The Obama administration released its fiscal year 2017 budget request Tuesday, drawing harsh criticism from oil and gas groups, which accused the president of advancing anti-fossil fuel policies at the expense of consumers.
Among the most noteworthy proposals in President Obama’s final budget is a $10/bbl fee on oil to be phased in over five years. The revenue generated from this fee would be used to shore up the U.S. Highway Trust Fund and to pay for the president’s “21st Century Clean Transportation Plan,” a host of transportation investments aimed at reducing greenhouse gas emissions.
In one of a number of fact sheets released with the budget Tuesday, the White House Office of Management and Budget (OMB) described the $10/bbl fee as a way to pay for the president’s plan “in a fair and sustainable way.”
“By placing a fee on oil, the president’s plan creates a clear incentive for private sector innovation to reduce our reliance on oil and invest in clean energy technologies that will power our future,” OMB wrote.
OMB said the president’s transportation plan “would invest over $2 billion per year to launch a new generation of smart, clean vehicles and aircraft” expanding research and development and launching “pilot deployments of safe and climate-smart autonomous vehicles.” OMB’s breakdown notes that the plan would ensure “access to at least one alternative transportation fuel by 2020, including electric vehicle charging, advanced biofuel pumps, and other low-carbon options,” but doesn’t mention natural gas vehicles (NGV).
Another part of the budget calls for new tax credits to incentivize commercialization of carbon capture technology and for the elimination of “inefficient fossil fuel subsidies that impede investment in clean energy sources and undermine efforts to address the threat of climate change. In total, the budget would repeal on average $4 billion per year in tax subsidies to oil, gas and other fossil fuel producers and, separately, expand the Oil Spill Liability Trust Fund tax.”
The budget calls for the federal government to double its annual investment in clean energy research and development between now and 2021 and tosses in “over $1.3 billion in discretionary funding for [clean energy] deployment support efforts, for a total of $9 billion [in fiscal year 2017] for clean energy technology programs across 12 federal agencies.”
With many details of the president’s proposed budget already publicly available prior to its release, American Petroleum Institute President Jack Gerard remarked Monday that Obama’s last year in office appears to be “dedicated to furthering an extremist agenda at the very real expense of the middle class and low-income families, through tax hikes on energy and a barrage of unnecessary and duplicative regulations that are catering to the well-funded, radical whims of ‘leave it in the ground’ activists.”
Gerard said the $10/bbl oil fee would be expected to add about 25 cents/gallon to the cost of gasoline for consumers.
“We know that this tax hike could also have an impact on food prices along with everything that relies on transportation to get to consumers,” Gerard said. “Only extremists whose goals ignore the concerns of consumers and lower-income families could welcome such an approach.”
The Independent Petroleum Association of America (IPAA) took a similarly dim view of the president’s proposed budget Tuesday. IPAA President Barry Russell said Obama’s budget puts domestic producers “at a clear disadvantage against global oil cartels and unfriendly nations. His proposal places a dangerous bet on unproven energy and gives the upper hand to nations that compete against us. And it increases taxes not only on the industry, but also on virtually every American.”
Russell alluded to the challenges producers face in the current commodity price environment.
“Unlike other energy producing countries, the U.S. oil and gas industry is made up of thousands of individual companies that compete here against each other but, now, are in a life and death fight against other countries, like Iran, Russia and Saudi Arabia, that have government-owned energy companies,” he said. “Many of these countries publicly brag about trying to drive out American producers from the marketplace, drive them out of business.
“Any other country with such rich energy resources would ensure the health of this strategic asset base. But in this country, the president’s budget attacks the U.S. oil and natural gas industry and every American energy consumer.”
The president’s budget proposal, at times reading like a policy wish list, isn’t expected to get very far with the current Republican-controlled Congress. In fact, the budget committee chairs in both the House of Representatives and the Senate said last week that they wouldn’t be holding a hearing with the director of the OMB to discuss the budget, as is typically done.
“Nothing in the president’s prior budgets -- none of which have ever balanced -- has shown that the Obama administration has any real interest in actually solving our fiscal challenges or saving critical programs like Medicare and Social Security from insolvency,” House Budget Committee Chairman Tom Price (R-GA) said. “Rather than spend time on” the president’s budget proposal, “Congress should continue our work on building a budget that balances and that will foster a healthy economy.”
“It appears the president’s final budget will continue to focus on new spending proposals instead of confronting our government’s massive overspending and debt,” Senate Budget Committee Chairman Mike Enzi (R-WY) said. “It is clear that this president will not put forth the budget effort that our times and our country require. Instead of hearing from an administration unconcerned with our $19 trillion in debt, we should focus on how to reform America’s broken budget process and restore the trust of hardworking taxpayers.”