Obama Administration: US Has Overinvested In Oil, Gas

The Obama administration opened a new front in its effort to impose $31.5 billion in taxes on oil and gas companies, saying that the nation puts too much emphasis on oil and gas at the expense of other industries.

The chief economist in the Obama administration’s Treasury Department testified before a Senate panel that current subsidies “lead to overinvestment” in the oil and gas industry. That went beyond previous statements about the need to protect taxpayers and was the clearest signal yet that the federal government hopes to end its role in nurturing domestic oil and gas production.

“To the extent that current subsidies for the oil and gas industry encourage the overproduction of oil and natural gas, they divert resources from other, potentially more efficient investments, and they are inconsistent with the Obama administration’s goals to reduce greenhouse-gas emissions and build a new, clean energy economy,” Alan Krueger, the Treasury’s chief economist, told the panel.

“That’s absurd,” said Devon Energy Corp. (DVN) Chief Executive Larry Nichols, the chairman of the American Petroleum Institute, before the panel. “At a time when respected energy studies agree on the need to increase all sources of domestic energy, it makes absolutely no sense to discourage production of our leading sources, oil and natural gas.”

Rigzone