The Obama administration has proposed making it more difficult for oil and gas producers to write down the expenses associated with drilling. The changes would raise taxes on the industry an estimated $3.5 billion in 2012.
Treasury Department testimony before a congressional committee said tax treatment for oil and gas encourages too much investment in that sector. The Obama administration hoped to divert that investment to solar, wind, geothermal and other renewable energy sources, according to the testimony.
A spokeswoman for Democratic Sen. Jeff Bingaman said it is unlikely Congress will vote on a change in oil and gas taxation any time soon.
“Independent producers are extremely important to our national economy, which is why I have never supported a wholesale repeal of oil and gas tax incentives,” said Bingaman, a member of the Senate Finance Committee and chairman of the Energy and Natural Resources Committee. “To the extent that Congress should be revisiting tax incentives, I think it makes sense to distinguish the incentives that benefit truly small independent producers from those that benefit only the largest and most profitable integrated producers.”
A spokeswoman for Democratic Sen. Tom Udall said he “has supported maintaining long-standing tax provisions that are used by independent oil and gas producers and royalty owners, which are numerous in New Mexico.” She said Udall has voted against tax code changes proposed last year by Sen. Bernie Sanders, an independent from Vermont, similar to the administration’s proposals.
“We need a tax code that promotes growth and job creation for small businesses while reducing loopholes that are nothing more than giveaways to giant corporations,” said Rep. Ben Ray Luján, a Democrat. “With New Mexico’s abundant natural gas resources, it is important to support local businesses that can help develop this clean burning source of energy that can power our cars and our economy.”
“As the oil and gas industry provides one of New Mexico’s most important sources of revenue, losing or even reducing the businesses in this industry would devastate state finances,” said Republican Rep. Steve Pearce. “Only through efforts to support job creation and job growth in all industries can we find a way out of our current economic situation and get Americans back to work and back on their feet. We must take action to restore America to the land where opportunities are unlimited, success is rewarded, and anything is possible. This cannot be achieved through tax increases.”
Proposed Oil Tax: What Candidates Say
The Journal also asked candidates for the U.S. Senate and the 1st Congressional District how they view proposals to change taxation of the industry.
Heather Wilson, former U.S. representative: “Successive Obama administration budgets have proposed increasing taxes on oil, gas and coal to discourage production as part of an environmental agenda that is far out of the main stream. I think we need more American-made energy and the jobs that come with it. That means low taxes and fair, predictable regulations.”
John Sanchez, lieutenant governor: “The Obama administration’s moves to put an end to start-up cost tax relief for oil and gas companies will only decrease the number of new projects. This comes at a time when an increase in new projects will buy us the time needed for renewable resources to develop over the next crucial decades.”
Greg Sowards, Las Cruces businessman: “This Administration’s repeal of the tax deductions will cause small oil and gas producers to cut production by as much as a third, which means the loss of over 100,000 American jobs.”
Hector Balderas, state auditor: “We must close the egregious tax loopholes and subsidies for big corporations that are seeing record profits, like ExxonMobil, at the expense of small businesses.””
Andres Valdez, Albuquerque community organizer: Did not answer.
Martin Heinrich, incumbent 1st Congressional District representative: “American taxpayers shouldn’t have to pick up the tab for billions in subsidies for big oil companies like BP and ExxonMobil. At the same time, we must support New Mexico’s small producers, and allowing intangible drilling costs to be deducted as expenses.”
U.S. House: Dist. 1
Janice Arnold-Jones, Albuquerque business consultant: “The current administration’s policy … would disproportionately affect New Mexico’s economic future by reducing the incentive of relatively small investors in small exploration development companies to take the speculative risks on which our state depends for future exploration.”
Dan Lewis, Albuquerque city councilor: “We need to preserve the energy investment incentives that are already in the tax code and seek to strengthen not weaken them.”
Gary Smith, retired Army veteran: “I am against these tax proposals because the small amount of revenue generated from these taxes pales in comparison to the damage that would be done to New Mexico’s economy by the job loss it would create.”
U.S. House: Dist. 1
Marty Chavez, former Albuquerque mayor: “I’m proud that New Mexico is a leader in promoting and providing traditional energy. .. and I will strongly support them. We must also lead the nation in building our clean energy economy.”
Michelle Lujan Grisham, Bernalillo County commissioner: “I will not support any proposal, Democratic or Republican, which would cost jobs and hurt New Mexico’s small businesses.”
Eric Griego, state senator: “I believe that clean energy investors should have a level playing field, and that giving tax breaks to just oil investors distorts the market.”