Obama calls for $2 bil fund from federal oil, gas royalties for alternative fuels R&D

Washington (Platts)--4Mar2014/128 pm EST/1828 GMT


The White House on Tuesday once again called for eliminating $4 billion in annual tax federal incentives for the oil and natural gas industry, including the deduction of intangible drilling costs and the percentage-depletion allowance for wells.

President Barack Obama has annually asked Congress to repeal what it calls "taxpayer subsidies" to oil and gas producers, saying the profitable industry does not need them and his fiscal 2015 budget proposal was no different.

The budget released Tuesday also calls for eliminating the ability of oil and gas companies to claim the domestic manufacturing tax deduction, cutting the tax credit for oil and gas produced from marginal wells, repealing the enhanced oil recovery credit and increasing the geological and geophysical amortization period for independent producers to seven years, among other measures.

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Obama also reiterated his request for a $2 billion alternative fuels research effort to be funded through royalties from oil and gas development on federal land.

The budget proposal outlines Obama's priorities for the upcoming year but is largely symbolic, as Congress is is responsible for writing and passing government spending bills. Indeed, Obama's repeated efforts to repeal oil and gas tax breaks have met with strong resistance from Republicans and oil-state Democrats. Fiscal year 2015 begins October 1.

In his budget, Obama proposed funding the Department of Interior at $12 billion, a 3.5% increase from the $11.6 billion Congress approved for the agency in the current fiscal year.

Interior's Bureau of Ocean Energy Management, which oversees offshore drilling on federal areas, would receive $170 million, while Interior's Bureau of Safety and Environmental Enforcement would receive $205 million.

The proposal also includes new inspection fees totaling $48 million for onshore oil and gas drilling on federal lands that would be used to reform and speed permitting for the Bureau of Land Management's oil and gas program and strengthen oversight and enforcement.

Obama also proposed reforms to the royalty program that Interior oversees for oil and gas development on federal lands. He said the changes would generate $2.5 billion in revenue over 10 years.

--Herman Wang, herman.wang@platts.com
--Edited by Jeff Barber, jeff.barber@platts.com

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