprehensive energy and climate bill with incentives that will finally make clean energy the profitable kind of energy in America.”
The second heavy stick: “At a time of record deficits, we will not continue tax cuts for oil companies, for investment fund managers, and for those making over $250,000 a year.”
Although any hint of new offshore leasing from the Obama camp might seem like a healthy turn, no one should be fooled. This administration has consistently trimmed lease sales and tightened restrictions on what leasing it has allowed.
And if it did try to open more than isolated pieces of now-closed areas of the federal offshore to resource development, Congress under current leadership wouldn’t fund the lease sales.
The sticks are what matter.
The cap-and-trade system proposed for climate-change mitigation would be disastrous for the industry, especially refiners. Even after Obama’s prodding, however, the Senate probably won’t ratify the House’s misjudgment by passing it.
Most senators won’t misread the national mood as badly as Obama has. Most can draw sound conclusions from a recent survey, conducted for the Pew Center for the People and the Press, of public opinions about “top priorities for 2010.” Among 21 national concerns, global warming ranked last.
The greater worry must be Obama’s allusion to “tax cuts for oil companies,” embedded in a list of populist villains.
This can mean only new wheels on the wagon of horrors Obama rolled out in his budget proposal last year, with its repeal of percentage depletion for independent producers, new taxation of Gulf of Mexico production, and exclusion of oil companies from a tax credit available to competitors in other businesses, among other things.
Obama has made clear he’s not retreating from the predilections evident in his first year in office. For the industry, this is reason to worry.
(Online Jan. 29, 2010; author’s e-mail: email@example.com)
Obama’s speech raises tax alarm for oil industry