The Obama administration and Congress have launched “multiple warheads” against the oil and gas industry, and although many of the proposals are “politically naïve,” they may get approved, said Clint Stretch, managing principal in the Washington, D.C., office of Deloitte Tax LLP, in a webinar titled “Oil and Gas Tax Policy: Live From Capitol Hill” for OilandGasInvestor.com.

“There is significant fear today among oil and gas producers. The new taxes that have been proposed could cause irreparable harm to the industry,” Stretch said. “This is more evidence that government is a very unpredictable business partner.”

The government needs to raise revenue to offset a growing budget deficit and increased spending. The Congressional Budget Office has estimated that the deficit could reach 3.5% of gross domestic product in 2010 and may go as high as 12% thereafter.

“We are in a very different world today. Since the early 1980s we have been essentially running the U.S. government at 20% off—that is, paying 80 cents to get a dollar of economic activity. Running a deficit of 3.5% of GDP in 2010 is unsustainable.”

Hence, the oil and gas industry is a target for revenue. Obama has proposed business tax increases with no corporate tax relief, although the changes may not kick in until 2011 or as the administration says, “after the recession.”

New revenue from a cap-and-trade or 100% auction-based carbon system is now being debated. “There is great resistance to the 100% auction format and people seem to think there should be a value-added tax or a fuel tax instead. Obviously this creates a risk to the petroleum industry.

The administration recently released its proposal to change taxation of companies with international operations, reflecting a possible 9% increase in total tax burden, for a total raise of $210 billion across all industries, “a truly extraordinary number,” Stretch said. The proposal would essentially subject those foreign earnings to double taxation.

Despite all the debate in Washington and worry in the oil patch, none of the proposals is inevitable, Stretch said, but it is clear there are serious changes coming that may affect all American industries.

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