A combination of President Obama’s first budget, the recently passed stimulus bill and the impending climate-change bill could add up to a massive shift in US energy policy. The major energy companies are apoplectic over the proposed changes which impose heavy taxes on the old fossil fuels, largely by removing long standing tax breaks, and transfer billions to help develop renewable sources of energy.

The publication of the budget immediately polarized the debate, with Republicans and industry spokesman denouncing the proposals while Democrats and environmental groups were largely supportive.

As most of the proposed changes have to do with esoteric tax deduction and accounting rules, their impact is comprehensible primarily to accountants for the industries concerned. Some have to do with tax loopholes which allow the oil industry free or cheap access to oil on federal property.

A spokesman recently said that the oil industry pays about $152 billion in local state and federal taxes each year. Some are saying that the changes would increase this tax burden by only $3-4 billion a year which does not seem much given the size of the industry’s recent profits.

One of the emerging issues seems to be the effect of the tax changes on the myriad of small producers who do most of the on-shore oil and gas drilling in the US these days. Unlike the majors who have massive cash reserves, these companies have been hit hard by the credit crunch and industry spokesmen insist they will be driven out of business in droves by higher taxes. This of course would add to unemployment and increase America’s dependence on foreign oil.

Environmental organizations see the proposed changes as the end to the tax-payer funded feast that they assert the oil companies have enjoyed far too long.

The truth in all this is nearly impossible for an outside observer to fathom. The only thing we can be sure of is that there will be ferocious debates in the Congress and massive lobbying efforts by both sides in the days ahead.