Bush' tax incentives for oil producers

Mar 06, 2001 01:00 AM

US President George W. Bush's current budget plan grants tax incentives totalling $ 9.8 bn in the next five years for domestic oil and natural-gas producers. According to an advance analysis of Bush's budget, the tax breaks from fiscal 2002 through fiscal 2006 will be based on long-standing US tax policy designed to increase domestic production and reduce vulnerability to supply disruptions, Joseph Mikrut, Treasury's tax legislative counsel, said in testimony before a House panel.
"The tax incentives contained in the present law address the drop in exploratory drilling that has occurred since the mid-1950s and the continuing loss of production from mature fields and marginal properties," Mikrut said. The cost projections don't include new oil and natural-gas production tax breaks proposed in Sen. Frank Murkowski's, R-Alaska, omnibus energy bill, which was introduced last month.

In Bush's budget plan, Mikrut said tax incentives for oil and natural-gas wells over the next five fiscal years include:
-- $ 4.4 bn in credits for enhanced oil recovery from producing wells including methods such as steam injection and water flooding;
-- $ 2.4 bn in credits for non-conventional fuels such as oil produced from shale and tar sands and gas produced from shale, coal seams, brine and biomass and coal-produced synthetic fuel;
-- $ 2.3 bn for percentage-depletion deductions by small non-integrated, or "independent", producers and royalty owners, with extra deductions for marginally producing wells; -- $ 640 mm for expensing of intangible drilling and development costs;
-- and, $ 100 mm for passive-interest deductions from producing properties.

In addition, the alternative minimum tax -- also known as the windfall profit tax -- has been effectively eliminated for independent oil and gas producers. The Treasury Department attorney also highlighted tax incentives for energy efficiency and alternative energy, which have been key to insulating the US economy from oil and gas price increases over the past two years.

Source: Dow Jones via Energy24
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