Obama's budget plan targets oil, gas tax breaks
— -- President Obama's proposed 2010 budget takes pointed aim at oil and gas companies, eliminating myriad tax breaks and proposing new fees on the providers.
The plan put out Thursday would repeal tax breaks intended to spur oil and gas exploration and penalize companies that don't develop wells on land leased from the government. It could raise tens of billions of dollars the next decade.
The industry says the blueprint would discourage investment aimed at cutting oil imports.
"New taxes could mean fewer American jobs and less revenue at a time when we desperately need both," says Jack Gerard, president of the American Petroleum Institute (API).
But consumer advocates cheered the proposal.
The financial impact is "peanuts compared to the excessive profits they're earning," says Mark Cooper of, the Consumer Federation of America.
Oil giants such as ExxonMobil posted record profits in 2008, but fourth-quarter earnings plunged as crude oil prices tumbled. Among other things, the proposal over 10 years would raise:
• $5.3 billion by imposing a new 13% excise tax on offshore oil and gas production in the Gulf of Mexico to close loopholes that gave companies relief from certain royalty payments.
•$1.2 billion by charging a fee on companies that don't produce on their Gulf leases. Environmentalists say offshore drilling should not be expanded while existing leases lie fallow. But API spokeswoman Cathy Landry says unused leases are ultimately surrendered.
•As much as $10 billion by reinstating taxes to clean up hazardous waste sites.
•$11.5 billion by barring companies from writing off drilling costs, such as labor, and by limiting their ability to write off lease payments.
•$13.3 billion by scrapping a 6% tax deduction that benefits all U.S. manufacturers.
The moves could cost the industry several billion dollars a year. Industry profits in the U.S. totaled $125 billion in 2007, according to the Energy Department. Argus Research analyst Phil Weiss says the industry would be far more adversely affected by a windfall profits tax.
