Obama Punishes Oil and Natural Gas Industry

U.S. President Barack H. Obama released his final fiscal 2010 federal budget on May 7th. It included $32 billion of new oil and gas taxes over a period of 9 years. Collections will begin in fiscal 2011.  The tax changes include: the elimination of a tax deduction available to other U.S. manufacturers, repeal of the percentage depletion allowance, new excise tax on new Gulf of Mexico production, repeal of expensing intangible drilling costs, repeal of enhanced oil recovery project injectant costs, plus others.

The budget also establishes additional fees on non-producing leases and additional permit fees. Lobbyists report that all of these taxes will be passed by congress with the possible exception of the excise tax on new Gulf of Mexico production.

According to the President of the Independent Petroleum Association of America, Barry Russell, “The new taxes and other provisions in the budget will make it more difficult to develop domestic energy. The Budget is in direct conflict with the goal of reducing our reliance on foreign oil.”

President R. Skip Horvath of the Natural Gas Supply Association says Obama’s budget is bad news for America’s consumers and worse news for American jobs. He says four million Americans depend on domestic gas for their livelihoods. He says a 10% decrease in direct natural gas jobs could wipe out the beneficial effects of a doubling of wind and solar jobs.

Horvath said, “Tax policies directly impact the decisions that are made regarding drilling, especially for smaller companies. More importantly, over 80% of the natural gas in the U.S. is actually produced in this country. We are troubled that this administration has such a basic misunderstanding of how domestic gas markets will be impacted. “

Commentary:  It appears to me that the Obama Administration and the Democratically controlled Congress is punishing the oil and gas industry. To fund some of their vast government programs they need new tax revenues and why not the oil and gas industry. They have been demonizing these companies for years. In 2007, Exxon paid a 41% corporate tax rate on taxable income. I guess 41% is not high enough. Why don’t we increase it to 90% and wipe out all of our domestic oil and gas production.