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.


Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.