Oil Industry

Oil Industry Tax and Deficit Issues
Robert Pirog Specialist in Energy Economics July 21, 2009

Congressional Research Service 7-5700 www.crs.gov R40715

CRS Report for Congress
Prepared for Members and Committees of Congress

Oil Industry Tax and Deficit Issues

Summary
President Obama, in an Earth Day speech, addressed the linkage between the problems he associated with U.S. reliance on imported oil and the importance of a future based more on alternative energy sources. These problems could be partially addressed by reducing what the Administration sees as favorable treatment of the oil and natural gas industries that were designed to increase production of petroleum products. The Fiscal Year 2010 Budget Proposal outlined a set of proposals, framed in terms of deficit reduction, that would potentially increase the taxes of the oil and natural gas industries, especially the independent producers. These proposals included an excise tax on Gulf of Mexico oil and natural gas production to limit previously granted royalty relief, repeal of the enhanced oil recovery and marginal well tax credits, repeal of the expensing of intangible drilling costs and the deduction for tertiary injectants, repeal of passive loss exceptions for working interests in oil and natural gas properties, and the manufacturing tax deduction for oil and natural gas companies, and the increasing amortization periods for certain expenses and the repeal of the percentage depletion allowance for independent oil and natural gas producers. It was estimated that these changes would provide $12.7 billion in deficit reduction over the period 2010 to 2014. The changes, if enacted, also would reduce the tax advantage enjoyed by independent oil and natural gas producers over the major integrated oil companies. On what will likely be a small scale, the proposals also will make oil and natural gas more expensive for U.S. consumers, with the effect of reducing consumption of those fuels.... [continues]

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