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Reigniting Subsidy Debate, Obama Takes on Oil, Gas Reigniting Subsidy Debate, Obama Takes on Oil, Gas

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Reigniting Subsidy Debate, Obama Takes on Oil, Gas


Senate Finance Committee Chaiman Max Baucus, D-Mont., at a May hearing on oil and gas company tax incentives. President Obama wants to end the subsidies.

President Obama on Monday asked Congress to end subsidies for all oil and gas companies, which could save the government more than $4 billion a year, to help pay for his jobs bill. It’s a shift from recent Democratic efforts to end tax breaks for just the five major oil companies.

The administration says oil and gas tax breaks totaling $41 billion over 10 years would help fund the $447 billion jobs bill. The suggested cuts were included in a 155-page proposal the White House sent Congress Monday afternoon.


The administration plan targets eight specific tax breaks the oil and gas industry receives right now, including the so-called Section 199 manufacturing credit—which the oil industry points out applies to all manufacturing sectors. Oil and gas companies already receives that tax break at a lower rate than all other parts of the economy. It’s a prime target for repeal because it accounts for nearly a quarter of all oil and gas subsidies.

The plan mirrored what Obama included in his fiscal 2012 budget proposal sent to Congress in February. The White House says changes to the Section 199 manufacturing credit alone would bring in $902 million in revenue in 2012.

But the president’s proposal goes beyond what many congressional Democrats are seeking. Earlier this year, they introduced legislation to repeal oil and gas subsidies, but their measures focused on just the nation’s five biggest oil companies—Shell, Chevron, ExxonMobil, BP, and ConocoPhillips.


Oil-state Democrats like Sen. Mark Begich of Alaska effectively argued that smaller and independent companies would be pushed out of drilling in the Gulf of Mexico if they lost those tax breaks. That, Begich and others argued, could lead to job losses in smaller oil and gas companies and allow the big oil companies to monopolize drilling in the Gulf. Obama had at one point been behind the effort to limit the repeal to just the five largest companies as well.

“When it comes to strengthening the economy and balancing our books, we’ve got to decide what our priorities are,” Obama said on Monday in a Rose Garden speech. “Do we keep tax loopholes for oil companies or do we put teachers back to work?”

In a draft memo last week on possible proposals to the deficit-cutting super committee, Democrats on the House Ways and Means Committee also called to end oil subsidies for only the five biggest companies.

Expanding the repeal to all oil and gas companies would bring in more revenue, but also could reignite the argument that smaller companies will lose out, ultimately costing jobs.


Also at stake are subsidies for renewable energy and ethanol. Those tax breaks account for much less money, but their benefactors also have less political clout than the oil industry.

This article appears in the September 13, 2011 edition of NJ Daily.

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