Oil groups hold their fire after Romney floats ending their tax incentives

Oil and natural gas producers said they’re keeping an open mind Thursday after Mitt Romney opened the door to repealing billions of dollars in industry tax breaks as part of a wider overhaul that would lower corporate rates.

But the industry hardly rushed to support the idea.

In Wednesday's first presidential debate, the GOP nominee said the incentives would “probably” not survive if he succeeded in lowering the corporate tax rate from 35 percent to 25 percent.

The industry has battled Democratic efforts to strip incentives such as expensing of drilling costs and the ability to claim a lucrative deduction on domestic manufacturing income, arguing that nixing the breaks would stymie production.

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But industry groups on Thursday said they’re open to discussion of the incentives' fate in a wider tax overhaul, while stressing that the specific tax breaks are important to their members.

“We welcome a discussion about broad tax reform that would lower the corporate tax rate and get rid of certain incentives. We just can’t give you a definite answer on what we would support and what we wouldn’t until we see a proposal. As they say, the devil could be in the details,” said Carlton Carroll, a spokesman for the America Petroleum Institute.

John Felmy, the group’s chief economist, appeared more skeptical on a call with reporters Thursday.

While Felmy noted the group is open to discussion, he added that removing incentives would have a disproportionate impact on smaller, independent firms, adding it would be “counterproductive” whether the tax rate is 25 percent or 35 percent.

Felmy also sought to downplay the idea that the tax breaks would be on the chopping block in a potential Romney administration.

“Saying something is on the table doesn’t mean you are taking away. It just means it is up for discussion,” he said.

Some Democratic proposals on tax break repeal would target only industry giants like Exxon Mobil and Chevron.

The White House, however, wants to raise roughly $40 billion over 10 years with a plan that would hit “Big Oil” and, in some cases, independent producers.

The White House plan would repeal the so-called percentage depletion allowance, which isn’t available to the major integrated companies, as well as repeal expensing of “intangible” drilling costs, which is fully available to independent companies and partially for the others, among other proposals.

Julia Bell, a spokeswoman for the Independent Petroleum Association of America, said in response to Romney’s comments that “comprehensive tax reform is needed.”

“But it has to be accompanied by lowering the individual rate as well as the corporate rate, because many of America’s independent producers are small businesses that file as individuals or pass-through entities in the tax code,” she said.

Kevin Book of the energy consulting firm ClearView Energy Partners, in a note, reiterated the company’s view that GOP control of the House, Senate and White House could still leave some tax breaks for major, integrated oil companies at risk.

“At last night’s debate, Gov. Romney appears to have confirmed our thinking,” said Book, the firm’s managing director.

This post was updated at 3:59 p.m.