The Obama adminstration’s FY2010 budget aims to whack a bunch of tax deductions for oil and gas companies, because it only encourages overinvestment in oil and gas, and “is inconsistent with the Administration’s policy of reducing carbon emissions and encouraging the use of renewable energy sources through a cap-and-trade program.”
Here’s a list of the changes:
- Levy Tax on Certain Offshore Oil and Gas Production
- Repeal Credit for Enhanced Oil Recovery (EOR) Projects
- Repeal Credit for Production from Marginal Wells
- Repeal Expensing of Intangible Drilling Costs
- Repeal Deduction for Tertiary Injectants
- Repeal Passive Loss Exception for Working Interests in Oil and Gas Properties
- Repeal Percentage Depletion
- Repeal Domestic Manufacturing Deduction for Oil and Gas Production
- Increase the Amortization Period for Geological and Geophysical Costs to Seven Years
- Eliminate the Advanced Earned Income Tax Credit
These changes won’t really have much impact on either the producers or the government. Obama just wants to shape policy so that capital doesn’t go towards oil, and instead heads toward alternatives.
The biggest of all these changes is the Intagible Drilling Costs change. That will change the way small, less than productive oil wells are approached. They’ll no longer be tax deductions.
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