President Obama 's Proposed Fiscal Year 2015 Budget

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Executive Summary
President Obama’s Proposed Fiscal Year 2015 Budget of the U.S. Government includes $97 billion in tax increases on the American oil and natural gas industry as well the repeal of several provisions specific to the oil and gas industry through the elimination of existing Fossil Fuel Preferences.
Furthermore, the elimination of Last-In-First-Out (LIFO) accounting standards will greatly diminish the oil and gas industry’s ability to pay comparatively less taxes on recently added inventory items that are more expensive than previously added inventory.
As a real-world example of the financial impact of the Proposed 2015 U.S. Fiscal Budget, two after-tax cash models were developed and evaluated based on a hypothetical drilling
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$74 was determined to be the before-tax breakeven selling price per barrel under the current tax rules. Applying the proposed changes, the breakeven selling price per barrel was determined to be $92. This clearly indicates that the proposed changes are not favorable to the oil and gas industry and pose a great risk to the financial health of the American oil and gas industry.
Current Tax Laws
Investors in oil and gas drilling programs seek a return on their investment through revenues produced by the wells drilled and through tax benefits associated with such drilling and production.
Tax Benefits Available to Investors
Presently there are numerous tax benefits enjoyed by investors in oil, the purpose of which are to encourage oil and gas production on American lands, discourage dependence on foreign oil and also to create and maintain well-paying jobs in the industry. These benefits allow companies drilling wells and developing production property to determine whether they should capitalize or deduct certain expenditures. Capitalized costs of equipment or leasehold interests are recovered through either depreciation (in the case of equipment or building) or depletion (in the case of the leasehold interest). At present, deductible expenses
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