Obama proposes end to oil, gas industry tax breaks

President Barack Obama outlined a budget plan Thursday that would end $26 billion in oil and gas industry tax breaks, point to a new direction for dealing with nuclear waste and shift government aggressively toward helping to develop renewable energy sources.

Obama called the tax break to the oil and gas industry "unjustifiable loopholes" in the tax system that in most cases other companies do not get.

The proposed budget, details of which were released Thursday, calls for abandoning the decades-old Yucca Mountain nuclear waste project in Nevada and begin the search for another answer to disposing thousands of tons of used reactor fuel now kept at power plants in 31 states. It also would end government subsidies to the nuclear industry to help them certify and plan new nuclear power plants, cutting the program from $178 million to $20 million.

The oil and gas industry tax breaks have often been targeted by congressional Democrats in recent years, but they have not been able to muster enough votes to rescind them. Most Republicans and the Bush administration vigorously defended the tax benefits, saying they're needed to boost domestic oil and gas development.

In the budget statement, Obama said the tax breaks, which are expected to save the oil and gas industry more than $26 billion over the next 10 years, are "unjustifiable loopholes ... costly to the American taxpayer and do little to incentivize production or reduce energy prices."

Responding to the Obama budget priorities, Barry Russell, president of the Independent Petroleum Association of America, complained, "We can't tax our way to energy independence."

The White House last February outlined in general terms its proposed budget for the fiscal year beginning in October. But the documents released Thursday provided specific numbers.

The budget would provide $197 million for the Yucca Mountain nuclear waste project in Nevada, but it directs that the money be spent to "explore alternatives" to the Nevada site and ongoing licensing activities that have yet to be terminated. It stipulates that no money go for site access work, new engineering or land purchases.

"There has to be an orderly shutdown" at Yucca, said Energy Secretary Steven Chu, who added that, nevertheless, "the administration is completely committed to finding a path forward" on the issue of nuclear waste. It plans soon to name a commission to develop a new nuclear waste plan.

Closing down the Yucca project, located 90 miles from Las Vegas, has been a relentless ambition of Senate Majority Leader Harry Reid, D-Nev. Obama, during his presidential campaign, promised Nevada voters that he would look for other ways to address the disposal of highly radioactive waste from commercial power plants.

Obama's budget also would largely abandon the Bush administration's push to develop hydrogen as an energy source, calling its emergence as a viable fuel unrealistic for the near future. Funding for the program, one cited frequently by President George W. Bush as a key to the country's energy future, would be cut by $101 million to $68 million. A separate $8 million research program on using nuclear power plants to produce hydrogen was canceled.

Other research into electric car technology, better batteries and development of biofuels is "a much better place to put our money," said Chu.