Administration attempts to justify tax proposals surprise Gerard

American Petroleum Institute Pres. Jack N. Gerard expressed surprise at an Obama administration official’s apparent attempt on Sept. 10 to justify proposals to repeal oil and gas tax incentives by saying that it is looking at other industries’ tax breaks too.

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, Sept. 15 -- American Petroleum Institute Pres. Jack N. Gerard expressed surprise at an Obama administration official’s apparent attempt on Sept. 10 to justify proposals to repeal oil and gas tax incentives by saying that it is looking at other industries’ tax breaks too.

“It seems that they got the cart before the horse. If they want to look at the tax code generally, we’re satisfied with that. But they obviously didn’t analyze the entire tax code before they suggested repealing our industry’s tax provisions,” Gerard told reporters during a Sept. 15 teleconference.

Alan B. Krueger, assistant US Treasury secretary for economic policy, mentioned that the administration was looking at other industries’ tax breaks during a Sept. 10 hearing by the Senate Finance Committee’s Energy, Natural Resources, and Infrastructure Subcommittee on the White House’s Fiscal 2010 oil and gas tax proposals.

When a subcommittee member, Jim Bunning (R-Ky.), asked him if the administration was currently singling out the oil and gas industry as it seeks tax incentive repeals, however, the US Department of the Treasury official replied, “That is correct.”

Gerard said he continues to be amazed by Obama administration statements that oil and gas tax incentives should be repealed to prevent overproduction of domestic resources. “The Treasury Department’s Green Book says there’s too much oil and gas production in the United States. We think that’s laughable. We think there needs to be some serious dialogue about what these proposals mean and about ways to get back to producing more oil and gas,” he said.

‘Ludicrous’
Citing a PricewaterhouseCoopers study commissioned by API that it released on Sept. 9, Gerard said the US oil and gas industry supports 9 million jobs and contributed more than $1 trillion, or 7.5%, to the US gross domestic product in 2007. “For the administration to focus [tax incentive repeals] on an industry that is such an economic engine seems ludicrous during a recession,” he maintained.

“We’re deeply troubled by what the administration has put forward for a variety of reasons, not the least of which is its apparent belief that there’s overproduction of oil and gas in the United States. At a time when it’s almost universally accepted on the Hill that there’s a need for more energy security, we hope cooler heads will prevail and these proposals will be rejected,” he continued.

He said that API has made progress in the past 2 months in getting US House Natural Resources Committee Chairman Nick J. Rahall (D-W.Va.) to modify some of his proposals to reform federal minerals management. But the oil and gas trade association remains concerned with the bill that Rahall introduced on Sept. 8, and that will be the subject of committee hearings on Sept. 16-17, according to Gerard.

“The legislation that’s being put forward actually will result in less domestic energy,” he explained. “In a preliminary analysis, outside sources say it could result in 18% less natural gas production over the next 30 years. Likewise, it could result in a $37 billion loss to our economy and a $4.7 billion loss in government revenue.”

Other concerns
Rahall’s bill also would hamper domestic production growth by increasing bureaucracy, and eliminate the federal royalty-in-kind program, which Gerard conceded has been badly managed but which remains a good idea.

He said that in public forums in 19 states during August in which API participated, citizens showed a surprisingly high interest in energy issues. “In Farmington, NM, which is a relatively small community, it was estimated that 1,000 people came to talk about oil and gas. Places like Detroit, where you wouldn’t expect many people to show up, attracted hundreds. A surprising number of people came from the farming community,” he said.

“Clearly, health care was Issue No. 1 over the August break. Energy was Issue No. 1-A,” he added.

Most of the concerns expressed at these forums centered on efforts to control greenhouse gas emissions through a carbon cap-and-trade program, Gerard said.

“I’ve had a number of conversations with members of Congress and believe that if the Waxman-Markey bill went to the House floor today, it wouldn’t pass. When you look at the Senate dynamic, with a lot of different people from both parties, you see several Democrats concerned about job loss and fuel loss,” he said. “I think the public is speaking up, and it’s having a clear impact on public officials.”

Contact Nick Snow at nicks@pennwell.com.

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