Senate panel studies ending oil tax breaks

WASHINGTON — Oil and natural gas executives on Thursday urged Congress not to adopt White House proposals to eliminate industry tax breaks that they say are necessary to stimulate domestic drilling and suppress retail prices.

Slashing the tax incentives would mean "real increases in the cost of doing business," leading to "less U.S. refining capacity" and "more reliance on imported gasoline," said American Petroleum Institute Chairman Larry Nichols.

Given the "need to increase all sources of domestic energy, it makes absolutely no sense to discourage production of our leading sources — oil and gas," Nichols said.

Nichols' comments came in testimony to the Senate Finance Subcommittee on Energy, Natural Resources and Infrastructure, which is vetting President Obama's budget proposal to repeal more than a half dozen tax provisions that have long been enjoyed by the industry — some for almost a century.

The targets for elimination include deductions for intangible drilling costs, domestic manufacturing deductions by oil and natural gas companies and the percentage depletion for wells — initiatives designed to trim the cost of doing business and soften some of the high capital costs of drilling and refining.

The White House also has proposed a new federal excise tax on oil and gas produced in the Gulf of Mexico.

The administration says Congress could raise $31.5 billion over nine years by getting rid of the "oil and gas company preferences."

A Treasury Department official on Thursday said that even if all of the tax subsidies were eliminated — and the added costs were passed on to consumers — the hike in prices at the pump would be "trivial."

Alan Krueger, assistant secretary for economic policy, cited a Treasury analysis that estimates consumers would pay about one cent more per gallon of gasoline and that natural gas prices would rise about 1 percent if all of the proposals were adopted.

Under fierce questioning by Sen. Jim Bunning, R-Ky., Krueger dismissed accusations that the proposals unfairly targeted the oil and gas industry. But he conceded the administration has not suggested similar tax changes for other mineral industries.

Other lawmakers have been cool to the tax proposals.

Sen. Jeff Bingaman, D-N.M., the Finance subcommittee chairman, said he has "concerns" about some of the suggested changes and worries they might hurt consumers, domestic production and jobs tied to the industry.