Obama Budget Hits Oil, Gas Cos with New Fees,Taxes

WASHINGTON (Dow Jones Newswires), Feb. 27, 2009

The Obama administration Thursday proposed raising at least $31.5 billion over 10 years from oil and gas companies, reflecting a repeal of tax breaks for domestic production and new charges on oil and gas production in the Gulf of Mexico.

The plans, outlined as part of a fiscal 2010 budget proposal, revive long-standing Democratic efforts to turn to the oil and gas industry as a source of funding for other priorities. Among other things, the Obama budget plan calls for about $13 billion over 10 years in new charges on oil and gas companies from the repeal of a tax deduction for domestic production.

"It's a concerning area, of course, because as you put more royalty and tax burdens on the industry, particularly a cyclical industry, you just have to be cognizant of the potential impact it has on investments," said Marvin Odum, the president of Royal Dutch Shell's (RDSA) U.S. operations, after meetings with various lawmakers about energy policy. "That's not something you can put real definition to, but I think it's a concern."

Oil companies have been fighting to maintain the tax treatment, which they say keeps jobs in the U.S. by encouraging domestic production. Congress scaled back the tax deduction last year to help pay for an extension of tax breaks for the solar and wind industries, but stopped short of eliminating it entirely.

The Obama administration also proposed a new excise tax on oil and gas production in the Gulf of Mexico, saying it would raise about $5 billion over the next 10 years. The White House said that the new tax, along with plans to charge user fees to oil companies for processing oil and gas drilling permits on federal lands, would "ensure that federal taxpayers receive their fair share" and "close loopholes that have given oil companies excessive royalty relief." The tax "will begin in 2011, after the economy has had time to recover," the White House said.

Democrats have been battling oil firms to get royalty payments from Gulf of Mexico leases signed in the late 1990s, years when the government apparently accidentally left price triggers out of contracts. Government auditors say that the omission could ultimately short change taxpayer coffers by billions of dollars.

Six companies -- including BP PLC, Royal Dutch Shell, ConocoPhillips and Marathon Oil Corp. - - originally agreed to pay royalties on the leases for production from October 2006, but not on past output. But that agreement wasn't finalized, and negotiations stalled after lawmakers pressed for payment on past output and after a court ruling in favor of the oil industry. The firms only represented a fraction of the total lease owners.

Around 40 companies representing 80% of the production haven't agreed to re-negotiate the leases, including Exxon Mobil Corp., Total SA, Chevron Corp. and Anadarko Petroleum Corp., according to Interior Department data.

Interior Secretary Ken Salazar and key Congressional Democrats have promised to reform the structure of fees and royalties on public lands, and a senior Office of Management and Budget official said the new oil industry taxes would help to "re-balance the tax system."

"This budget begins that process, that conversation on finding ways to rebalance the tax system over so that we can get at the $1.3 trillion deficit that we inherited," the official said.  

Copyright (c) 2009 Dow Jones & Company, Inc.

Related Companies
 Company: BP plcmore info


 - From a Little-Known Shale Play in New Mexico, BP Gets a Gusher (Aug 7)
 - Big Oil Seen Vulnerable to Fresh Slump Despite Growth at $50 (Aug 2)
 - BP's West Africa Partner Kosmos To List In London By End-September (Aug 2)
 Company: Exxon Mobil Corporationmore info


 - Exxon Misses Estimates as Cuts Fail to Offset Output Declines (Jul 28)
 - Exxon Fined for Russia Sanctions Violations Under Tillerson (Jul 20)
 - ExxonMobil Says Will Drop Discussions Over Indonesia's East Natuna (Jul 18)
 Company: Shellmore info


 - Shell Divests Stake in Saudi JV (Aug 16)
 - Australia's $180B LNG Megaproject Boom Enters Final Stretch (Aug 14)
 - BP Says It Is Considering IPO of US Pipeline Assets (Jul 18)
 Company: Total S.A.more info
 - Natref Refinery To Reach Full Output This Weekend After Disruption (Aug 4)
 - Big Oil Seen Vulnerable to Fresh Slump Despite Growth at $50 (Aug 2)
 - Total Beats 2Q Expectations Helped By Strong Cash Flow, Costs Cuts (Jul 27)
 Company: ConocoPhillipsmore info


 - ConocoPhillips Trims CAPEX After Posting Quarterly Loss (Jul 27)
 - ConocoPhillips to Sell Barnett Assets for $305 Million (Jun 29)
 - ConocoPhillips To Lay Off 300 In Canada After Cenovus Deal (May 4)
 Company: Anadarko Petroleummore info
 - Anadarko Becomes First US Oil Producer To Slash 2017 CAPEX (Jul 24)
 - Blast Backlash Hangs Over Drillers as 'Fractivists' Seek Limits (Jun 13)
 - Colorado Oil Tank Fire Kills One, Injures Three (May 26)
 Company: Marathon Oil Companymore info


 - RoyalGate to Drill New Well in Equatorial Guinea's Block Z (Sep 25)
 - ShaMaran Subsidiary to Contest TAQA Default Notice (Sep 21)
 - Marathon, OMV Hand Back Croatia Oil Exploration Licences (Jul 29)
Events  SUBSCRIBE TO OUR NEWSLETTER

Our Privacy Pledge
SUBSCRIBE


Most Popular Articles


From the Career Center
Jobs that may interest you
Senior Construction Contracts Manager
Expertise: Contracts Administration|Contracts Engineer
Location: Alpharetta, GA
 
Logistics Coordinator
Expertise: Logistics Management|Planner / Scheduler
Location: Marietta, OH
 
Contracts Advisor
Expertise: Contracts Administration
Location: Hanover, MD
 
search for more jobs

Brent Crude Oil : $50.8/BBL 0.13%
Light Crude Oil : $47.55/BBL 0.08%
Natural Gas : $2.94/MMBtu 0.67%
Updated in last 24 hours