President Joe Biden plans to scrap more than $45 billion tax credits for the domestic fossil fuel industry. The proposal serves as another blow to an industry already reeling because of Biden's executive orders.
According to the White House budget proposal published on March 28, the Biden administration plans to remove more than a dozen tax credits for the fossil fuel industry. It defended the proposal as necessary to prevent further fossil fuel investment. If approved, the scrapped tax credits will increase the federal government's revenue by around $45.2 billion between 2023 and 2032.
The Department of the Treasury wrote in its general budget explanation: "These oil, gas and coal tax preferences distort markets by encouraging more investment in the fossil fuel sector than would occur under a neutral system. This market distortion is detrimental to long-term energy security and is also inconsistent with the [Biden] administration's policy of supporting a clean energy economy, reducing our reliance on oil and reducing greenhouse gas emissions."
According to the Treasury Department, repealing the "use of percentage depletion with respect to oil and natural gas wells" would account for $13 billion, the largest portion of the $45.2 billion tax credits. Percentage depletion allows independent producers to deduct 15 percent of their gross revenue coming from their oil and natural gas properties.
The budget also puts forward two proposals set to increase government revenue by more than $10 billion each over the next 10 years.
It proposed ending the practice of expensing intangible drilling costs. These costs include "all expenditures made by an operator for wages, fuel, repairs, hauling, supplies and other expenses incident to and necessary for the drilling … and preparation of wells for the production of oil and natural gas.
It also proposed increasing the geological and geophysical amortization period for independent producers. Currently, this amortization period is two years for independent producers. Major integrated oil companies, meanwhile, are given a period of seven years to repay costs incurred in relation to oil and natural gas exploration.
Tax cuts to fossil fuel industry do more harm than good
Americans for Tax Reform Federal Affairs Manager Mike Palicz denounced the proposals as an attack on an already beleaguered industry. "This budget is basically a $45 billion tax increase on the oil and gas industry. This is more targeting oil and gas for provisions that are just good tax policy that any industry should be able to take advantage of," he told the Daily Caller.
Palicz added: "This is a clear effort to continue to try and paint [the oil and gas industry] as the villain." (Related: Biden mulls deals with Iran, Venezuela after announcing ban on Russian oil imports.)
Republican lawmakers also echoed Palicz's sentiment, denouncing the Biden administration's tax proposal on the same day it was published. GOP politicians have doubled down on calls to incentivize domestic energy production instead of penalizing the industry.
Wyoming Sen. John Barrasso said in a statement: "President [Joe] Biden wants to spend more taxpayer dollars on his green energy schemes instead of increasing American energy production to solve the energy crisis he created. The president's priorities could not be more out of touch with families in Wyoming and across the country."
The top GOP legislator on the Senate Energy and Natural Resources Committee added: "This budget is dead on arrival. Republicans will focus on what Americans care about most – national security, energy security and economic security. That means tackling inflation, unleashing American energy production and keeping Americans safe."
The Biden administration's proposals in the budget would cause further spikes in the already exorbitant prices of fuel worldwide caused by the Russia-Ukraine conflict. Prices of crude oil soared about $100 per barrel, sending repercussions of record highs for prices at the pump. On March 29, the average cost of gasoline nationwide hit $4.24 per gallon – an increase of almost half compared to a year ago.
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Watch the Fox Business report below about oil and gas industry executives denouncing President Joe Biden for vilifying the industry.
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Sources include:
Home.Treasury.gov [PDF]
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