Energy industry works to save its tax breaks By JENNIFER A. DLOUHY Copyright 2010 Houston Chronicle, Nov. 29, 2010, 9:41PM WASHINGTON — Oil and gas industry leaders are warning the lame-duck Congress that lawmakers will jeopardize jobs and an economic rebound if they slash tax incentives for energy producers and petroleum refiners. The Obama administration has proposed eliminating tax deductions and policies that have long benefited the oil industry. Although Congress has been lukewarm to the ideas before, lawmakers may revive them as part of a plan to extend Bush-era tax cuts set to expire Dec. 31.   The issue could arise if lawmakers try to find a way to pay for renewing the Bush tax cuts by raising other taxes or cutting spending elsewhere. If they go the tax route, the oil and gas industry incentives could be in the cross hairs.   "The question is whether the Congress will feel (renewing the Bush tax cuts) needs to be paid for through tax increases or spending offsets," Stephen Comstock, tax manager for the American Petroleum Institute, said Monday. "That debate is still raging." Bush-era tax cuts It is unclear how - or if - Congress will renew the expiring tax cuts that took effect under former President George W. Bush. Democrats and Republicans could compromise on a plan to temporarily renew some of the tax cuts, possibly for those earning less than $1 million or some other threshold.   API officials have been trying to ward off any new industry-focused tax changes by arguing that oil and gas companies already pay their fair share. They also stress that some of the targeted deductions are critical to keeping capital flowing to new projects that employ workers while producing energy.   Comstock said that in some discussions with lawmakers, industry representatives have been told "you guys need to pay your fair share" and "you guys have the money." Fact sheet To counter that view, API officials are handing lawmakers and congressional staff a fact sheet that stresses that oil and gas companies pay an effective tax rate - 48.4 percent of pre-tax net income - that is nearly double that of other industries, which pay about 28.1 percent in income tax expenses.   Some of the proposals under discussion would block oil and gas companies from taking tax deductions and using accounting practices that are broadly allowed for other industries.   For instance, lawmakers have proposed barring the nation's five largest oil companies from taking a domestic manufacturing deduction that currently allows them to cut their taxable income by 6 percent. Other industries and smaller oil companies would still be able to take the deduction.   jennifer.dlouhy@chron.com