The Los Angeles Times reported the plan on Friday which it said was backed by the Export-Import Bank and some of the big US firms.
The newspaper said the rationale behind the proposal is to acquire much-needed funds needed for the rebuilding effort in the country.
The bank along with a business coalition that includes Halliburton, Bechtel Group and other major companies are warning that unless new funds are secured, the "reconstruction well could dry up".
Those companies, which have ties to officials in the Bush Administration, are interested in winning contracts in Iraq.
But some administration officials along with lawmakers, policy analysts and prominent Iraqis disagree.
They believe mortgaging Iraq's most vital resource would prevent future leaders from deciding how to spend their country's oil money, the report said.
The Times also said those who oppose the plan question the US's legal and moral authority to make such a pledge without the issue being debated by elected Iraqi officials.
"Unless a recognised Iraqi government or the UN Security Council authorises the plan, it appears to violate international law," Democratic Congressman Henry Waxman was quoted as saying.
The US military has already come under criticism for awarding Iraqi oil contracts to a Halliburton subsidiary in March without putting it out to bid.
On Thursday, it said it invited bids to replace those contracts worth up to a billion dollars.
The US Army Corps of Engineers said it would issue one contract for the fields in the north of Iraq and another for the south, each worth from $500,000 to a maximum $500 million.