President Barack Obama’s 2010 budget, which would take effect Oct. 1, 2009 includes $3.6 trillion in spending and details a tax increase of more than $30 billion on U.S. natural gas and oil production investments as estimated by the White House last week.
President Obama’s budget proposal would also repeal several tax incentives championed by the industry and close so-called loopholes that have allowed energy companies in recent years to avoid making royalty payments to the federal government. The tax changes represent the most onerous tax proposal in the history of America’s oil and natural gas industry.
A tax increase of this size would have a devastating effect on Louisiana, which is well-known as the Energy State. The proposed increase would result in a greater slowdown in drilling activity, which translates into fewer jobs, less investment in communities and less state and local revenue from producing companies.
» Repeal the expensing of intangible drilling costs.
» Repeal the practice of percentage depletion.
» Repeal marginal well tax credits.
» Repeal enhanced oil recovery credits.
» Increases geological and geophysical amortization costs.
» Create an excise tax on Gulf of Mexico production.
» Repeal certain manufacturing tax deductions.
» Implement a $4 per-acre fee on Gulf leases designated as “nonproducing.”
The tax changes would hurt small businesses because 90% of the oil and natural gas wells developed in the United States are developed by small, independent businesses—not so-called ‘Big Oil.’ America’s clean-burning, abundant natural gas will be essential to any clean energy agenda, and America’s natural gas and oil are critical to decrease the country’s reliance on foreign oil.
The Louisiana energy industry supports the development of alternative fuels as an important part of the United Stated independence from foreign oil sources. However, the vital role of the oil and natural gas industry cannot be ignored. Taxing the natural gas and oil industry out of the equation of a varied, comprehensive energy structure for the United States is not practical or feasible. President Obama’s proposed tax increase, aimed at increasing revenue from the oil and natural gas industry, flies in the face of the goal of creating the comprehensive energy proposal that utilizes all sources of energy.