Just a couple of days after the advocacy group Citizens for Tax Justice released a report showing how profitable oil and gas companies receive unneeded incentives from the US government, President Obama asks the Congress to stop this madness and remove the subsidies from 2015 fiscal budget.
In addition, the president also calls for cuts in the tax credit for resources extracted from marginal wells and repealing of the enhanced oil recovery credit.
The budget proposal for the upcoming year was released by the White House last week. It contains a list of measures and priorities that Obama is hoping to put forward. Some have already been presented and rejected by the Congress, including the suggestion to allocate $2 billion for research on alternative fuel sources, which should be obtained from oil and gas developments that are currently located on federal land. Other measures that the President calls for include restraining oil and gas companies from claiming deduction on their domestic manufacturing tax, increase in geological and geophysical amortization period for independent producers, and repealing of the oil recovery credit.
If the Congress approves the proposal, the onshore oil and gas companies that drill on federal land will be charged with new inspection fees. The money will be redirected towards the oil and gas program of the Bureau of Land Management. The Department of Interior should also receive an increase of 3.5% of their annual funds, which would partly go to the Bureau of Ocean Energy Management and partly to the Bureau of Safety and Environmental Enforcement. In addition, there will be changes in the royalty program, which concerns oil and gas developments on federal land, run by the Department of Interior. Obama expects that these should generate around $2.5 billion, in a period of ten years.
Of course, these are all part of the proposal, and have not yet been approved by the Congress. Regardless of all previous efforts of Obama’s group, the Republicans and oil-state Democrats managed to prevent any cuts and changes in the oil and gas taxation system. It remains to be seen which direction the debate will take this year. The Congress has to approve any governmental spending before October 1st, when the new fiscal year begins.
Image (c) Reuters