Royal Dutch Shell Plc  .com Rotating Header Image

Obama Administration Revives Tax Battle With Oil Industry

THE WALL STREET JOURNAL

The Obama administration’s push to raise taxes on the oil industry is reigniting a battle the industry fought and won last year.

Under pressure to narrow projected deficits, President Barack Obama’s 2010 budget proposal calls for raising more than $31 billion over the next decade by eliminating the oil and gas industry’s eligibility for various tax breaks.

[Obama Revives Battle With Oil Industry]Associated Press 

Interior Secretary Ken Salazar, center. Mr. Salazar signaled that the administration might reconsider some proposed tax increases on small, independent producers.

The plan would slap companies with a new excise tax on production in the Gulf of Mexico worth $5.3 billion between 2010 and 2019, and repeal the industry’s eligibility for a manufacturing tax credit worth $13.3 billion in that period. The industry says the final cost of Mr. Obama’s proposals on petroleum production could top $400 billion, once his plan to put a price on greenhouse-gas emissions is factored in.

The Obama administration has generally justified its proposals by arguing that taxpayers deserve a better deal. Speaking to the American Petroleum Institute this month, Interior Secretary Ken Salazar cited a recent report by the Government Accountability Office that said the U.S. receives a low share of revenue for oil and gas resources compared with other countries.

In an interview Wednesday, Mr. Salazar signaled that the administration might reconsider some proposed tax increases on small, independent producers.

“If it is going to have a disproportionate impact on a mom-and-pop kind of operation, I do think that’s something that should be taken into consideration,” Mr. Salazar said. In general, he added, “the oil and gas companies have all the incentives they need” for exploration and output.

At other times, the administration has tied its proposals to its environmental agenda. Testifying before Congress this month, Treasury Secretary Timothy Geithner said, “We don’t believe it makes sense to significantly subsidize the production and use of sources of energy that are dramatically going to add to our climate change.”

The oil industry, which in its campaign donations has long favored Republicans, is taking its case to voters. A new ad campaign by the American Petroleum Institute in about a dozen states says new taxes would “hobble our ailing economy” and “cost thousands of American jobs.”

“I think we should pay our fair share of taxes, but I don’t think we should look at this industry as the source of all money to pay for the renewable energy industry,” said Peter Robertson, vice chairman of Chevron Corp. Mr. Robertson said Mr. Obama’s tax proposals will discourage domestic oil and natural-gas production and undermine his goal of reducing U.S. dependence on foreign oil.

On Wednesday, a White House spokesman said the administration’s budget seeks to “transition our nation to a clean-energy economy fueled by domestic sources.”

The fight over how much oil companies should pay the federal government is a Washington perennial.

In recent years, surging crude prices have led to record profits for the major oil companies. A report by the Congressional Research Service last year said the top five major integrated companies — Exxon Mobil Corp., Royal Dutch Shell PLC, BP PLC, Chevron and ConocoPhillips— generated more than $100 billion in profits on nearly $1.5 trillion of revenue in 2007.

Last summer, when oil prices were near record highs, Democrats in Congress proposed slapping a windfall-profits tax on oil producers, rescinding various tax breaks for the industry and using the money raised to fund alternatives such as wind and solar power. The oil industry said the proposals would do nothing to bring down $4-a-gallon gas prices. The legislation died.

Now, oil prices are down 63% from their highs. Many companies are cutting back on investment in exploration and production. That is raising fears that the industry won’t be able to respond quickly once the economy recovers and demand for oil returns.

Instead of raising their taxes, oil producers say the government should open up more offshore and onshore territory for exploration, a step the industry says would lead to billions of dollars in additional royalties for the government. But some Democrats note recent government audits have questioned how effectively the U.S. tracks domestic oil production, and have found cozy relations between industry officials and government royalty collectors.

“That’s our No. 1 goal — to make sure the mechanisms are in place to collect [royalties],” said Rep. Nick Rahall (D., W.Va.), chairman of the House Natural Resources Committee.

Write to Stephen Power at [email protected] and Siobhan Hughes at[email protected]

Printed in The Wall Street Journal, page A5

This website and sisters royaldutchshellgroup.com, shellnazihistory.com, royaldutchshell.website, johndonovan.website, and shellnews.net, are owned by John Donovan. There is also a Wikipedia segment.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Comment Rules

  • Please show respect to the opinions of others no matter how seemingly far-fetched.
  • Abusive, foul language, and/or divisive comments may be deleted without notice.
  • Each blog member is allowed limited comments, as displayed above the comment box.
  • Comments must be limited to the number of words displayed above the comment box.
  • Please limit one comment after any comment posted per post.