Obama Urges End to ‘Unwarranted’ Oil, Natural Gas Tax Breaks

President Barack Obama urged congressional leaders to act quickly on his proposals to eliminate “unwarranted” tax breaks for the oil and gas industry and use the savings to fund clean-energy programs.

His request to Democratic and Republican leaders of Congress came after House Speaker John Boehner expressed “openness to eliminating these tax subsidies,” according to a letter released today by the White House.

Obama said there is “no silver bullet” to stop rising gasoline prices that are putting pressure on consumers and threatening to hinder the recovery. Instead, the U.S. should act to buffer Americans from higher prices in the long term by investing in alternative energy, he said.

“One of those steps is to eliminate unwarranted tax breaks to the oil and gas industry and invest that revenue into clean energy to reduce our dependence on foreign oil,” Obama wrote in a letter to Boehner, House Democratic leader Nancy Pelosi of California, Senate Majority Leader Harry Reid of Nevada and Senate Minority Leader Mitch McConnell of Kentucky.

Energy prices, particularly for gasoline, are emerging as a political issue as Obama is preparing for his 2012 re-election campaign. Oil for June delivery fell 52 cents to $111.76 a barrel at 1:49 p.m. on the New York Mercantile Exchange. Prices have gained about 33 percent in the past year. The average retail price for a gallon of gasoline is $3.869, compared with $2.854 a year ago, according to the AAA’s daily survey.

Obama Television Interview

The president continued to press the case in an interview with a Detroit television station, one of four he conducted today with local broadcasters. It “makes no sense” for oil companies to continue to get the tax breaks while gas prices are so high and the companies are enjoying enormous profits, he said on WXYZ.

“This is obviously something that’s affecting everybody,” he said. “We’ve got to make sure that we take those $4 billion and we reinvest in things like alternative energy vehicles.”

Boehner, an Ohio Republican, told ABC News in an interview broadcast yesterday that subsidies for oil and gas companies are “certainly something that we ought to be looking at.”

“Everybody wants to, to go after the oil companies,” Boehner said. “And, frankly, they’ve got some part of this to blame.”

Budget Proposal

Obama’s fiscal 2012 budget plan, unveiled Feb. 14, proposes eliminating oil and gas tax breaks estimated at $46.2 billion over 10 years. They include $11.2 billion from the so-called percentage depletion deduction for oil and natural gas wells, which benefits small producers.

Without giving specifics about what tax breaks he might be willing to scrutinize, Boehner questioned whether big oil companies need the oil depletion allowance. He also argued that Republicans want to open up more exploration and new domestic production, sending a message to commodity markets that he said might calm jitters.

“I think if we began to allow more permits for oil and gas production it would send a signal to the market that America’s serious about moving toward energy independence,” Boehner said, according to an ABC transcript. That “would calm these prices down quite a bit.”

Obama’s budget proposal also targets a break that lets oil companies expense production costs such as labor, drilling rig time and rig maintenance, and reduce their tax liability more quickly than under regular depreciation rules.

Raising Taxes

Boehner’s spokesman, Brendan Buck, said today that Obama’s proposal “would simply raise taxes and increase the price at the pump.”

McConnell also criticized the proposal as “counterproductive” and said in a statement that Obama should instead encourage domestic energy production.

Obama is working to save his proposals for research and development of alternative and clean energy sources from budget cuts as Congress and the administration look for ways to trim budget deficits that are forecast to exceed $1 trillion this year and next. The proposals were part of Obama’s fiscal 2011 budget and never acted on by Congress.

The president, aiming to reduce the political fallout of increasing gasoline prices, announced last week that the Justice Department will examine the role of “traders and speculators” in oil markets and how they may contribute to rising prices.

“We are going to make sure that no one is taking advantage of American consumers for their own short-term gain,” Obama told an audience in Reno, Nevada, on April 21.

(Source: http://www.bloomberg.com/news/2011-04-26/obama-urges-end-unwarranted-oil-natural-gas-tax-breaks-1-.html)