Oil, gas industry aims to nip tax hikes in the bud

Oil, gas industry aims to nip tax hikes in the bud

By Jim Snyder
Posted: 03/23/09 07:26 PM [ET]

Congressional anger at the oil and gas industry hasn’t receded nearly as much as gas prices have, complicating the effort by lobbyists to block $31 billion in taxes or new fees proposed by President Obama in his budget blueprint.

Lawmakers take the first crack at that proposal this week, with a House Budget Committee markup on Wednesday.

The Appropriations and tax committees will fill in the details of the 2010 budget, but they will do so within the budgetary confines provided by the budget writers. Lobbyists are working furiously this week to limit the damage at the start of the process before proposals have a chance to gain momentum.

Under the blueprint, oil and gas providers would be on the hook for a slew of tax increases, mostly from the repeal of breaks that now serve as an inducement for production in hard-to-get-to areas.

Several energy lobbyists said the industry is likely to have to swallow something, as Democrats look to shift to a greener economy by paying for the development of renewable fuels.

But lobbyists remain hopeful they can walk Congress back from the $31 billion number in the White House’s proposal.

The global recession has dramatically lowered the demand for oil and gas, which in turn has provided relief for consumers at the pump. But the industry is still an enticing target for revenue to pay for a host of efforts, like developing greener renewable fuels.

Oil and gas lobbyists argue increasing the industry’s taxes will cost jobs during a recession — and could also lead to the need to import even more oil and gas from overseas.

“Right now we need more jobs and economic activity,” said John Felmy, the chief economist at the American Petroleum Institute, which represents the major oil companies.

The House Natural Resources Committee, meanwhile, will examine another issue important to the oil and gas industry: offshore drilling.

The cries of “Drill, Baby, Drill” have quieted with the decline in oil prices, and now some environmental groups want Congress to reinstate the bans on drilling in the Outer Continental Shelf, which lawmakers let expire in the fall when $4-a-gallon gasoline was still fresh in voters’ minds.

The Interior Department is currently studying whether to open up new areas to drilling. It is permitted in the western Gulf of Mexico and in a more limited way off the coasts of Alaska and California.

Dianne Saenz, a spokeswoman at Oceana, said her group would urge the committee to reinstate the drilling moratorium at the hearing, which happens to fall on the 20th anniversary of the Exxon Valdez oil spill.