OIL LOBBY HEAD: CONGRESS SHOULD KEEP INDUSTRY TAX BREAKS IN PLACE

Tamar Hallerman
GHG Monitor
1/11/13

Congress should spare tax breaks for fossil fuel companies as its looks to reduce the federal deficit, the head of the American Petroleum Institute said this week. In a Jan. 8 speech, API CEO Jack Gerard said lawmakers should not target the roughly $4 billion in tax breaks the oil and gas industry receives annually should Congress begin a larger tax reform discussion as expected this year. “Our view is that we should not be singled out as an industry for punitive tax reforms,” he said.

Congressional Democrats have long seen slashing the industry’s tax breaks as an area of easy cost savings, and President Barack Obama has particularly been a vocal advocate for cutting those incentives, citing record profits for oil companies and booming domestic production. “We’ve subsidized oil companies for a century. That’s long enough,” Obama said in his 2012 State of the Union Address. “It’s time to end the taxpayer giveaways to an industry that rarely has been more profitable, and double-down on a clean energy industry that never has been more promising.” While Republicans have long scoffed at those requests, which crop up almost perennially in Congress, some GOP lawmakers have indicated a willingness to put the option on the table as part of a larger overhaul of the tax code.

Gerard: Gov’t Will Earn More if Incentives are Kept

But in his speech this week, Gerard said the government would earn more tax revenue by keeping the breaks in place. The royalties generated by increased production would generate tens of billions more in tax revenue for the government than if the incentives were simply slashed, he said. “The opportunity to develop the resource, create new jobs and generate revenue shows that revenues are much higher with this path than they are with punitive tax measures,” Gerard said, estimating that the federal government currently earns roughly $86 million per day from tax revenues on oil and gas production. He said that eliminating the subsidies would cut government revenues by moving more operations and subsequent potential revenues overseas. “The impact on the industry by increasing the cost of production in doing business in the United States is not positive,” he said.

Gerard said oil and gas companies pay their “fair share” of taxes. “We pay more than our fair share, of which we’re happy to do, but allow the industry to do what it does best: create jobs, generate revenue. That’s the way to contribute to the fiscal conversations of the country, not to discourage it by punitive tax policy,” he said. Regardless, Gerard said API would be vocal during any tax overhaul discussion. “We’re prepared to enter into that discussion. We’ll be at the table along with everybody else,” he added.