Monday, March 2, 2009

Obama Attacks Small Producing Natural Gas & Oil Wells

Louisiana Oil and Gas Association: Obama budget attacks the oil and gas industry
Don G. Briggs • • March 1, 2009
In a time of global insecurity, it is imperative that the United States becomes less reliant on foreign oil sources, to ensure our nation's security.
However, President Barack Obama's unconscionable proposed tax increase, aimed at increasing revenue from the oil and natural gas industry, flies in the face of that goal.

On Thursday, Obama released his FY 2010 budget, which is titled "A New Era of Responsibility Renewing America's Promise." The budget provides for a $30 billion-plus tax increase on the nation's oil and natural gas producers, designed to help pay for alternative energy projects. In the proposed budget, Obama strips from the oil and gas industry incentives that have been the "holy grail" of the industry for years, incentives that are critical in a high-risk investment industry.

Obama has made it very clear his administration intends to redistribute the wealth in our country. The record profits posted by the major oil companies in 2008 have become a target for the Obama administration.

What administration fails to understand is that American independent oil and natural gas producers drill 90 percent of the wells drilled in the U.S. American independents produce 68 percent of the oil and 82 percent of the natural gas in the United States.

Stripping the much-needed incentives from the thousands of American producers across the country will shut down oil and gas exploration and cause thousands of producing wells to be shut in.

The budget proposal includes:

# Repeal Expensing of Intangible Drilling Costs - This attracts capital for high-risk, cost-intensive businesses.

Repeal of Percentage Depletion - As an oil or natural gas well produces over time, it depletes the natural resource. This tax incentive allows for the "depreciation" of these wells, many of which are small, barely economic wells. Without this provision, many wells would be shut in.
# Repeal Marginal Well Tax Credit - A credit that is given for wells that produce small amounts of oil and gas and are barley economical. These marginal wells produce about 20 percent of the nation's oil and 12 percent of its natural gas.

# Excise tax on Gulf of Mexico production - The U.S. produces much of its oil and natural gas from the Gulf today, and will in the future.

# Repeal of Manufacturing Tax Deduction - A deduction given to every other American manufacturer.

At a time when the American oil and gas industry is reeling from free falling oil and gas prices, coupled with a world financial and capital crisis, Obama has now created the perfect storm by stripping industry of vital incentives.

Without the incentives listed above and others that are not listed, domestic oil and natural gas production will decline at a rapid rate. The United States will become ever more reliant on foreign countries for its energy resources, putting our nation's security at a greater risk.

Obama's budget must be approved by Congress to become law. Both Republicans and Democrats from producing states will be working to block Obama's attack on the American oil and gas industry.

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