By Don Briggs
It was just a few weeks ago that we felt a breath of fresh air as Congress voted not to include the President’s proposed oil & gas tax increases in the Budget Reconciliation process.
On this past Thursday President Obama outlined the details of his FY 2010 budget.  As expected and feared, the President continued his attacks on the US oil & gas industry.  The details laid out his plan to end $26 billion in industry tax breaks, calling them “unjustifiable loopholes.”
The only bright spot in an otherwise scary budget proposal was the removal of the excise tax on oil produced in the Gulf of Mexico.  However, a White House official quickly cautioned against getting too excited over this omission, then added that any new tax proposals would be included in materials released next week.
In justifying the proposal the White House said “Oil and, to a large extent, gas are internationally traded commodities, and their prices are determined on the world market.  As a result, domestic oil and gas production subsidies do not significantly reduce the prices that consumers pay for products such as gasoline and home heating oil, resulting primarily in higher returns to the oil industry.”
Such economic reasoning makes me wonder if I’m living on the same planet as these people.  The US produces 5.3 million barrels of oil per day, of which, eighty percent (in round numbers) is produced by independent oil and gas producers.  Stripping the independents of the economic incentives needed to explore for oil and gas will cause US oil and natural gas production to decline, thus causing higher prices and even a greater dependence on foreign countries for oil.
Natural Gas Supply Association President R. Skip Horvath said that Obama’s budget was bad news for American consumers and worse news for American jobs. “People don’t appreciate how big the gas industry is in this country. Four million Americans depend on domestic gas for their livelihoods, both those who work directly in the industry as well as those in second jobs, such as steel and concrete, and retailing,” he said.  You cannot tax yourself into energy security.
In a further effort to end domestic oil and gas production, the White House plans to terminate the Oil and Gas Research and Development Program (approximately $50 million a year).   This is a program that directs oil and gas revenues to research programs. These programs typically develop technologies that improve production, reduce costs and can lead to production in areas that previously could not be developed.   The budget goes on to say that these developments “…should instead be funded by the companies that benefit from the projects.”
What is most shocking about that last statement is just how hypocritical it is.  The President’s Stimulus Package includes billions of dollars for development and deployment of Renewable Energies.
The Obama Administration’s bias against the domestic oil and gas industry comes not only in the Obama’s FY 2010 budget.  Two weeks ago, Senator Schumer filed Senate Bill 888.  If passed, S. 888 will amend the Internal Revenue Code of 1986 to terminate certain incentives for oil and gas.  SECTION 1. SHORT TITLE This Act may be cited as the `Oil Industry Tax Break Repeal Act of 2009′.
There’s more.  Representative Henry Waxman (D)(Calif.) is pushing legislation to stop hydraulic fracturing of natural gas wells, which would stop the exploration and development of natural gas plays such as the Haynesville Shale and others.
Let me be perfectly clear.  We are in a fight for our right to explore and produce America’s oil and natural gas resources. There are now 60 Democrats in the Senate.  A party line vote is all it would take for the budget to pass.  The negative impact on the US oil and gas industry would be immeasurable.