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>>Obama Plan Could Devastate US Oil & Gas Industry

Oklahoma Oil Industry Worried by Obama Budget

Plan to eliminate subsidies would affect Oklahoma, experts say

BY JAY F. MARKS The Oklahoman Comments 18
Published: February 5, 2010

Enid oilman Harold Hamm doesn’t hesitate when asked about the potential impact of President Barack Obama’s budget proposal.

"I think it would be devastating for the industry, and it would be devastating for the country as a whole,” he said.

Hamm, president of Enid-based Continental Resources, said the industry has made significant strides in the last several years, without much credit for its successes.

"We’ve actually been able to crack the code on natural gas and crude oil production from the shales, which has basically ... given us almost an unlimited supply of natural gas in this country,” he said. "By the same token, we’re on the upswing in this country with oil production.

"A lot of people didn’t think that was possible, but it certainly is.”

Hamm said the growth in domestic oil production has caused a dip in the amount of oil the U.S. imports from other countries.

On the upswing

The U.S. produced nearly 44 percent of its oil supply in 2008, according to the U.S. Energy Information Administration. That figure rose to nearly 49 percent in the second quarter of 2009.

"Not a lot of people realize that,” Hamm said. "It’s a little known fact.”

That progress could go out the window if lawmakers approve Obama’s proposed budget, which includes the elimination of fossil fuel subsidies.

"We don’t consider these subsidies,” Devon Energy Corp. spokesman Chip Minty said. "These are normal business expenses the industry has been allowed to deduct for decades.

"This would be a tax increase that would reduce exploration and production activity, increase energy prices and eliminate jobs.”

Administration officials estimate the loss of those subsidies could cost the oil and gas industry as much as $40 billion over the next decade. Other parts of the president’s budget plan could harm the industry as well.

That loss could be especially noticeable in Oklahoma, Oklahoma City University economist Steve Agee said, because the state is so reliant to tax income generated by the oil and gas industry.

The industry accounts for nearly $14 billion in payroll and 98,000 jobs in Oklahoma, according to 2007 study by accounting firm PricewaterhouseCoopers.

That equals about 5 percent of the state’s labor force.

Agee said the proposals in Obama’s budget are like tax increases that likely will leave less money for producers to drill for oil and gas and curtail supply.

More investments

The targeted subsidies encourage more investment in the oil and gas industry rather than areas of the economy that could be more productive, according to the administration’s budget plan. Eliminating the laws that allow companies to amortize intangible drilling and development costs would prevent the overproduction of oil and gas.
Minty said he doesn’t understand that argument.

"We believe by increasing our production of domestic energy we can reduce our dependency on oil from outside of the United States and provide the energy our economy needs to grow,” he said.

Reduced drilling likely would have an adverse effect on the economy and job market.

"You saw it last year: when you reduce your drilling activity ... you eliminate a lot of jobs, which is counter to what we’re trying to do in this country,” Minty said. "We account for 9 million jobs in the United States.”

Devon will join other oil and gas company and industry groups to fight the proposed tax increases.

"It’s our responsibility to make sure that policymakers understand how these measures will affect the industry,” Minty said.

"That’s important not only to our business, but ... to consumers and the economy.”



Read more: http://www.newsok.com/obama-budget-brings-worries-to-oklahoma-oil-industry/article/3437246#ixzz0fBbYNLqv