Barry Russell, president and CEO, Independent Petroleum Association of America:
“To be clear, there are many problems with the nation’s tax code, but when it comes to America’s oil and natural gas industry, the current tax code, refined over the past 100 years, is an example of public policy that actually works. Current tax rules and laws ensure that industry pays its fair share in taxes, which is now one of the most heavily taxed industries in the country. The current tax code also encourages investment resulting in massive new U.S. energy supplies and millions of jobs.
The result: today, America’s oil and natural gas industry is a bright spot in the economy and the envy of the world. Just this month, for the first time in almost twenty years, we produced more oil here at home than we imported. But, the Baucus tax plan jeopardizes America’s energy renaissance.
“Senate Finance Committee Chairman Baucus’ efforts to update the tax code include repealing certain historical tax provisions that support continued energy development such as the current Intangible Drilling Costs (IDCs) deduction. A study released by Wood Mackenzie found that repealing the IDCs deduction would have a drastic impact on the American economy, including 190,000 jobs lost within the next year and 233,000 by 2019. The study also found repealing the IDC deduction would force U.S. oil and gas producers to cut back their production by 15 to 20 percent annually, reducing industry spending by $407 billion between 2014 and 2023.
“Congress should know that the tax policies that govern independent producers are not credits, subsidies or handouts. These provisions and deductions, which are available to nearly every American industry, enable continued investment in U.S. energy exploration and production. Independent energy producers — companies with an average of 12 employees, which drill nearly 95 percent of the nation’s oil and gas wells — are at the heart of America’s great energy revival. The current provisions in the tax code that promote continued American energy production are key to the success of these small operators.
“Independent oil and natural gas producers’ onshore upstream taxes alone generated $67.7 billion in 2010. Removing these tax provisions would lead to less industry activity and could actually generate less in total government revenue.
“American voters understand the importance of supporting continued development of our vast energy resources – development that is creating jobs and providing revenues from the statehouse to the federal treasury. As Washington looks to reform the tax code and manage the budget, the real costs of changing the historic tax structure supporting American energy cannot be overlooked.”
IPAA will be submitting extensive comments to Chairman Baucus on this issue.
For more information on independent oil and natural gas producers and the tax code, visit www.energytaxfacts.org.