Oil, gas industry aims to nip tax hikes in the bud

Congressional anger at the oil and gas industry hasn’t receded nearly as much as gas prices have, complicating the effort by lobbyists to block $31 billion in taxes or new fees proposed by President Obama in his budget blueprint.

Lawmakers take the first crack at that proposal this week, with a House Budget Committee markup on Wednesday.

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The Appropriations and tax committees will fill in the details of the 2010 budget, but they will do so within the budgetary confines provided by the budget writers. Lobbyists are working furiously this week to limit the damage at the start of the process before proposals have a chance to gain momentum.

Under the blueprint, oil and gas providers would be on the hook for a slew of tax increases, mostly from the repeal of breaks that now serve as an inducement for production in hard-to-get-to areas.

Several energy lobbyists said the industry is likely to have to swallow something, as Democrats look to shift to a greener economy by paying for the development of renewable fuels.

But lobbyists remain hopeful they can walk Congress back from the $31 billion number in the White House’s proposal.

The global recession has dramatically lowered the demand for oil and gas, which in turn has provided relief for consumers at the pump. But the industry is still an enticing target for revenue to pay for a host of efforts, like developing greener renewable fuels.

Oil and gas lobbyists argue increasing the industry’s taxes will cost jobs during a recession — and could also lead to the need to import even more oil and gas from overseas.

“Right now we need more jobs and economic activity,” said John Felmy, the chief economist at the American Petroleum Institute, which represents the major oil companies.

The House Natural Resources Committee, meanwhile, will examine another issue important to the oil and gas industry: offshore drilling.

The cries of “Drill, Baby, Drill” have quieted with the decline in oil prices, and now some environmental groups want Congress to reinstate the bans on drilling in the Outer Continental Shelf, which lawmakers let expire in the fall when $4-a-gallon gasoline was still fresh in voters’ minds.

The Interior Department is currently studying whether to open up new areas to drilling. It is permitted in the western Gulf of Mexico and in a more limited way off the coasts of Alaska and California.

Dianne Saenz, a spokeswoman at Oceana, said her group would urge the committee to reinstate the drilling moratorium at the hearing, which happens to fall on the 20th anniversary of the Exxon Valdez oil spill.

{mospagebreak}“The costs of oil drilling are too high,” given the concerns about global warming, Saenz said.

The group also wants Congress to block the lease sale of 70 million additional acres in the Arctic Ocean.

As they try to reverse a big defeat, environmental groups were also eyeing a long-sought victory.

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An omnibus lands measure expected to be on the House floor on Thursday would designate more than 2 million acres of wilderness, roughly 1,000 miles of national wild and scenic rivers and 10 new national heritage areas, according to the Pew Environment Group.

Jane Danowitz, director of Pew’s public lands program, said the bill was “landmark legislation.”

She said the bill was the single largest expansion of wilderness in the past 15 years.

Meanwhile, lawmakers were also anticipating a $75.5 billion emergency war-spending request for remainder of the year. The submission of the supplemental may be delayed into next week, as the administration is trying to figure out funding for Afghanistan and the Mexico border-area violence, sources tell The Hill.

The request was expected to include four additional F-22 fighter jets. Lockheed Martin, the plane’s prime contractors, and its supporters on Capitol Hill are likely to try to push for more.

A proposal by Rep. John Murtha (D-Pa.), the chairman of the House Appropriations Defense panel, to include money for the Air Force’s new midair refueling tanker contract will also likely engender significant controversy. Murtha has proposed splitting the $35 billion contract between the two antagonists: Boeing and Northrop Grumman.

Northrop Grumman, which teamed up with EADS North America for the contract, this week offered tempered support for a split in the contract, but Boeing has kept silent about a dual buy and the company’s congressional supporters are so far opposing it.

Murtha is not dissuaded by that, judging by an off-the-cuff comment he made to reporters recently, saying Boeing will do “whatever we ask them to do. They would be happy to get this thing over with and build a tanker.”

Time may be Murtha’s bigger enemy. The Pentagon wants Congress to approve the supplemental request by Memorial Day, which leaves only two months for Murtha to find a compromise on an issue that has created bad blood on both sides.


Roxana Tiron contributed to this article.