White House targets oil-and-gas tax breaks as part of plan to replace sequester

Unless Congress acts to stop sequestration, federal spending will be slashed by about $110 billion on March 1, with half the total coming from the Pentagon.

On Tuesday, Senate Majority Leader Harry Reid (D-Nev.) made similar comments about the subsidies. The remarks indicate Democrats plan to take another stab at axing the subsidies, this time as part of an effort to dodge the automatic spending cuts, after legislative efforts failed last Congress.

“There are many low-hanging pieces of fruit out there that Republicans have said they agreed on previously. I’m not going to go into detail, but one of them, of course, is deal with oil companies,” Reid said Tuesday.

These swipes at the nearly $4 billion in annual incentives awarded to the oil-and-gas industry are not new.

President Obama and Senate Democrats have pushed several bills to eliminate deductions offered to the oil-and-gas industry. Some bills would have affected only the largest firms, though smaller, independent drillers still would have taken a hit in others.

But Republicans, and some oil-state Democrats, have blocked those attempts.

They contend the industry's tax incentives should not be singled out for repeal when many other businesses are given deductions and cost-recovery mechanisms.

Oil industry lobbyists also say removing the tax incentives could slow domestic energy development.

Still, some Republicans and industry-friendly Democrats have said they are open to putting oil-and-gas incentives on the table only as part of a broader tax code overhaul.

“It can't be we'll let sequester kick in because we insist that tax loopholes remain where they are for corporate jet owners, or subsidies provided to the oil and gas companies that have done so exceedingly well in recent years have to remain in place. That’s just — that’s not I think a position that will earn a lot of support with the American people,” Carney said.

— This story was updated at 6:14 p.m.