Obama seeks deficit reductions in repeal of tax breaks for oil and gas

US President Barack Obama introduced his proposals to save the federal government $3 trillion over the next ten years by cutting spending and raising taxes. It includes the repeal of a number of tax subsidies for the oil and gas industry. Obama sent a detailed proposal to the "super committee" on deficit reduction, a bipartisan, 12-member joint committee made up of senators and representatives.

Obama's proposal would include $580 billion in spending cuts, a saving of $1.1 trillion by drawing down troops from Iraq and Afghanistan, and $1.5 trillion from tax reform.

Pointing out that the tax system is "riddled with exceptions and special interest loopholes" that allow some companies to avoid paying taxes, Obama declared that "That has to change."

His plan to let tax breaks for the wealthy expire would raise $1.28 trillion, with an additional $300 billion to come from eliminating corporate tax breaks, including those to the oil and gas industry. These would include eliminating the depletion allowance for oil and gas wells; repealing the use of the domestic manufacturing deduction for oil and gas production; eliminating the use of deductions for intangible drilling costs; and eliminating the use of a deduction for "any tertiary injectant used as part of a tertiary recovery method."

The Obama plan also proposes saving $66 million by requiring oil and gas companies pay drilling permit fees to the Bureau of Land Management. The industry could also be hit with a 9.7-cent/barrel excise tax on crude oil and imported petroleum products, to fund cleanup of hazardous waste sites under the Superfund program.