10 April 2013 20:35 [Source: ICIS news]
WASHINGTON (ICIS)--President Barack Obama’s proposed 2014 budget drew prompt condemnation from US energy industry officials on Wednesday, who charged that increased taxes and fees targeting oil and gas could put the nation’s energy renaissance at risk.
Obama presented his 240-page, $3,778bn (€2,871bn) fiscal year (FY) 2014 budget on Wednesday, saying that his goal in the revenue and spending plan was to re-ignite the US middle class and stimulate hiring by channelling federal funds to infrastructure repair and development, technological innovation and early childhood education.
But because the US federal government takes in only about $2,500bn in taxes and other revenues each year, Obama’s FY 2014 budget would mean a deficit of some $1,300bn.
To cover part of that red ink tab, the White House wants to raise taxes by about $700bn, meaning that the US would have to take on another $744bn in additional debt next year to cover the overall $3,778bn spending plan.
Part of the $700bn in tax increases would come from the elimination of certain tax benefits – such as investment deductions, accelerated depreciations and tax credits – for oil and natural gas producers, plus increases in fees and royalties on developers that want to drill on federal lands.
Jack Gerard, president of the American Petroleum Institute (API) said he was disappointed in Obama’s budget proposal and its tax increases on oil and gas producers.
“The president’s 2014 budget plan returns to the well of bad ideas and backtracks on his state of the union commitment,” Gerard said, referring to Obama’s pledge earlier this year to advance an “all of the above” energy policy.
API noted that the president’s proposed tax increases on fossil energy development mark the fifth time in as many years that the White House has sought to raise additional revenue from the energy sector. In each of the previous four Obama administration budget proposals, Congress declined to approve those tax increases.
Citing the energy boom that has taken place in the US over the last several years, Gerard urged the White House to reverse course.
“Frankly, the administration should be trying to replicate the success America’s oil and natural gas industry has had in creating jobs and growing the economy, primarily through development on private and state lands,” he said. “The evidence clearly shows that what we’re doing is working.”
Virginia Lazenby, president of the Independent Petroleum Association of America (IPAA), said that if Obama’s budget proposal were put in force, its increased taxes and fees would force drillers to cut their capital expenditures by 25%.
“This means fewer jobs, less revenue to government treasuries and a halt to the progress our nation has made toward achieving energy security,” Lazenby said.
“America’s oil and natural gas revolution – one of the few bright spots in our slow economy – is at risk,” she added.
Lazenby, whose organisation represents drilling companies and says they account for 95% of energy wells drilled in the US, said the Obama budget’s additional royalty and fee increases along with policy changes “will make it harder for independent producers to operate on federal land”.
Tom Pyle, president of the American Energy Alliance (AEA), an energy sector advocacy group, said that Obama “continues his effort to incorporate punitive and discriminatory tax measures for oil and gas producers into the tax code, while renewing his effort to poach mineral royalties owed to US taxpayers to fund his green energy schemes”.
Pyle also said that the Obama budget plan was conspicuous in failing to make any reference to the long-planned Keystone XL oil pipeline.
“Despite a four-year delay and numerous environmental impact studies … the failure to permit this critical infrastructure project is a daily reminder of the administration’s rejection of common-sense solutions to meet America’s energy needs,” he said.
The Obama budget now faces extensive reworking in Congress, where Republicans in control in the House and Democrats in charge of the Senate will have to find some common ground to complete a budget before the 2014 fiscal year begins on 1 October.
($1 = €0.76)
Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy
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