The energy industry is pushing back—hard—against President Obama’s proposed $3.6-trillion budget, and for good reason.

The budget would increase the cost of doing business for oil and gas companies by $31.5 billion over the next decade by imposing new fees, taxes and changes in regulatory policies. Beyond that, it would force the industry to absorb much of the $79-billion cost of a cap-and-trade plan. That adds up to a potential hit of about $100 billion.

Specific proposals in the budget include:

– Repealing $13.3 billion in manufacturing tax credits;

– Adding a new, $5.28-billion excise tax on Gulf of Mexico drilling leases that would effectively cap royalty relief for previously issued leases;

– Ending deductions for intangible drilling costs (IDCs), which carries a $3.4-billion price tag;

– Creating a $1.16-billion “use it or lose it” fee on nonproducing leases in the Gulf; and

– Setting new fees for processing drilling permits on federal lands.

Lawmakers from energy states have already said they would try to block the proposals, which Sen. Lisa Murkowski of Alaska called “punitive” and said “won’t increase the energy security of the United States.”

Barry Russell, CEO of the Independent Petroleum Association of America (IPAA), said, “These proposals make no sense during this economy, when increased American energy could result in new jobs and more tax and royalty revenues” for state and federal governments.

A report delivered to Congress in December by the American Petroleum Institute reinforces Russell’s contention. It argued that policies aimed at opening up new domestic production, which Obama’s proposal would curtail, could generate $1.7 trillion in new government revenue and create 160,000 jobs.

--Rick Burleson

About the author: Rick Burleson’s is a managing partner of Houston-based law firm Burleson Cooke LLP that focuses on the energy industry. He can be reached at and 713-358-1701. A PDF of his opinion-page article that appeared in the Houston Chronicle regarding the dangers of an anti-fossil-fuel approach to energy policy is available at