Louisiana Mid-Continent Oil and Gas Association

Obama budget would boost renewables, nix oil and gas tax breaks

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President Barack Obama called today for boosting funding for pipeline safety and renewable energy while again proposing to roll back several tax breaks for the oil and gas industry.

In his fiscal 2013 budget proposal, submitted to Congress today, Obama proposed boosting research funding and extending tax credits for clean energy as well as providing more money for energy-efficiency programs. He also called for rolling back oil and gas “tax preferences” worth $40 billion over 10 years.

It is the fourth straight year Obama has called for rolling back tax breaks for the oil and gas industry, but that call — and the budget more generally — is largely a symbolic statement because it stands little chance to pass through Congress.

Obama teased at the proposals during his State of the Union address, in which he outlined what he called a national economic “blueprint.”

“It’s time to end the taxpayer giveaways to an industry that rarely has been more profitable, and double down on a clean-energy industry that never has been more promising,” he said.

The president’s budget would boost renewable energy in a number of ways, most notably by extending key tax credits for renewable-energy production and clean-energy manufacturing. And it significantly boosts funding for research and development into a range of alternative-energy technologies and advanced vehicles.

The White House said those proposals would help the administration achieve its goal of putting 1 million electric cars on the road by 2015 and doubling the percentage of electricity from low-carbon sources like natural gas and wind by 2035 through Obama’s plan for a clean-power mandate.

The proposal indicates that Obama wants to aggressively promote federal support of renewable energy, even amid continuing Republican criticism of the administration’s loan guarantee to the now-bankrupt company Solyndra LLC, a California solar-panel maker.

The Pipeline and Hazardous Materials Safety Administration, which administers pipeline-safety programs, would get a $75 million boost to $276 million. Pipeline safety in particular would get $67 million more than last year, including to hire more federal inspectors and bolster a state pipeline-safety grant program.

While the proposal to roll back oil and gas tax breaks probably won’t go anywhere in Congress, it nonetheless will serve as an indicator of Obama’s policy platform and vision ahead of the 2012 election. And it sets up a fight with the oil and gas industry, which quickly responded to the proposal.

American Petroleum Institute President Jack Gerard told reporters it’s an example of how “his actions don’t match his words.”

The call for rolling back the tax breaks comes just weeks after Obama called for more domestic oil and gas production in his State of the Union speech.

Gerard also called the proposal bad policy because it would hurt an industry that has boosted the economic recovery, costing jobs and potentially sending some oil and gas investments to other nations. If the industry tax breaks were eliminated, Gerard said domestic oil and gas production would fall, meaning less revenue for the government.

“If the president is interested in balancing the budget, the way to generate revenues is to create economic activity, not penalize the best job creator in the country,” Gerard said.

Rep. Doc Hastings, R-Wash., chairman of the House Natural Resources Committee, said in a statement that “instead of promoting new American energy production, this budget will make energy more expensive for American families and small businesses by imposing new taxes and fees.”

But environmental and alternative-energy advocates praised the budget. They have long called the energy industry tax breaks as unfair and said they discourage much-needed investment in cleaner energy sources.

“Overall, this forward-thinking budget would help America continue building on the progress toward a clean energy economy that creates jobs, improves our health and protects our environment,” said Scott Slesinger, legislative director for the Natural Resources Defense Council, an environmental group.

Daniel Weiss, climate strategy director for the Center for American Progress, praised the budget because it “would make taxes fairer by eliminating $40 billion in unnecessary breaks for big oil companies that made record profits in 2011.”

Among the tax breaks for the oil-and-gas sector are the “tertiary injection” deduction, a manufacturing deduction that multiple industries benefit from, and the “intangible drilling costs” deduction (for well-development expenses that don’t go toward elements of the final well).

“Many of these tax breaks that have been around which have created fossil-fuel preferences have been around decade after decade after decade,” Interior Secretary Ken Salazar told reporters, adding he wasn’t surprised that the industry would attack an attempt to roll them back.

Obama’s proposed Interior Department budget is largely unchanged from last year, but it includes a number of new user fees for resource development on federal lands and offshore, including:

  •     Fees for processing oil-and-gas drilling permit applications and inspections.
  •     Fees for new oil-and-gas leases that companies aren’t producing.

The proposed Interior budget also contains other energy-related funding changes:

  • Boost of renewable energy funding 21 percent to $86 million in 2013 to help the administration meet its goal of approving 11 more gigawatts of renewable projects on federal lands by the end of that year.
  • Increase in funding by $28 million for the two new Interior agencies that handle offshore drilling: the Bureau of Ocean Energy Management and the Bureau of Safety and Environmental Enforcement. The administration said the increase needed to ensure offshore energy development occurs safely and responsibly.
  • Cut of $200 million from an Interior program that helps six states with offshore oil-and-gas development, including Texas, because “states have been slow to obligate funding.”

The Energy Department is a big winner in Obama’s budget, getting a 3.2 percent proposed funding boost over 2012. The DOE Office of Energy Efficiency and Renewable Energy’s budget would rise nearly 30 percent to $2.3 billion, including:

  •     An 80 percent funding boost for energy efficiency.
  •     Increased funding for development of advanced vehicle technologies.
  •     Hundreds of millions for research and development of solar, wind and geothermal.

The Energy Department budget also would:

  •     Provide $350 million for the Advanced Research Projects Agency-Energy, which funds “transformative energy research.”
  •     Give $5 billion for the Office of Science, which bills itself as “the lead federal agency supporting fundamental scientific research for energy.”
  •     Cut research and development funding by 21 percent for fossil fuel technologies such as carbon capture and storage.

Obama’s budget also would fund a multi-year research initiative “aimed at advancing technology and methods to safely and responsibly develop America’s natural gas resources.” That initiative would include a study on “the environmental, health, and safety risks of natural gas and oil production from hydraulic fracturing in shale and other geologic formations.”

Obama offered his support for the shale-gas boom in his State of the Union address. But he said he wanted the U.S. to “develop this resource without putting the health and safety of our citizens at risk,” echoing longtime concerns of environmental advocates about the drilling technique that has increasingly become associated with shale gas.

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