President Obama released his fiscal year 2015 budget on March 4, a $3.9 trillion package that includes a range of wish-list items in an election year. Among other things, the budget calls for the elimination of a range of tax breaks that benefit oil, natural gas, and coal companies.
The tax breaks amount to $4 billion annually, and eliminating them is request that the President has called for multiple times over several years. Over ten years, if enacted, cutting the tax breaks would save $48.8 billion over ten years.
The budget also calls for $27.9 billion to fund the Department of Energy, a bump of 2.6% over last year’s funding levels. His budget did call for an increase in spending for DOE’s Fossil Fuel program, mainly focused on research for “clean coal” technologies.
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As for renewable energy, the budget calls for a permanent extension of the production tax credit for wind power, which has suffered from on-again off-again treatment from Congress. It expired at the end of 2013 and was not renewed. If extended, it would cost $19.2 billion over ten years.
However, the budget has a near-zero chance of being implemented, at least without serious changes. The fossil fuel industry has repeatedly pushed back against the President’s plans, and with mid-terms looming, Congress will almost certainly reject the President’s plan. Moreover, many Senate Democrats that are up for reelection come from conservative states that support fossil fuel development, such as Mary Landrieu (D-LA) and Mark Begich (D-AK). Thus, as both parties prepare for the mid-term elections, it is unlikely that there will be major reforms to the tax code or radical changes in spending levels.
In any event, energy reforms in the budget will likely be a sideshow. The most contentious elements of the President’s budget will center around raising the minimum wage, and lower troop levels at the Pentagon.
By Joao Peixe of Oilprice.com