A battle is brewing over a potential corporate tax overhaul in 2013, and the prospect fills oil and gas lobbyist Lee Fuller with dread.
“As a whole, this industry really doesn’t see an advantage to these proposals that would lower the corporate rates and eliminate deductions,” said Fuller, the vice president for government relations at the Independent Petroleum Association of America.
Translation: the energy industry is going to cling for life to its tax breaks.
Repealing investment benefits -- including one that allows deducting the expenses of everything from roadwork to well repair -- will curtail investments that are lowering foreign oil imports and creating thousands of jobs, Fuller said. Critics -- including President Barack Obama -- say oil and gas companies can afford to give more.
Tax issues this year will affect businesses here and abroad, from Exxon Mobil Corp. (XOM:US) to the U.S. unit of Iberdrola SA, a Spanish company that specializes in clean energy, if the White House and Congress get serious about cutting out the dozens of breaks and subsidies in favor of a lower rate.
Obama’s call to end the $4 billion in annual tax subsidies to oil companies including Exxon Mobil, the biggest U.S. oil company, has failed to pass in either house of Congress.
Green Tax Breaks
Green energy interests are also ready to fight to continue their incentives.
Wind companies, for example, are trying to protect a credit that shaves as much as a third off the costs of producing power, saying its disappearance will lead to significant job losses.
The American Wind Energy Association, a Washington-based group whose members include General Electric Co., released a plan in December to phase out the credit in six years, a concession to growing concerns about the rising federal deficit.
One way to raise revenue is to tax carbon dioxide emissions, which could also encourage the development of renewables to address the risks associated with climate change.
The idea appears to have greater cachet off Capitol Hill than on it. Senator Ron Wyden, an Oregon Democrat and incoming chairman of the Energy and Natural Resources Committee, says a carbon tax would be a “big lift politically.”
Reaching any agreement on energy has been hard to do in recent years. Congress hasn’t passed a major bill since 2007, when lawmakers agreed to raise the fuel-efficiency standards for cars and trucks and set biofuel production targets.
Since then, the U.S. energy landscape has undergone a “transformational shift,” Wyden said in a recent interview.
Hydraulic fracturing has increased domestic production of oil and natural gas. That’s lowered imports, and cut gas costs to their lowest level in a decade. Chemical companies are planning to re-locate stateside because natural gas is an important ingredient for their products.
Natural gas has also become the fuel of choice for utilities instead of coal. The switch is lowering carbon emissions, even though Obama couldn’t get through Congress a sweeping climate-change bill.
Wyden said more direction from Washington could provide businesses with greater certainty over where to invest, expanding growth in an industry that’s already a bright spot in a sluggish economy.
One issue he plans to examine is whether natural gas should be exported. Fifteen companies have applied to the Energy Department for permission to sell to markets in Asia and elsewhere. An Energy Department-commissioned study has offered an almost unqualified endorsement of exports.
Wyden said that in 2013 he’ll try to promote hydropower, biomass and geothermal power sources to help develop a “low- carbon economy.” On these issues, he said he hopes to find agreement with the top Republican on the panel, Senator Lisa Murkowski of Alaska, whose state shares some of the same resources.
Paul Bledsoe, a Washington-based energy consultant, said he’s doubtful Democrats who control the Senate and Republicans in charge of the House can agree on a major bill. One possible way forward would be to couple an energy-efficiency bill with measures expanding offshore oil and gas production.
“The real question is whether the parties would rather have a bill or a talking point,” Bledsoe, a former energy adviser to President Bill Clinton, said.
ALSO WORTH WATCHING IN 2013:
EPA: Lisa Jackson’s planned departure as head of the Environmental Protection Agency leaves President Barack Obama facing a confirmation war as regulators prepare to release final rules imposing the first limits on carbon dioxide emissions. Congressional Republicans have sought unsuccessfully to prevent the EPA from acting under the Clean Air Act to fight global warming. In 2013, a new administrator may come under fresh attacks if the agency acts to limit greenhouse gases from existing facilities. Now proposed rules are limited to new power plants.
KEYSTONE: The State Department says it will make a determination about TransCanada Corp. (TRP)’s pipeline from Alberta’s oil sands to refineries in Texas early in 2013. Environmentalists oppose the project because they say it promotes development of tar sands mining, which releases more carbon dioxide than oil drilling.
CONFERENCES: From solar panels to Canadian oil sands, there is no shortage of talking topics at various energy conferences tracked by the U.S. Energy Information Agency.
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