Independents Battle US Plan to End Tax Incentivesby Dave Michaels|The Dallas Morning News|Monday, May 03, 2010
May 2--WASHINGTON -- Devon Energy, the largest producer of natural gas in the Barnett Shale, is fighting an Obama administration tax proposal that it says would raise its tax bill by $800 million.
Goldston Oil Corp., a small, family-owned business that drills 15 wells per year, says the same proposal would wipe out a third of its drilling operations.
As the Obama administration tries to show its commitment to reducing the deficit and greenhouse gas emissions, it has targeted the elimination of decades-old tax incentives that benefit independent oil and gas companies. The independents have reacted with a lobbying push to salvage their tax incentives, as they blast the White House proposal as evidence of bias against oil and gas.
"It is about ideology, really," said William F. Whitsitt, executive vice president for public affairs at Oklahoma City-based Devon. "It's about, 'We're going to decide there are other more productive sectors of the economy, and we're going to divert this money to things that we determine have a higher social good.' "
The administration makes no bones about wanting to build what it calls "a new, clean-energy economy." Treasury officials say oil and gas subsidies drain investment from cleaner but less profitable sources of energy. Repealing them would raise about $36 billion that could be put to other uses, including deficit reduction.
The skirmish is also a stark reminder of the difficult task of overhauling tax expenditures, the hundreds of deductions, exclusions and exemptions that pockmark the tax code. Federal Reserve Chairman Ben Bernanke has urged members of the president's deficit commission to consider tax changes, while two senators pushing their own legislation want to repeal numerous deductions and exclusions as part of an effort to lower individual and corporate rates.
Eleven:--You are correct, there will be a fierce fight re.: MLP taxation---However, most "fierce fights" are resolved by compromise. I suggest that most pols are clever fellows. They MUST show that they have done SOMETHING for the electorate. So, perhaps they will continue the tax exception for the "general partners" but eliminate it for the "managing" partner. That way everyone (pols) would get something and offend the least people.--Let's face it, Obumer is an egalitarian--He wants to spread the wealth (ours) around as much as possible.
That news dovetails into the April 27 UBS EPD/DEP analyst report. The projections show a large decrease in contract fractionation beginning midyear. This new contract obviously fills that void noted last week by UBS.
No I sold out in JUL 07 shortly after the merger with Fremont Commercial. I thought Sugarman had lost his mind buying Fremont Commercial in the market rather than waiting for it to go BK.
I owned SFI for many many years before that and Barry Sternlick was a first rate manager of SFI.
I can't believe the Board keeps Sugarman on. The NPL profile is so bad.... its like he guided SFI to ground zero of every POS overbuilt market and then within each market managed to lend money to the worst POS developer.
I am angry that Sugarman sank a great specialty finance reit. Fortunately, new ones will come along to take SFI's place because even if they get out from under their problems there will not be much of a market for high risk real estate lending. The best borrowers with the best projects will not need an SFI to finance them.
this was out this AM while the selling-off was occurring:
"HOUSTON--(BUSINESS WIRE)--Enterprise Products Partners L.P. (NYSE:EPD - News) today announced that its operating subsidiary, Enterprise Products Operating LLC, has entered into a six-year agreement to provide Anadarko Energy Services Company with natural gas liquid (NGL) fractionation services. Under the terms of the contract, Enterprise will make up to 62,000 barrels per day (BPD) of firm NGL fractionation capacity available at the partnership’s fractionation complex in Mont Belvieu, Texas beginning September 1, 2010.
“This is our single-largest fractionation agreement in the history of the partnership and we are very pleased to expand our relationship with one of the country’s top independent producers,” said A.J. “Jim” Teague, Enterprise’s executive vice president and chief commercial officer. “This agreement serves as yet another example of the strategic importance of our Mont Belvieu hub and NGL pipeline infrastructure in providing producers in prolific basins in the western United States with vital, value-added midstream services and enhancing the options available to them through our integrated value chain.”
Teague added, “With this contract, we will have added long-term supply of more than 100,000 BPD in 2010. To accommodate this demand, Enterprise previously announced the construction of a new fractionator that is expected to be in service in the first quarter of 2011, which will increase the partnership’s NGL fractionation capacity at Mont Belvieu from 230,000 BPD to 305,000 BPD.”"
Obama wants America to look like Europe. Watch the news and see our future with Obama and his leftist advisors in charge of the government. Do we really want to be like Greece, Spain,Portugal, Italy, etc. Now some of his tax people want big taxes on carbon and the MLP's so the money can be diverted to green energy. This President is a joke. Unfotunately the joke is on the American people. We need a change and November can't come soon enough.
Let's see how the brits election turns out next week. Labor was ahead 3 weeks ago and then there was a sudden turn toward the conservatives.
IF the conservatives win in Britain you can bet there will be a lot of dems creaming in their jeans.
David Obey of Wisconsin announced his retirement today. That is a surprise and clearly his polling data was showing that after 40 years in congress his lurch from atypical liberalism to the dark side of marxism did his career in.
<<<Do we really want to be like Greece, Spain,Portugal, Italy, etc.
In many ways we already do. Look at comparisons of debt to GDP and such. We can't continue on the debt-entitlement road that we are on.
That article is NOT about taxing MLP's
"Those are a so-called Section 199 deduction, which effectively reduces the corporate tax rate for companies that perform manufacturing and construction activities in the U.S.; a write-off for "intangible drilling costs," which includes most noncapital costs associated with extracting oil or gas; and "percentage depletion," a form of depreciation that applies to natural resources. "
that is a different animal
Let's not forget that MLP's are partnerships which are "pass through entities". The tax attributes of the partnership pass through to its partners, or unit holders of our MLP. So then, if there is a change in Sec. 199, that change will affect those partners that may benefit from or suffer respectively from a position relating to their Sec. 199 attributes.
I would not venture to guess how all of this Obamanian Legislation will turn out. However, if it adversely affects the energy producers in the US of A, it will be an enormous mistake.
This country needs energy and should continue to provide incentives to those in the industry for the risk of exploring for, finding, extracting and distributing it.
We have been captive to oil producing nations who, in many cases, do not share our political and social views for many years. Giving up this critical resource to those alien forces is totally against the American Way and weakens our global positioning. That cannot happen and Obama knows that as well as he knows his oath of office.(No pun intended).
 Ch4_tycoon wrote - correctly - that the tax changes referenced in the cited article would not hit the non-E&P MLPs. But - anything hurting the rig count will hurt MLPs.
 There is a lot of volume hurting prices in other sectors today. REITs are down. BDCs are down. So this could be a more generic 'equity income' sell-off than it is a unique MLP sell-off.
 We are not going to know the 'whys' for this sell off until this event is over. But MLPs began this sell-off at valuations that were at the mid-point of fairly valued. One could make the case that any sector that is close to fairly valued in the current environment of economic uncertainty is really over-valued.
 My thinking - if you are a buy and hold type - there is no news to generate selling today. And I would only buy if I were under weight in my MLP sector weighting. If you have not set a target percentage of your holdings you want in MLPs, then you really need to make THAT decision first.
There was measure to tax mlps in some committee within the last two years. It is certain to resurface in the current climate. I think the plan was to grandfather established investors, but tax going forward from a specified date.