Oil, Gas Take Hits on Proposed Budget

On Feb. 1 President Obama launched the federal appropriations season with the release of the fiscal year 2011 budget, outlining his priorities for the coming federal fiscal year (Oct. 1, 2010 to Sept. 30, 2011).

The budget hit the headlines with eye-popping deficit projections at 11 percent of GDP in FY2011. And more dramatically, wrote the New York Times, “By President Obama’s own optimistic projections, American deficits will not return to what are widely considered sustainable levels over the next 10 years,” and turn higher at the end of the decade.

To prevent a larger deficit this year and in its projections for the decade, the president proposed numerous measures to raise additional revenue and trim government spending. Oil and natural gas activities were targets on both sides of the federal income statement.

On the revenue side, the president has proposed to repeal a series of oil and natural gas tax “preferences.” This is essentially the same proposal the president made last year, but which Congress did not adopt. The Office of Management and Budget estimated that eliminating these tax measures would net $36.5 billion over 10 years.

The measures include repealing for oil and natural gas companies the expensing of intangible drilling costs, percentage depletion for oil and natural gas wells, the exception of passive loss limits for working interests on oil and natural gas wells, a domestic manufacturing tax deduction available to all other industries and extending the amortization of geological and geophysical expenses for independents to seven years.

It also repeals several other provisions: the enhanced oil recovery and marginal well credits, and a deduction for tertiary injectants.

If implemented, these measures would severely disrupt the petroleum industry, both majors and independent oil and natural gas producers. AAPG’s view on taxes is articulated in its statement on tax reform:

“ … AAPG supports [tax] policies which serve to encourage petroleum exploration and production …”

The president’s proposals certainly do not meet this standard, and run counter to a sound national energy policy.

Turning to the expense side of the federal income statement, the president’s budget proposed $200 billion in spending cuts to discretionary programs. These cuts were spread across federal agencies.

At the Department of Energy (DOE) the proposed cuts included the oil and natural gas research and development (R&D) programs. In doing so, President Obama followed in the footsteps of President Bush, who also repeatedly “zeroed out” these programs.

The petroleum-oil technologies R&D program was unfunded in FY2010. Instead of restoring funding for this program, as it had in previous years, Congress reprogrammed $20 million for a new unconventional fossil energy technologies program.

The administration is not seeking FY2011 funding for either of these programs.

The natural gas technologies R&D program also was eliminated for FY2011. Funding in FY2010 was $17.8 million. Most of this was dedicated to methane hydrates research, which will shift to DOE’s Office of Science.

Carbon sequestration research at DOE focuses on carbon capture technologies and geologic storage. The FY2011 funding request is down about 7 percent to $143 million. The regional sequestration partnerships continue their Phase III projects, with nine injection sites looking to inject at least one million tons of carbon dioxide over three years.

The DOE geothermal program continues to see increased funding requests. The FY2011 budget request is $55 million, an increase of 25 percent. The focus of this program is research, development and deployment of technologies to realize the potential of enhanced or engineered geothermal systems to contribute significantly to base load power generation in the United States. The program will continue its efforts in deploying a public geothermal database, international cooperation, low-temperature geothermal systems research – including produced water from oil and natural gas wells – and the challenges of induced seismicity and water usage.

  • Shifting to the U.S. Geological Survey (USGS), its budget proposal included a 9 percent increase for the Energy Resources program, to $30.8 million. This increase is to provide the scientific support the Department of Interior needs to foster wind development on public lands.
  • The Minerals Resources program faces a 2.5 percent decrease in funding to $52.5 million due to some reprogramming of funds. But the administration deserves credit for recognizing the value of the minerals program. It had been under continuous threat during the previous administration.
  • The National Cooperative Geologic Mapping program budget request is up a fraction at $28.3 million, and the USGS data preservation program is expected to also remain flat at $1 million.

There were no surprises in the president’s budget, at least for the programs we track. DOE oil and natural gas programs are perennially under pressure, while carbon sequestration and geothermal present real opportunities for applied geoscience researchers. At USGS chronic underfunding hampers the data preservation program.

The proposed tax changes have caused great consternation among AAPG members, because of their destructive potential if implemented. It is up to us to explain to our elected officials, friends and neighbors why these tax proposals are bad public policy and why the federal government should be involved in oil and natural gas R&D.

Now is not the time for panic. Now is the time for AAPG members to get personally engaged.

Comments (0)


What Can I Do?

Add Item

Enter Notes:
* You must be logged in to name and customize your collection.
Recommend Recommend
Printable Version Printable Version Email to a friend Email to a friend

Washington Watch

Washington Watch - David Curtiss

David Curtiss served as the Director of AAPG’s Geoscience and Energy Office in Washington, D.C. from 2008-11.

