Sen. Robert Menendez (D-NJ), who is not seen as a friend of the oil and natural gas industry, Thursday re-introduced legislation that could raise taxes for major producers by more than $20 billion over the next 10 years. However, the bill gives small independent producers, and refiners and natural gas processors a break.

"Lavishing these giant corporations with incentives they don't need simply deepens our deficit and our dependence on dirty fuels," Menendez said. His legislation is co-sponsored by Democratic Sens. Jeff Merkley of Oregon, Sheldon Whitehouse of Rhode Island, Frank Lautenberg of New Jersey, Jack Reed of Rhode Island, Barbara Boxer of California, Bill Nelson of Florida and Patrick Leahy of Vermont.

The bill would repeal existing taxes or create new ones for mostly major producers and large independents. It seeks to impose an excise tax on oil and gas produced on federal lands on the Outer Continental Shelf to offset the royalties that some producers failed to pay on production in the Gulf of Mexico. This would raise $5.3 billion over the 10-year period, according to estimates.

It also proposes to end foreign tax credits for producers, which could amount to a savings of $8.2 billion for the federal government. And the measure proposes to repeal the expensing of intangible drilling costs for smaller producers. Producers with annual revenues of less than $100 million would still retain the use of this deduction. President Obama's budget projects a savings of $10.9 billion over the next decade, but it doesn't grandfather the smaller companies so this will lower the score, according to Menendez.

Moreover the bill would repeal percentage depletion for oil and gas wells for larger producers. Producers with yearly revenues of less than $100 million would maintain this deduction. The president's budget estimated this would save $9.6 billion, but it did not include the grandfathering of smaller companies.

The measure seeks to repeal the domestic manufacturing deduction for oil and gas production, except for companies that have annual revenues of less than $100 million, and oil refining and natural gas processing. This proposal has not been scored, but could save billions.

The bill also would allow producers with annual revenues under $100 million to amortize geological and geophysical costs over two years, while all others would amortize these costs over seven years. This would result in a savings of less than $1 billion.

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