The White House released its 2019 budget on Tuesday, which includes $45 billion in cuts to fossil fuel subsidies, one of several attacks the beleaguered sector has faced.
According to the White House budget, which was released Monday, more than a dozen fossil fuel industry tax credits will be phased out between 2023 and 2032, resulting in an estimated $45.2 billion boost for the federal government. The administration claims that the plan is intended to curb future fossil fuel investment.
“These coal, oil, and gas tax preferences distort the economy by pushing firms to invest in the fossil fuel sector than they otherwise would,” according to the Dept. of the Treasury.
“This market distortion is harmful to long-term energy security and does not align with the Administration’s commitment to a clean energy economy, lowering our reliance on oil, and lowering greenhouse gas emissions,” the dept. noted.
The repeal of the so-called “use of percentage depletion” in terms of natural gas wells and oil accounts for a large $13 billion of the more than $45 billion in credits erased by Biden’s budget. The credit permits independent producers to deduct 15% of their gross revenue.
Over the next ten years, ending the ability to expense intangible drilling costs and boosting the geophysical amortization time period for independent drillers will add more than $10 billion to government coffers. Drilling costs may be deducted over a 24-month period under current tax rules for independent producers.
“This budget is essentially a $45 billion tax increase on the oil and gas sector,” Mike Palicz, Americans for Tax Reform’s federal affairs manager, told The Daily Caller News Foundation. “This is more targeted targeting of the oil and gas industry for provisions that are just good tax policy that any sector should be able to take advantage of.”
“This was a clear attempt to continue to portray the oil and gas sector as the villain,” he added.
Meanwhile, the invasion of Ukraine has disrupted global energy markets, causing oil prices to surge past $100 per barrel and gasoline costs to rise to all-time highs. Gasoline in the United States cost more than $4.24 a gallon on Tuesday, higher by 48% compared to one year ago.