After months of contested debate that pushed the United States economy to the brink of default, President Obama signed the bill to raise the debt ceiling into law. The bill, crafted by House Speaker John Boehner, was passed by the House on Monday night with a bipartisan vote of 269-161 and passed by the Senate today with a bipartisan vote of 74-26.
Absent in the bill were any provisions which increased taxes on the oil and gas industry which would have resulted in a loss of industry investment—which inevitably means a loss of jobs, decreased government revenues, and diminished energy security.
IPAA President and CEO Barry Russell sent a letter to Congressional leadership asking them to oppose any provisions with tax increases on the industry. In it, he highlighted the role of independent producers as job creators and explained the adverse consequences of the tax increases:
“Two key issues that affect independent producers relate to drilling costs and percentage depletion. These are neither loopholes nor subsidies. They are mechanism—like depreciation that provide for capital recovery. Independent producers historically have reinvested as much as 150 percent of their American cash flow back into new American projects. Changes that limit this capital will affect the 4 million jobs associated with just America’s independent onshore investments.”
The resistance against any tax provisions on the industry was picked up by legislators like Democratic Rep. Gene Green (TX-9) and his colleagues, who sent a letter urging House leadership to oppose any bill which, through eliminating the “capital necessary to continue drilling new wells” would “put thousands of these jobs in jeopardy, deepen our nation’s dependence on unstable regions of the world, and hamper our economic recovery.” Read IPAA’s economic analysis to learn how repeal of the historic tax structure would adversely affect the industry and devastate the economy.
Although the battle has been won, the administration’s war on oil continues. Part of the debt compromise includes the creation of a bipartisan commission, appointed by Congressional leadership. This commission will have to work together to make greater deficit reductions by late November. In his initial comments upon signing the debt compromise, President Obama spoke of a “balanced approach” in which “everything is on the table.” What the President meant by “everything,” was made very clear the next moment when he specified that the balanced approach must include “getting rid of taxpayer subsidies to oil and gas companies.” President Obama is still unabashedly intent on singling out of the oil and gas industry for tax hikes would continue—and he hopes the commission will be the perfect means to do so.
Jay Carney, the president’s press secretary, also made similar remarks in his press conference commenting that when finding 1.2 trillion more in deficit cuts as legislated through the deal, we must ask “oil and gas companies…[to] share in the sacrifice.”
The American economy scored a victory when tax increases on the industry were left out of the deficit bill. However, the administration’s rhetoric shows that the industry is not in the clear. Undoubtedly, Democratic legislators on the commission will seek to raise taxes on oil and gas companies as part of a larger assault on the industry. What America needs right now are jobs, energy supply, and energy security. What America doesn’t need is a tax hike on the industry—which would absolutely result in an increase on the debt through decreased revenues to government coffers.