Oil Company "Subsidies?"

OK, President Obama is not happy with the deal struck to bring down our debt, he now wants to get rid of subsidies for Oil companies, and raise the taxes on the most wealth Americans and corporations.

I did a search on oil subsidies, and it may surprise you (or maybe not).

Here are the tax expenditures the President has targeted: taken from http://www.americanprogress.org/issues/2010/05/oil_company_subsidies.html

1. Intangible drilling costs. Firms engaged in the exploration and development of oil or gas properties may expense (deduct in the year paid or incurred) certain types of drilling expenditures from their taxes. These costs include wages, fuel, repairs, hauling, and supplies related to and necessary for drilling and preparing wells for the production of oil and gas. Other companies incurring similar types of costs must recover this cost over the life of the investment. The administration expects that eliminating this subsidy will produce budget savings of about $7.839 billion over 10 years.

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If he is going to do this, is he also going to eliminate the deduction for small businesses for their expenditures, like mileage to and from work, if your business is in your home, the office computer, etc.? And it includes wages? How about when they give Congressmen $500,000 to hire up to 18 aides? How many congressmen are there? At $500,000 each! That would save a lot. Make them pay their employees just like the oil companies have to. And Senators get even more money for staff.

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2. Deduction for tertiary injectants. Tertiary, or enhanced oil recovery, methods increase the amount of oil that a company can extract from a well by an additional 5 percent to 15 percent according to some research. This tax expenditure subsidizes the costs of tertiary injectants—the fluids, gases, and other chemicals that are pumped into oil and gas reservoirs as part of this process. The subsidy essentially gives companies government money for acting in ways that will enhance their profits. It allows companies to expense the costs of tertiary injectants, even though such costs should be recovered over time. Companies can alternatively choose to deduct these costs as an intangible drilling cost.The administration expects that eliminating this subsidy will produce budget savings of about $67 million over 10 years.

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How about eliminating the subsidy to farmers to grow corn for ethanol? It's been proven that ethanol only makes an engine deteriorate faster.

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3. Percentage depletion allowance. Percentage depletion allows an independent oil company to deduct from its taxes about 15 percent from the revenue generated from a well, even if that amount exceeds the well’s total value. This means that oil companies take a deduction as long as a well is producing oil, without regard to how much, or whether, the well is still declining in value. Companies in other industries are only allowed to deduct an amount that represents the decline in their investment’s value that year. The administration expects that eliminating this subsidy to produce budget savings of about $10 billion over 10 years.

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Is this a way of driving the oil companies out of the US? Remember, under his plan, energy costs will naturally sky rocket.

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4. Passive investments. The government generally only allows investors to deduct a limited amount of losses from “passive activities” such as renting land in order to prevent tax shelters. Yet oil and gas properties are exempt from this rule. This gives oil and gas companies a competitive edge over other types of energy companies. The administration expects that eliminating this subsidy will produce budget savings of about $180 million over 10 years.

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And why is it when I bought my house in 2008, I had to sign something that said if they found precious minerals or oil on my property, it didn't belong to me? Do you think the government would pay me for it? Not.

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5. Domestic manufacturing tax deduction. Companies that manufacture, produce, or extract oil and gas or any primary derivative receive a manufacturing subsidy provided that the product was made in the United States. But since removing this subsidy does not affect the production of oil, the subsidy does not significantly affect business decisions and eliminating the subsidy would not affect consumer prices. The subsidy is essentially a throwaway for oil companies. The tax expenditure is provided through a deduction for 9 percent of income, subject to a limit of 50 percent of the wages paid that are allocable to domestic production during the taxable year. The administration expects that eliminating this subsidy will produce budget savings of about $17.3 billion over 10 years.

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Yea, won't affect the price of oil in the United States. Let's make it as unfriendly as possible so all the oil companies move to another country. Then we'll still be buying our oil from Saudi Arabia.

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6. Geological and geophysical expenditures. The Energy Policy Act of 2005 created this tax subsidy, which allows companies to deduct the costs associated with searching for oil, recovering the costs over a two-year period. The administration expects that scaling back the amortization period to seven years would produce budget savings of about $1.1 billion over 10 years.

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I suppose this is so they won't choose to drill in Alaska, or Idaho or where ever they could find new oil. Another one of Obama's anti-oil policies.

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7. Foreign tax credit. This credit is intended to prevent the double taxation of income that is taxed abroad but also subject to tax in the United States. Yet companies, particularly oil companies, have managed to exploit this subsidy even when they don’t pay income taxes abroad. In total, adjusting the rule would prevent companies from avoiding about $8.5 billion in taxes over a 10-year period.

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How about checking the books occasionally? They could then add their government employees and give them something to do. Instead they want to possibly double tax companies because some have exploited it?

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8. Enhanced oil recovery credit. Companies receive a 15 percent income tax credit for the costs of recovering domestic oil when they use “enhanced oil recovery” methods to extract oil that is too viscous to be extracted by conventional primary and secondary water-flooding techniques. The EOR credit is nonrefundable and is allowed if the average wellhead price of crude oil (using West Texas Intermediate as the reference) in the year before the credit is claimed is below the statutorily established threshold price of $28 (as adjusted for inflation since 1990) in the year the credit is claimed. Oil prices in fiscal year 2006 were too high for companies to receive this subsidy, but the subsidy remains in existence. Its elimination is not expected to produce budget savings.

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This is being eliminated because if we start producing oil again, the price WILL fall, because we won't be buying it from Saudi Arabia. He wants to make sure the money goes there.

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9. Marginal well production. This provision provides a subsidy for oil and gas produced from certain types of oil and gas wells. These wells include those that produce heavy oil and those with an average production within a statutorily specified range. Oil prices were too high for companies to receive this subsidy in fiscal year 2006, but the subsidy remains in existence. Its elimination is not expected to produce budget savings.

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Again, eliminating this one will only effect us if oil prices go down. That's something President Obama doesn't want....low fuel prices. Once again, under his plan, energy costs will necessarily sky rocket.

Do you really think that people hire on to work on oil rigs because it's fun? They do it for the money. It pays well. It only pays well and is profitable to drill for oil in the US because of these tax breaks. If these companies leave the US because it's no longer profitable, how many people will be out of work? Do you really think they'll keep the same people on if they move to a different country? This is nothing but a bid to make oil companies leave the United States. That way he can say the prices are high because we have to buy from the Arab countries. I have to wonder, where are his loyalties? They certainly don't appear to be with the American people.