Oil group pushes tax breaks in TV ads

The oil and natural gas industry’s largest trade group is launching new television ads tomorrow designed to warn lawmakers off plans to spike a portfolio of lucrative tax incentives.

The ads, sponsored by the American Petroleum Institute, will air in Michigan, Pennsylvania and Ohio — home to Republican lawmakers who sit on a congressional supercommittee tasked with developing a plan to pare at least $1.2 trillion from the deficit over the next decade by Nov. 23.

Members of the panel have kept their plans relatively quiet, but there are no signs that Republicans on the committee are giving in to Democratic demands that they ax tax incentives long enjoyed by the oil and gas industry as a way to raise revenue.

Still, API President Jack Gerard said, it is important to underscore the value of those tax deductions — and warn of the perils in cutting them.

“We want to take every opportunity to reinforce that the oil and natural gas industry presents a large part of the solution as the super committee seeks to address deficit reduction,” Gerard said. A better way to raise money, Gerard said, would be to enact “pro-development policies,” including opening up areas now off-limits to oil and gas development.

If you want revenue, Gerard said, “give us opportunities to produce America’s oil and natural gas.”

It’s a common refrain from the industry: “We pay our fair share in royalties and other fees to the government — and we could send federal coffers even more with greater access to America’s oil and gas reserves.”

But the move comes amid “Occupy” protests on Wall Street, in Washington, and other cities nationwide, where activists are demanding an end to policies that benefit corporate executives at the expense of lower and middle classes.

There also have been renewed calls to ax the oil and gas industry tax incentives from some in Congress, including more Senate Democrats who made their pitch to the super committee last week.

Gerard said the new television ads are part of API’s overall advertising campaign — including commercials with the familiar female announcer describing the industry as a job creator. But these new commercials don’t look quite the same.

Take, for example, the ad geared toward Rep. Dave Camp, R-Mich., a super committee member and the head of the House Ways and Means Committee, who is working on a broad tax overhaul plan.

“While America struggles with unemployment, one industry is creating jobs in Michigan. But some want new job crushing energy taxes, putting our economy at risk again. You could pay more to fill up or switch on a light. It could cost us jobs. Fortunately some in congress understand. Michigan’s Dave Camp has opposed higher taxes. Tell Congressman Dave Camp: Keep fighting for Michigan jobs and against job destroying energy taxes.”

The words come against a backdrop of catchy music and rapidly passing images of hard-hatted workers and gas pumps.

The ad for Rep. Fred Upton, R-Mich., is much the same. But it could have extra benefits for the lawmaker, who as chairman of the House Energy and Commerce Committee has drawn fire from some moderate Republicans who says he has moved too far to the right while leading the panel.

Rep. Ed Markey, D-Mass., who wants to see the tax incentives repealed, called the API’s campaign “tin-eared” and “tone deaf.”

“Every dollar given to an oil company is another dollar taken away from Medicare, from student loan assistance (and) from child hunger programs,” Markey said in a statement.”

Gerard insisted that the tax incentives on the chopping block are essential to returning capital to oil companies so they can be invested in future energy development. Ending the tax breaks doesn’t hurt corporate execs, Gerard said; it hurts the ability of energy companies to reinvest in oil and gas development.

Congressional Democrats have taken aim at a number of tax deductions used by the industry, including:

  • A domestic manufacturing deduction, which has generally been available to a broad range of U.S. firms.
  • A deduction for intangible drilling costs, such as the cost of repairs, site preparation and hauling supplies. Currently, integrated oil companies can expense 70 percent of the cost of these intangible drilling costs, but this provision is used widely by independent producers.
  • A percentage depletion deduction for oil and natural gas wells, computed using a portion of the revenue from the sale of those hydrocarbons.
  • a deduction of certain tertiary injectants, chemicals used to boost the amount of oil and natural gas that can be recovered from individual wells.