Washington (Platts)--14Apr2010/632 pm EDT/2232 GMT

Obama administration efforts to eliminate tax breaks for oil and natural gas producers came under criticism Wednesday from Republicans on the US House of Representatives' Ways and Means Committee, who argued the measure will cost jobs.

"I am ... discouraged by the administration's proposed tax increases on oil and gas and coal industries," Michigan Representative Dave Camp, the senior Republican on the committee said. He added that tax incentives should not be directed solely at renewables.

"You cannot increase the cost of producing 85% of the energy being used today and expect consumers or employers to benfit from tax incentives that are going to less than 10% of the energy being used today," Camp said at a committee hearing.

In its fiscal 2011 budget request, the administration proposed eliminating $36.5 billion in tax breaks to the oil and gas industry over the next 10 years. The breaks have gone to small oil and gas companies for decades. At the same time, the administration is aggressively pursuing a series of tax incentives for renewable-energy production and manufacturing projects.

The administration attempted to eliminate the tax breaks in its fiscal 2010 budget, but Congress did not approve it.

Micheal Mundaca, the US Department of Treasury's assistant secretary for tax policy defended the administration's efforts, saying the targeted tax incentives amount to less than 1% of the industry's annual revenue. "We don't think it will have a significant effect on [energy] prices, we don't see a [reducing] effect on employment," Mundaca said.

But several committee Republicans were unpersuaded. Ohio Representative Patrick Tiberi told Mundaca that if the incentives are eliminated "[b]usinesses and jobs that exist today will no longer exist tomorrow. How does that help our economy?"

The Energy and Treasury departments also are involved in administering billions of dollars in so-called clean-energy tax breaks under last year's economic stimulus package. The American Recovery and Reinvestment Act provided $2.3 billion for clean energy manufacturing tax credits, and $16 billion for grants in lieu of tax credits for renewable-energy generation projects.

The federal government has awarded all of the $2.3 billion in manufacturing tax credits, which has so far created about 50,000 jobs, according to Matt Rogers, DOE's head of Recovery Act spending. In addition, the government has awarded $3.1 billion in grants in lieu of tax credits, which has resulted in about 60,000 jobs, Rogers told the committee.

Rogers defended the tax credits for renewables, saying that they have contributed to a doubling of US renewable-power generation capacity in the past 18 months.

President Barack Obama requested a $5 billion expansion of Treasury's current $2.3 billion clean-energy manufacturing tax credit in his fiscal 2011 budget request.

--Derek Sands, derek_sands@platts.com