EPRINC Study Finds Proposed Taxes on Oil and Gas Industry Will Curb Domestic Production, Increase Imports

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U.S. taxes collected from the domestic petroleum industry represent a complex and often contradictory patchwork of policy initiatives, trading off concerns over raising revenues with attempts to encourage the development of clean fuels as well as reducing oil and gas imports. The largest drawback of the Administration's tax proposals is that they tend to push U.S. energy policy towards greater reliance on imported oil and natural gas and greater reliance on imported refined products.

The Energy Policy Research Foundation, Inc. (EPRINC) has released an assessment of the Obama Administration's proposals to increase taxes on the domestic petroleum industry. EPRINC's analysis concluded that increased tax revenues forecasted by the Administration from the removal of upstream production incentives will be quickly offset through lost domestic production as a result of lower investment in domestic exploration and development and accelerated well closures. EPRINC estimated the costs imposed on the U.S. economy from higher imports using established criteria already in use by the Federal government to justify the import substitution benefits of alternative fuels.

EPRINC also concluded that the tax proposals will lead to greater emissions of GHGs as domestic natural gas production is curtailed in favor of greater coal use in the generation of electricity - at least in the very near term. Additionally, recent reforms in corporate tax treatment to place U.S. manufacturers from a variety of industries on a level playing field with foreign manufacturers would be repealed for the petroleum sector under the Administration's tax proposal. These new taxes would assist foreign refiners in gaining an even greater share of the domestic market for gasoline. The share of the U.S. gasoline market now claimed by foreign refiners has tripled over the last nine years and likely will continue to grow as refiners face higher costs from the loss of the manufacturers' tax credit. The Administration's tax proposal does not call for removal of the manufacturers' tax credit from other sectors of the economy. The full report, entitled "Do Higher Oil and Gas Taxes Pose a Threat to U.S. Energy Security?" can be downloaded from EPRINC's website at http://www.eprinc.org/pdf/administrationtaxesfy2010.pdf

About the Energy Policy Research Foundation, Inc. (EPRINC)

EPRINC was incorporated in 1944 in New York and is a not-for-profit organization that studies energy economics with special emphasis on oil. It moved from New York to Washington, D.C. in 2007. It is known internationally for providing objective analysis of energy issues. EPRINC researches and publishes reports on all aspects of the petroleum industry which are made available free of charge to all interested organizations and individuals. It also provides analysis for quotation and background information to the media. EPRINC has been called on to testify before every session of Congress in the last decade. The Foundation briefs government officials, public groups, legislators, and provides written background materials on request. EPRINC does not speak for the industry or any of its segments.

Views expressed in publications, interviews and testimony result from the Foundation's own analysis and are not meant in any way to represent a consensus of industry views. EPRINC's supporters recognize the importance of a credible, authoritative and impartial organization that can help industry and government officials, the media, and the general public better understand the petroleum industry and the markets in which it operates.

EPRINC publications are available for free on the foundation's website: http://eprinc.org/publications.html

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