President Barack Obama sent a mixed message to the natural gas industry, Washington trade groups said Wednesday, by naming the fuel a clean energy source at the same time he renewed efforts to eliminate major tax breaks and deductions.
In his State of the Union address Tuesday, Obama urged Congress to pass legislation that would require electricity generators to produce at least 80% of their power from clean sources by 2035. He piqued gas producers' interest when he suggested a broad array of fuels should count toward that clean-energy standard.
"Some folks want wind and solar," Obama said. "Others want nuclear, clean coal and natural gas. To meet this goal, we will need them all, and I urge Democrats and Republicans to work together to make it happen."
Obama said Congress should pay for the clean-energy agenda by rolling back billions of dollars in tax incentives for "oil companies."
"I don't know if you've noticed, but they're doing just fine on their own," he said, drawing laughter and applause.
Bill Whitsitt of Devon Energy said the juxtaposition wasn't fair to the sector. He said oil shouldn't be portrayed as "old energy" at a time when it provides unprecedented mobility and consumer products.
"The oil industry is also the oil and gas business," said Whitsitt, Devon executive vice president of public affairs. "It is a high-tech, futuristic business. If anyone doubts that, all they have to do is look at the technology used today to extract both oil and natural gas from these ultra-hard shale rock -- and any notion of old energy would be dispelled."
Whitsitt said the tax treatment sounded the same as the administration's two previous budget proposals, which called for the removal of certain deductions for producers. Stripping the deduction for intangible expenses for drilling companies would cost as much as 20% of Devon's drilling budget, he said.
"It tells us that the speech writers either need help understanding our industry or it was very clever and was used for some other purpose," he said. "It's very puzzling as to why he would single us out yet again."
Bruce Vincent, chairman of the Independent Petroleum Association of America, said the measure would eliminate jobs and burden small businesses.
"The president's massive tax hike proposal -- which was soundly rejected by Democrats and Republicans on Capitol Hill last Congress -- would cripple our industry's ability to compete," he said in a statement, "leaving struggling American consumers more vulnerable to unstable energy prices at the pump and in their homes, and deepening our nation's dependence on often unfriendly regions of the world to fuel our economy, which will further worsen our balance of trade."
Natural Gas Supply Association members were heartened to hear Obama include natural gas in the speech but troubled by the tax talk, too, spokeswoman Daphne Magnuson said.
"Using more natural gas in the United States helps reduce emissions and is a proven way to create jobs," she said. "Higher taxes on producers would negatively impact that effort."
The Interstate Natural Gas Association of America focused on the positive, gas should count toward clean energy mandates, spokeswoman Cathy Landry said.
"The devil is in the details with these things," she said. "The State of the Union is an aspirational speech. You really need to find out, 'What does this mean?' We're pleased that he at least acknowledged that natural gas is part of our energy future. We wholeheartedly agree."
Because the tax proposal goes after producers, not pipelines, Landry said INGAA would not fight it.
