Oil Group Head Says Tax-Code Revamp Unlikely to Pass
A divided U.S. Congress probably won’t agree to revamping the tax code this year, according to the head of the American Petroleum Institute, which is lobbying to protect breaks for the oil and gas industry.
Speaking at a Bloomberg Government breakfast, API Chief Executive Officer Jack Gerard said he doubts that Congress will agree to major changes in the corporate tax rate, given the political divisions between the Democratic-controlled Senate and the Republican-led House.
That may give the industry time to lobby in support of breaks that it gets, including one that allows companies to expense or deduct the costs of drilling a well. Gerard said any changes to the U.S. tax code must be equitable and not single out oil companies more than other businesses.
“We argue just treat us fairly, treat us the same as all other industries, don’t single us out for punitive treatment,” Gerard said. Curtailing the break for intangible drilling costs, for example, may mean less domestic production of oil and gas, he said.
President Barack Obama’s administration has proposed repealing oil-and-gas industry tax breaks totaling $41 billion over the next decade. The administration would use the proceeds to reduce the corporate tax rate to 28 percent from 35 percent, and to 25 percent for manufacturers.
Gerard said oil companies would support tax changes that “make the U.S. more cost competitive.”
Gerard, whose group includes major oil companies including Exxon Mobil Corp. (XOM) in Irving, Texas, and Chevron Corp. (CVX) in San Ramon, California, also criticized the administration for not yet approving the Keystone XL pipeline.
TransCanada Corp., (TRP) based in Calgary, first applied for a permit to construct the line from Alberta to refineries in the U.S. Gulf Coast five years ago.
A southern leg is nearing completion. TransCanada reapplied to construct the top half from the oil sands to Steele City, Nebraska, where it would connect with other pipelines, after Obama rejected the original route in January 2012.
“It’s unfortunate that it’s gone on so long,” Gerard said. “The president talks about job creation. He’s got the biggest one sitting right in his lap, standing right in front of him. All he has to do is say, ‘Yes,’ and we move forward.”
The State Department is reviewing the permit because it crosses an international border. It is working to complete its environmental review of the project.
In an address on climate change in June, Obama said he wouldn’t approve the project if it was found to significantly exacerbate carbon pollution.
A draft State Department-directed environmental analysis said Keystone wouldn’t promote large greenhouse gas emissions because the oil sands in Alberta would be developed even if the pipeline wasn’t built.
Environmentalists have said the analysis underplays the importance of Keystone XL on Alberta development. The mining and use of bitumen from the oil sands releases more greenhouse gases than other forms of drilling.
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