IPAA responds to Obama administration’s proposed 2013 budget

IPAA responds to Obama administration’s proposed 2013 budget

WASHINGTON – Documents released by the White House today reveal that the Obama administration will attempt to resurrect a series of punitive tax hikes on U.S. oil and natural gas producers in his final 2013 budget plan, an announcement that comes just weeks after President Obama and top administration officials publically praised the potential benefits of extensive American energy production. In response, Independent Petroleum Association of America (IPAA) Chairman Virginia “Gigi” Lazenby released the following statement:

“Just weeks ago, President Obama addressed the nation, touting an America ‘built to last’ thanks to a resurgence of U.S. manufacturing and energy production. Yet today, in one sweeping motion, the White House refuted that rhetoric with counterproductive actions.

“The Obama administration’s proposed budget seeks to impose $41 billion in job-crushing taxes on the oil and natural gas industry over the next decade. And while the President believes his proposal targets ‘Big Oil’, it instead burdens the heart of America’s energy base – the thousands of small and independent American oil and natural gas producers. These businesses – that on average employ only 11 workers – develop 95 percent of U.S. wells while producing 85 percent of U.S. natural gas and 54 percent of U.S. oil. Additional taxation will harm this linchpin for American energy production as it would any business no matter what industry – all the while cutting jobs and reducing revenues on which so many states rely.

“The proposed budget calls current oil and natural gas tax policy “unwarranted” and refers to its statutes as “loopholes.” In reality, oil and natural gas producers pay more in taxes, royalties and revenues than virtually any other American industry, as well as significant state and local taxes that support local communities. Reinvesting 150 percent of their American cash flow back into new American production, independent producers are constantly supporting and advancing this nation’s ability to develop its natural resources and maintain its standard of living.

“Yet every tax increase on independent producers reduces capital investment in the industry, resulting in fewer jobs, less revenue to American governments, depleted retirement and pension funds, and dismantled American energy security.

“The Obama administration’s proposed budget piles additional roadblocks to U.S. oil and natural gas development in the form of hiked royalty payments and increased user fees for producers operating on federal lands. This attempt to restrict federal land access flies in the face of President Obama’s promise for an “all-of-the-above” energy strategy. After all, federal lands have seen the fewest number of onshore leases since 1984.

“IPAA will continue to take its case directly to those in Congress, both Democrats and Republicans, who recognize the value which independent American energy producers deliver-if and when they are given the chance. If President Obama is truly dedicated to an America ‘built to last’, he will listen to our message, follow through on his word, and recognize the vast benefits of American oil and natural gas production for America’s workforce, economy, security and future.”

Below are some of the budget items IPAA is focused on:

TAXES:

  • Repeal of Expensing of Intangible Drilling Costs; Percentage Depletion; Passive Loss Limitations for Working Interest in Oil and Natural Gas Properties; Enhanced Oil Recovery Credit; Marginal Wells Credit; Tertiary Injectants; Elimination of the increased geological and geophysical period for independent producers to seven years.
  • “Tax Carried (Profits) Interests as Ordinary Income. Currently, many hedge fund managers, private equity partners, and other managers in partnerships are able to pay a 15 percent capital gains rate on their labor income (on income that is known as “carried interest”). This tax loophole is inappropriate and allows these financial managers to pay a lower tax rate on their income than other workers. The President proposes to eliminate the loophole for managers in investment services partnerships and to tax carried interest at ordinary income rates. This would reduce the deficit by $13 billion over 10 years.”

 

ENVIRONMENTAL PROTECTION AGENCY:

  • EPA requesting millions in additional appropriations dollars to expand its roving study on hydraulic fracturing to areas involving air, water, ecosystems.
  • The EPA also will continue to build on current research to study the potential impacts of hydraulic fracturing on drinking water. Building on ongoing research, the $14 million total request in FY 2013 for hydraulic fracturing research will begin an effort to assess additional questions regarding the safety of hydraulic fracturing. The research will be coordinated with DOE and USGS under a developing Memorandum of Understanding which emphasizes the expertise of each Federal partner, and will include an assessment of potential air, ecosystem, and water quality impacts of hydraulic fracturing. (p. 10)
  • For the Air, Climate, and Energy (ACE) research program, an increase of $3.8 million above FY 2012 will support an effort to address additional questions regarding the safety of hydraulic fracturing (HF). Resources will support ambient air monitoring and associated health effects assessments to address the potential impacts of HF on air quality, water quality, and ecosystems. (p. 29)
  • The EPA and USDA will enhance existing coordination efforts in reducing nonpoint source pollution and the EPA will move beyond its ongoing study and expand its work with DOE and the USGS on understanding and the potential impacts of hydraulic fracturing.

 

DEPARTMENT OF INTERIOR:

  • Charging user fees to companies for processing O&G drilling permits on inspecting operations on federal onshore & offshore lands.
  • Establishing fees for new “non-producing” oil and gas leases on onshore and offshore federal lands.
  • Making administrative changes to O&G royalty system and terminating the RIK program.

 

DOE / RESEARCH:

  • The Budget also includes $45 million for the Department of Energy, the Environmental Protection Agency, and the U.S. Geological Survey for a coordinated effort among these agencies to conduct an R&D program aimed at reducing the potential health, safety, and environmental risks of hydraulic fracturing for natural gas and oil production from shale formations. (p. 55)
  • As part of an overall investment of $421 million in fossil energy R&D, the Budget includes $12 million to fund a multi-year research initiative aimed at advancing technology and methods to safely and responsibly develop America’s natural gas resources. (p. 102)
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