The administration of President George W. Bush supports repealing certain tax provisions favoring oil and gas and encouraging holders of deepwater Gulf of Mexico leases issued in 1998-99 without price thresholds to voluntarily renegotiate terms.
But it opposes compelling those leaseholders to renegotiate or pay extra fees or be barred from future lease sales. It also opposes removing the oil and gas industry from a tax reduction applied to other US manufacturers, the White House’s Office of Management and Budget said.
OMB made the remarks in an administrative policy statement on Jan. 17, one day before the House passed, by a 264-163 vote, HR 6-the “Creating Long-term Energy Alternatives for the Nation (CLEAN) Act.” The statement addresses provisions in the bill.
It said Section 204 of HR 6, the provision aimed at compelling leaseholders to renegotiate, potentially could significantly delay future lease sales while it is litigated.
“Even if a challenge is ultimately held to be unfounded, a court might enjoin sales resulting in significant revenue decreases to the [US] Treasury and disruption of energy supplies to the nation,” OMB continued.
It said that while the administration opposes “statutorily forced renegotiations of contracts,” it is investigating options to deal with the problem, and it supports voluntary renegotiations under which the leaseholders would accept the addition of price thresholds. OMB said that the administration also “strongly opposes” Section 302, which effectively would raise taxes for oil and gas producers by removing them from a deduction which Congress approved for all US manufacturers in 2004.
“While it is appropriate to eliminate unneeded tax incentives targeted specifically at the oil and gas industries, it is inappropriate to single out this industry from all others for punitive tax treatment. Broad-based tax increases on any industry make that industry less competitive with overseas counterparts,” OMB said.
It said the 2005 Energy Policy Act provisions accelerating the write-off of certain geological and geophysical costs and providing mandatory royalty relief and prohibitions on drilling-related user fees are not necessary, and it supports their repeal as outlined in HR 6.
OMB also urged Congress to consider repealing other 2005 energy act provisions directed at oil and gas, such as federal funding for oil and gas research and development. “The industry has the incentives and resources to accomplish such activities without additional federal subsidies, which are unwarranted in today’s price environment,” the White House office said in its policy statement.