Proposals for new federal taxes are still out there

The taxes which were part of the Obama administration's fiscal 2010 budget request did not make it into either the US Senate or House's broad reconciliation proposals. That doesn't mean they won't be considered.

Apr 14th, 2009

The oil and gas tax increases which were part of the Obama administration's fiscal 2010 budget request did not make it into either the US Senate or House's broad reconciliation proposals in early April. That doesn't mean that they won't be considered.

Industry observers told me that the taxes and fees could show up in other legislation, possibly the energy bill which is being developed by the Senate Energy and Natural Resources Committee.

The proposals include excluding refiners from a tax credit other domestic manufacturers use to compete against overseas firms which receive subsidies from their governments. "US refiners are closely connected to the world oil market. Removing this tax credit would simply move more refining out of the country," said Lou Pugliaresi, president of Energy Policy Research Foundation Inc.

Independent producers have been among the most active groups against the proposals. "It will be Issue No. 1 for us when we come back there on Apr. 20," said Rock Zierman, president of the California Independent Petroleum Association.

Shares goal, but. . .

"We share the president's goal of wanting to wean the United States off foreign oil, but you can't do it by killing domestic production. That's what his tax proposals would do," he continued.

The Independent Petroleum Association of Mountain States was in the midst of its members' Washington call-up when the House and Senate passed budget reconciliation bills.

IPAMS members tried to convey the message that more natural gas will be needed to achieve clean energy goals which congressional Democrats and the White House have set, according to Jon Bargas, public affairs director for IPAMS.

"We were encouraged by most of our meetings. We tried to concentrate on members who would understand the adverse impacts these proposed tax increases would have particularly on small, independent producers," he told me.

Freshman Democrats

IPAMS members visited not only members of Congress from the Rocky Mountains, but also freshman Democrats from previously Republican districts, Bargas said. "A lot of them hadn't realized how harmful and extensive these tax increases would be to small independent producers or how much of our national gas comes from the Intermountain West," he said.

The upstream independents from the Rockies also explained that they're feeling the economic recession too, and that their industry is responsible for about 150,000 jobs in the region.

"With low commodity prices and shortage of capital, and our industry's high reinvestment rate, it made our message clear that increasing taxes could hurt our industry and make it more difficult for us to help achieve reduced greenhouse gas emissions and other environmental goals," Bargas said.

"We face a struggle based on the economic cycle and the reality of energy prices today. The number of active drilling rigs across the country has fallen by half the past few months. Our members have been through this before and can handle it. But throwing in more taxes now would be a serious mistake," said Zierman.

Contact Nick Snow at nicks@pennwell.com

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