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With a $3.8 trillion dollar price tag, President Barack Obama released his proposed budget Monday. It has the largest projected deficit in U.S. history, but it also includes cuts to government programs and subsidizes to the oil and gas industry. Texas Public Radio’s David Martin Davies has more.
February 1, 2010 · There are a number of federal subsidies and tax breaks for oil and gas industry. For example, the cost of hauling supplies and for prepping a drilling site are deductable.
Oil companies can also deduct the percentage of depletion claimed for extraction of oil and natural gas.
“As you know just driving around West Texas, sometimes there are wells that operate when the price is high and will shut down when the price gets below a particular price point – when the price is near that tipping point the presence or absence of those tax benefits – acceleration and depreciation – oh, there’s a bunch of them – may make a difference on whether the well can pump or not” said David Spence a University of Texas professor at the McCombs School of Business.
But President Obama says the nation can’t afford these write-offs for the oil industry any longer. The White House says the tightening of these tax breaks will save the nation $40 billion over ten years.
Ben Sebree of the Texas Oil and Gas Association says his industry isn’t getting tax subsidies.
“That’s really not repealing a subsidy; it's increasing a tax that no one else is paying,” he said.
And Sebree says that it will cost Texas jobs.
“This is particularly bad for Texas. Texas both produces energy and consumes it. You and I use energy we turn on our electricity.” he said.
Spence says the elimination of oil industry tax cuts is part of the bigger Obama push for a greener economy.
“Sort of the underlining philosophy here is these new technologies can't compete if the traditional technologies are going to remain cheap. And so, to the extent that they can be made more expensive, that gives a leg up to cleaner technologies,” Spence said.
And if people see that as putting an unfair burden on the oil industry or taking away a competitive advantage that they never should have had in the first place is a matter of a political point of view.
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