Oil, gas producers send 2nd panel to D.C.

While health care is drawing much of Congress' attention these days, Kansas oil and gas producers aren't being lulled into thinking proposed changes in federal tax laws involving their industry have gone away.

That's why a delegation of those involved in the industry from the Midwest, including some from Kansas, went to Washington last week to meet with four key Democratic senators from oil-production states.

"We have to stay vigilant," said Ed Cross, president of the Kansas Independent Oil and Gas Association and a member of the delegation.

That's because Congress will be looking for ways to pay for the 2010 budget, and eliminating some tax deductions for the oil and gas industry is one of them. The oil and gas tax provisions are part of President Obama's proposed 2010 budget.

When the proposed tax changes were announced earlier this year, the Treasury Department said the revisions would pump $36 billion into the nation's coffers over the next 10 years by erasing some credits for exploration and drilling.

The proposals would cost the Kansas oil and gas industry more than $150 million annually, Cross said.

The Independent Petroleum Association of America, a trade organization, said eight areas of the proposed changes would cost the nation's oil and gas industry $30 billion over the next 10 years.

This was the delegation's second trip to the nation's capital to discuss the impact of the Obama administration's proposed tax changes. It met with seven other senators during the summer.

Cross said both trips resulted in meetings that lasted up to two hours with each senator.

"I came away with the sense that we're making progress in educating Democratic senators about what this could do to small independent oil and gas producers," Cross said.

Last week, the group visited Sens. Mark Begich, D-Ark.; Evan Bayh, D-Ind.; Mark Udall, D-Colo.; and Dick Durbin, D-Ill., as well as Rep. Lloyd Doggett, D-Texas.

Two of those eight areas of proposed changes would eliminate tax deductions for percentage depletion and intangible costs for drilling and development and would have the greatest impact on independents, Cross said.

The tax provisions Obama is proposing to eliminate are being called "subsidies" by some in Washington, Cross said.

But during the visits, Cross said the group told the senators that the provisions were incentives.

"We explained that the president's proposed action on oil and gas taxes were based on academic notions that simply do not apply in the real world," Cross said.

He said the proposals would depress investment in domestic oil and gas projects, weaken the nation's energy security and make it more difficult to achieve economic recovery.

Cross said it was significant that last month Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, didn't include Obama's oil and gas tax proposals as funding sources for Baucus' version of the health care bill.

"But we're not out of the woods on this," Cross said.