If Congress passes all of President Obama's tax proposals that are directly and indirectly aimed at domestic oil and natural gas producers, the hit could be more than double the widely reported $32.6 billion, according to the American Petroleum Institute (API).
The proposed $32.6 billion tax increase includes only those initiatives aimed solely at producers, said API spokeswoman Cathy Landry. But there are several other tax hike proposals -- such as reinstatement of the Superfund tax, repeal of last-in-first-out (LIFO) accounting and reform of the international tax policy -- that could push the tax burden up even further for producers, she noted.
These three tax proposals, which were included in the president's budget blueprint for fiscal year (FY) 2010, "are targeted at all industries, but some of them will disproportionately affect oil and gas," Landry said.
The proposed reinstatement of the Superfund tax would result in the collection of $17.2 billion, a large chunk of which would be paid by oil and gas, she said. Repeal of LIFO accounting would net $61 billion and would have a huge impact on refineries. And reform of the international tax policy, which would affect all companies, would result in an additional $210 billion for the federal government, she noted.
The API's "best guesstimate" is that the total impact on the oil and gas industry from the proposed direct and indirect taxes could be more than $80 billion, Landry said, adding that this was a "conservative estimate." She also quickly added that the figure did not include the projected costs associated with a cap-and-trade system to limit carbon emissions.
Meanwhile the Senate Wednesday continued to debate its budget resolution for FY 2010. A final vote on it is expected Thursday. The Senate budget resolution includes a deficit-neutral reserve fund to finance Obama's energy priorities (renewable energy projects), but the Senate will have to come up with offsetting revenues from other sources -- possibly by repealing existing tax incentives for oil and gas producers -- to push through legislation promoting renewable energy.
The Senate budget currently does not include "reconciliation instructions," but it appears that Democrats will try to change that. Reconciliation language can be used by Democrats to thwart filibusters on certain kinds of legislation that would move later in the year, CQ Today reported. Democrats would need only a simple majority to pass legislation related to the budget, and that could include energy and climate-change bills.
The House also expects to finish up with its budget blueprint by the end of the week. The House budget resolution includes reconciliation instructions for heath care and education, but not for energy.
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