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Budgets

Clinton Administration's 1996 Budget Proposal Affects US Oil Industry

Strategic Insights

— 1 min read

The Clinton administration's proposed 1996 budget could provide significant tax benefits to the US oil industry, while also introducing new regulatory hurdles. The budget plan aims to increase incentives for oil companies to invest in domestic production, at the same time as reducing their financial burden. However, the administration's attempts to increase fees for wetlands regulatory permits may face opposition from Congressional Republicans who are pushing for regulatory reform.

Key Takeaways:

  • The proposed 1996 budget proposes to increase the expensing of intangible drilling costs for integrated oil companies from 70% to 100%.
  • The budget also introduces an enhanced oil recovery tax credit of 15% on US projects, including tertiary oil recovery costs.
  • Owners of working interests in oil and gas properties are exempt from the "passive income" limitations, despite being subject to the alternative minimum tax.
  • The Department of Energy's (DOE) 1996 budget cuts spending on fossil energy programs, while increasing funding for energy efficiency and renewables by 16% to $1.34 billion.
  • The Office of Fossil Energy's budget is cut to $606 million, down from $798 million in 1995.
  • Research and development (R&D) on natural gas programs is boosted by $30 million to $146 million in 1996.
  • The field demonstration program for petroleum will be at a slightly reduced level from 1995.

Statistics:

  • The proposed budget aims to increase the expensing of intangible drilling costs from 70% to 100%.
  • The enhanced oil recovery tax credit is equal to 15% of the taxpayer's costs for tertiary oil recovery.
  • The DOE's budget for energy efficiency increases by 16% to $1.34 billion in 1996.
  • The Office of Fossil Energy's budget is reduced by 24% to $606 million in 1996.
  • Research and development on natural gas programs will receive $146 million in 1996, up from $116 million in 1995.
  • The field demonstration program for petroleum will see a reduction in funding.

Sources:

  • [Washington] -- "Clinton Budget Aids Oil Industry by Mark Clayton, Staff writer of The Christian Science Monitor", Monday, February 26, 1996.
  • [Washington] -- "Clinton's energy budget plan could speed up alternative fuels", Cronin, Joseph, The Dallas Morning News (Dallas, TX), February 28, 1996.

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