Newspaper article THE JOURNAL RECORD

Petroleum Industry Facing $3.2 Billion Taxation Jump / Says Institute

Newspaper article THE JOURNAL RECORD

Petroleum Industry Facing $3.2 Billion Taxation Jump / Says Institute

Article excerpt

Recent changes in federal regulation and legislation are estimated to add $3.2 billion in annual taxation on the petroleum industry and related industries, according to the American Petroleum Institute.

Proposed alterations in federal regulations and legislation within the next two years could add between $10 billion and $17 billion annually.

The study, which was completed in November, breaks down possible taxation issue by issue.

- Reduction in the quantity of lead in leaded gasoline.

The U.S. Environmental Protection Agency prescribed new standards limiting the lead content of leaded gasoline to 0.1 grams per gallon.

The agency has estimated the lead phasedown will cost the refining industry about $500 million per year from 1986 to 1990.

- Implementation of the Federal Tax Reform Act of 1986.

The petroleum industry will be directly affected by limitations on expensing intangible drilling costs in the year incurred, percentage depletion changes and passive loss limitations, according to the study.

The nation's business sector will pay increased taxes through changes in the depreciation schedules, repeal of the Investment Tax Credit, changes in the taxation of foreign source income and tax accounting provisions.

The study expects these alterations to be only partially offset by the lower corporate tax rates.

In the next five years, the cost of these tax alterations will average $2 billion annually, the study reports.

- Increased revenues for Superfund.

Congress reauthorized funding for the Hazardous Substances Response Trust Fund, or "Superfund," and increased the funding level from $1.4 billion over the previous five year period to $8.5 billion over the next five years. A new underground tank fund will add $500 million over the next five years.

A tax on petroleum provided $200 million for the initital program. Petroleum taxes estimated at $3.25 billion will contribute to the reauthorized program. With the addition of the industry's portion of the new corporate tax rates, the American Petroleum Institute estimates the industry will face an added tax burden of $700 million.

The Environmental Protection Agency, Congress and the Department of Transportation have proposed several additional pieces of legislation that could place more taxes on the industry within the next two years.

- Inclusion of exploration and production wastes as hazardous under the Resource Conservation and Recovery Act.

High volume wastes associated with exploration and production of oil and natural gas are not considered hazardous wastes under the act, according to the study. Drilling muds and produced water are high volume wastes.

In August 1987, Congress is set to receive an Environmental Protection Agency report to determine whether high volume wastes should be included under hazardous waste regulations or under the less stringent solid waste regulations.

If the high volume waste designation changes to include them under hazardous wastes, costs could equal $15 billion initially and $5 billion annually, industry sources told the institute.

- Additional Acid Rain Legislation.

Congress considered a bill last session that would impose additional costs to refiners, according to the study. …

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