SO MUCH FOR 'ENERGY INDEPENDENCE'

Removing drilling incentives will mean less drilling, which will mean less domestic production and more imports of both oil and natural gas...

Democrats are calling to eliminate drilling subsidies that have encouraged advances in technology and have opened vast new U.S. energy sources.

In May, President Obama called the tax breaks for the oil and gas industry "unjustifiable loopholes" that do "little to incentivize production or reduce energy prices." That's flat not true. Subsidies encourage energy companies to plow huge amounts of capital into more drilling. And that drilling has resulted in unprecedented increases in natural gas production and potential.

An April Department of Energy report estimated that the newly available shale resources total 649 trillion cubic feet of gas. That's the energy equivalent of 118.3 billion barrels of oil, or more than the proven oil reserves of Iraq.

Nonetheless, president Obama's 2010 budget calls for the elimination of two tax breaks:

• One permits energy companies to deduct the bulk of their expenses for drilling new wells;
• The other allows well owners a tax break based on the value of production from their wells.

Meanwhile:

• Ethanol and biofuels are getting subsidies of $5.72 per million British Thermal Units (BTUs); that equals about $33.25 in government subsidies for the energy contained in one barrel of oil.
• Natural gas and petroleum liquids, by comparison, only get $0.03 per million BTUs (about $0.17 for the energy contained in one barrel of oil).

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