Watching Government Budget breakout

The Clinton administration's proposed $1.69 trillion budget for fiscal 1998 has a heavy emphasis on raising money.

The Energy Department is slated for a 2.6% spending increase to $16.6 billion, with more than $13 billion going for nuclear weapons and cleanup programs. Energy efficiency and renewable energy programs would get more funding.

DOE's budget includes an estimated $2.4 billion from the planned sale of Elk Hills Naval Petroleum Reserve next year (OGJ, Jan. 13, 1997, p. 22).

The plan would not sell oil from the Strategic Petroleum Reserve in fiscal 1998 but would sell $1.145 billion worth in 2002 to balance the budget then.

Other agencies

The Interior Department budget would increase 3% to $7.3 billion. Within DOI, Minerals Management Service, which oversees leases and royalty collections, would get $205 million, up $600,000.

MMS plans to spend about $6.3 million more to handle the resurgence of industry activity in the Gulf of Mexico.

Cynthia Quarterman, MMS director, said, "The record-breaking results of recent lease sales in the Gulf, particularly in deeper waters, have placed a heavy demand on our efforts...and present many technical and regulatory challenges. We cannot afford to skimp on overseeing what promises to be a 70-100% increase in oil production in the gulf by the year 2002."

The Environmental Protection Agency is asking for $7.6 billion. It includes $35 million to expand programs that enable citizens to get data on toxic pollution in their communities and $63 million to improve energy and transportation efficiency and reduce "greenhouse" gas emissions.

Taxes planned

The administration's budget proposes a 24.3¢/gal tax on kerosine used as diesel fuel. Exceptions would be provided for aviation fuel and some feedstock uses. Persons using kerosine for heating could apply for refunds. The tax is designed to ensure that persons blending kerosine in diesel do not escape the 24.3¢/gal tax applying to unblended, undyed diesel fuel.

The budget would extend the 5¢/bbl Oil Spill Trust Fund tax on oil production and imported crude and products. The $200 million/year tax would be suspended if the trust fund reaches more than $2.5 billion.

And the administration proposed reinstating oil, chemical, and corporate environmental taxes to finance the Superfund cleanup program. The taxes could raise $1.8 billion/year to pay for cleaning toxic waste sites.

Superfund taxes expired at yearend 1995, and Congress refused to renew them last year until it could agree on reauthorization of the Comprehensive Environmental Response, Cleanup, and Liability Act.

Foreign income

The budget would reduce federal tax deductions available to oil and gas companies with foreign revenues.

The plan, same as one floated last year, is designed to raise $400 million to help balance the budget by 2002. The proposal would require a U.S. company to pay taxes on oil and gas income earned by a foreign subsidiary before the subsidiary sent any dividends to its U.S. parent.

It would also cap the tax deduction U.S. companies receive on oil and gas production income taxes they have paid in other countries.

And it would block a U.S. firm from using any oil and gas income taxes it had paid to other governments as credits against taxes it owed on other earnings, such as shipping income or capital gains.