Budget fighting begins with oil lobby assault

The administration’s 2011 budget recommendations drew a rebuke from the
oil-and-gas industry and others targeted for cuts as the annual fight
over spending officially kicked off Monday.

Oil and coal industries have done well in beating back climate change legislation, which has stalled in the Senate.

{mosads}But now the sectors face a repeal of tax breaks worth nearly $40 billion over 10 years. The cuts come out to around $2.7 billion a year and help pay for an overall increase to the Energy Department’s 2011 budget, with renewable-energy sectors standing to gain.

The budget includes about $108 million in new funding to advance and expand research in the wind, solar and geothermal industries, DoE said.

Energy Secretary Steven Chu said the budget recommendations will make sure the administration’s goal of doubling the amount of electricity produced by renewable-energy sources not including hydropower by 2012 would be met.

Congressional committees will spend much of the rest of the week hashing out the details of the president’s budget request, which never survives Congress intact.

The oil-and-gas industry, in fact, has proven adept at fighting off proposals to repeal a range of subsidies. Democrats in Congress, for example, have tried without success to exempt the industry from claiming a lucrative manufacturing tax credit.

In its latest budget offer, the administration is again seeking to block the oil-and-gas industry from the manufacturing tax credit. Chu also said the administration would seek to end a tax break for ultra-deepwater drilling that is valued at around $50 million a year.

The industry made clear that it will use the struggling economy and high unemployment rates to protect its tax breaks.

“With America still recovering from recession and one in 10 Americans out of work, now is not the time to impose new taxes on the nation’s oil and natural gas industry,” said Jack Gerard, the president and CEO of the American Petroleum Institute. “New taxes would mean fewer American jobs and less revenue at a time when we desperately need both.”

The $3.8 trillion budget blueprint includes a non-defense discretionary spending freeze, or about one-sixth of the total budget.

The request drew complaints from other sectors as well.
Financial lobbyists on Monday said they were opposed to the administration’s efforts to cut federal subsidies from the Terrorism Risk Insurance Program.

The administration said changes to the program would create nearly $250 million in savings between 2011 and 2020.

The administration proposed cutting the subsidy and encouraging the private property and casualty insurance industry to develop alternative reinsurance options. The administration said that the insurance industry is better equipped to deal with the threat of terrorism now than following the Sept. 11 attacks.

The budget proposal also recommends dropping coverage for acts of domestic terrorism. Congress reauthorized the terrorism insurance program in 2007, and lobbyists said they sensed little appetite for lawmakers to revisit the law this year.

{mosads}Industry associations, including the Property Casualty Insurers Association of America (PCI), American Insurance Association (AIA) and Financial Services Roundtable, said they were opposed to the administration’s proposal.

“It is my sense that the Congress will hold to the long-term extension that they passed in a bipartisan vote,” said Ben McKay, senior vice president at PCI.

A spokesman for AIA said that any change to the current law “would have a detrimental impact on the availability and affordability of terrorism risk insurance.”