Obama Budget Seeks to Raise Taxes, Royalties on Energy Companies

WASHINGTON - President Barack Obama's 2014 budget plan seeks to bolster the U.S. Treasury with increased taxes and royalties from energy companies, confirming his long-held belief that the oil, natural-gas and coal industries can be a source of new revenue to reduce the U.S. budget deficit.

Mr. Obama's budget seeks to eliminate a number of tax breaks currently awarded to oil, natural-gas and coal companies. One such incentive, known as the Section 199 deduction, allows energy and some other companies to deduct 6% of qualifying income.

Mr. Obama has asked Congress to repeal these tax breaks in previous budget proposals, but the initiatives have so far failed to gain traction in either the House or the Senate. The changes would raise $44 billion over 10 years, according to the 2014 proposal.

The budget plan also seeks to raise revenue from energy production on federal lands and waters. Through a mix of legislative and administrative changes, the budget proposes to increase the royalty rate for onshore energy production, which is currently lower than the rate for offshore production, and seeks to change a law under which some companies are allowed to skip royalty payments altogether.

These changes would raise $2.5 billion in net revenue over 10 years, according to the White House--roughly equal to the $2 billion Mr. Obama wants to spend on new clean-energy research. The president said in his State of the Union address in February that he wants to finance a research-focused Energy Security Trust using revenue from federal energy production.

Mr. Obama has sought for years to repeal tax advantages for energy companies, saying the U.S. government is needlessly subsidizing an industry that makes billions of dollars of profit each quarter.

Oil and natural-gas companies have pushed back on Mr. Obama's proposals and have accused the president of singling them out unfairly. The Section 199 deduction, for example, is awarded to all U.S. manufacturers and yet the president has proposed to repeal it only for energy companies.

The oil and natural-gas industry has said it is willing to entertain tax changes only as part of a broader discussion of a tax overhaul.

The royalty changes were included in the proposed budget plan for the U.S. Interior Department. The 2014 budget includes $11.7 billion in discretionary spending for the agency, an increase of more than 4% over the 2012 enacted level.

Copyright (c) 2012 Dow Jones & Company, Inc.


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gordon dyck | Apr. 12, 2013
Mr.Obama is quick to raise taxes promising to cut expenditures in return. But, as a fiscal cliff debacle shows that promise is soon forgotten on his part. Here he goes again picking out another candidate for higher taxes promising more mythical expenditure reductions in return. Considering that the new oil & gas supplies coming from shale fields will make the U.S a major energy product exporter over the next decade; his plan to increase taxes on this industry will kill the goose before it can lay any golden eggs.

Richard Haas | Apr. 11, 2013
Headline should read: "Obamas Plan to Raise the Price of Gasoline for the Poor and Middle Class". What idiot thinks these costs wont be passed on?

THOMAS M. JONES | Apr. 10, 2013
Moving in right direction ! But 50% of funds collected should be spent to help build the STRATEGIC RESERVES TO 10,000,000,000 barrels of oil from Canadian $60 OIL AND CREATE PERMANENT JOBS.


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