Washington Watch

Washington Watch - Creties Jenkins

Creties Jenkins is a past president of the EMD.

Washington Watch

Washington Watch - Peter MacKenzie

 Peter MacKenzie is vice chair of the Governance Board. 

Washington Watch

Washington Watch - Dan Smith

Dan Smith is chair of the Governance Board.

Policy Watch

Policy Watch is a monthly column of the EXPLORER written by the director of AAPG's  Geoscience and Energy Office in Washington, D.C. *The first article appeared in February 2006 under the name "Washington Watch" and the column name was changed to "Policy Watch" in January 2013 to broaden the subject matter to a more global view.

View column archives

See Also: Book

Desktop /Portals/0/images/_site/AAPG-newlogo-vertical-morepadding.jpg?width=50&h=50&mode=crop&anchor=middlecenter&quality=90amp;encoder=freeimage&progressive=true 4585 Book
Desktop /Portals/0/images/_site/AAPG-newlogo-vertical-morepadding.jpg?width=50&h=50&mode=crop&anchor=middlecenter&quality=90amp;encoder=freeimage&progressive=true 4386 Book

See Also: Bulletin Article

This article describes a 250-m (820-ft)-thick upper Eocene deep-water clastic succession. This succession is divided into two reservoir zones: the lower sandstone zone (LSZ) and the upper sandstone zone, separated by a package of pelitic rocks with variable thickness on the order of tens of meters. The application of sequence-stratigraphic methodology allowed the subdivision of this stratigraphic section into third-order systems tracts.

The LSZ is characterized by blocky and fining-upward beds on well logs, and includes interbedded shale layers of as much as 10 m (33 ft) thick. This zone reaches a maximum thickness of 150 m (492 ft) and fills a trough at least 4 km (2 mi) wide, underlain by an erosional surface. The lower part of this zone consists of coarse- to medium-grained sandstones with good vertical pressure communication. We interpret this unit as vertically and laterally amalgamated channel-fill deposits of high-density turbidity flows accumulated during late forced regression. The sandstones in the upper part of this trough are dominantly medium to fine grained and display an overall fining-upward trend. We interpret them as laterally amalgamated channel-fill deposits of lower density turbidity flows, relative to the ones in the lower part of the LSZ, accumulated during lowstand to early transgression.

The pelitic rocks that separate the two sandstone zones display variable thickness, from 35 to more than 100 m (115–>328 ft), indistinct seismic facies, and no internal markers on well logs, and consist of muddy diamictites with contorted shale rip-up clasts. This section is interpreted as cohesive debris flows and/or mass-transported slumps accumulated during late transgression.

The upper sandstone zone displays a weakly defined blocky well-log signature, where the proportion of sand is higher than 80%, and a jagged well-log signature, where the sand proportion is lower than 60%. The high proportions of sand are associated with a channelized geometry that is well delineated on seismic amplitude maps. Several depositional elements are identified within this zone, including leveed channels, crevasse channels, and splays associated with turbidity flows. This package is interpreted as the product of increased terrigenous sediment supply during highstand normal regression.

Desktop /Portals/0/PackFlashItemImages/WebReady/sequence-stratigraphy-of-the-eocene-turbidite.jpg?width=50&h=50&mode=crop&anchor=middlecenter&quality=90amp;encoder=freeimage&progressive=true 5773 Bulletin Article

See Also: DL Abstract

Human kidney stone formation (nephrolithiasis) presently affects 12% of men and 5% of women in the United States, generating an estimated annual healthcare cost of $2.1 billion. A first of its kind analysis is being untaken of the integrated role of human microorganisms (the microbiome) in influencing the dynamics of human disease-related mineral precipitation (biomineralization). Direct comparison and inference is being drawn from geobiological studies of microbe-water-rock interactions in Yellowstone hot-springs, Caribbean coral reefs and Roman aqueducts.

Desktop /Portals/0/images/_site/AAPG-newlogo-vertical-morepadding.jpg?width=50&h=50&mode=crop&anchor=middlecenter&quality=90amp;encoder=freeimage&progressive=true 11398 DL Abstract

See Also: Short Course

Black Belt Ethics examines the various tenants that define the martial artist’s code of honor. The course reviews each of these tenants and discusses how they can be applied in our personal and professional lives.

Desktop /Portals/0/PackFlashItemImages/WebReady/ace2015-sc05-black-belt-hero.jpg?width=50&h=50&mode=crop&anchor=middlecenter&quality=90amp;encoder=freeimage&progressive=true 14562 Short Course