U.S. Oil, Gas Producers: President Obama’s 2016 Budget Proposal Derails Progress

U.S. Oil, Gas Producers: President Obama’s 2016 Budget Proposal Derails Progress

WASHINGTON, D.C. – Today, Independent Petroleum Association of America (IPAA) President and CEO Barry Russell released the following statement in response to President Barack Obama’s released budget proposal for Fiscal Year 2016:

“At a time when the oil and natural gas industry is experiencing significant uncertainty, the President’s call for higher taxes on the industry would increase costs on our energy companies and ultimately the savings that are passed on to hardworking American families. The President’s call to repeal the industry’s ‘subsidies’ mischaracterizes the industry’s tax provisions and disregards the way the tax code has influenced energy development for decades. These are the same deductions provided to a wide array of other industries from manufacturing to accounting. These historic provisions enable independent producers to take on the high capital risk of exploring for and producing America’s oil and natural gas. Without these deductions, like Intangible Drilling Costs (IDCs) and percentage depletion, the American energy revolution the President continues to tout would not exist as it currently does.

“In his State of the Union address, President Obama was quick and correct to praise America’s energy renaissance, highlighting that the United States is producing more oil and gas here at home than we are importing. However, today’s budget proposal by the President seeks to derail this energy boom – production that has transformed our national energy outlook while cleaning up our air, reducing carbon emissions, and creating good-paying American jobs.

“American independent oil and natural gas producers currently reinvest 150 percent of their capital budgets into new energy projects, providing over 4 million jobs and billions of dollars in revenue and taxes, while producing oil and clean-burning natural gas across the nation. However, if the President’s call to remove the IDC deduction were enacted, independent oil and natural gas producers would reduce their capital investments by up to 25 percent. These companies – who produce 95 percent of the nation’s oil and natural gas – will be forced to cut production, resulting in less revenue to U.S. Treasury and fewer American jobs. This would derail America’s progress toward achieving greater energy security. The tax treatment is crucial to the continued health and operations of these companies.

“Proposed changes to the percentage depletion deduction would also impact America’s small independent producers – companies with an average of just 12 employees — and royalty owners. These stakeholders are the backbone of American energy development and they rely on the percentage depletion deduction to maintain America’s marginal wells, which generate 20 percent of American oil and more than 12 percent of American natural gas.

“Repeal of the passive loss exception would also harm these small businesses. This provision was originally instituted to ensure that small producers, who rely on private investors for financing, could compete with larger companies and gain access to capital from banks and other larger financial institutions. IPAA is greatly concerned about the impact repealing this tax provision would have on the small businesses that rely on these investments to continue exploring and producing oil and natural gas.

“Instead of targeting tax provisions that support the exploration and development of America’s vast natural resources, the President should encourage energy production here at home. If the President is truly interested in reducing the nation’s deficit and creating new jobs, he should recognize the important role that America’s independent producers can continue to play in fueling a long-term revitalization of America’s economy.”

To learn more about tax provisions that support continued American energy production and job growth across the nation, visit www.EnergyTaxFacts.com.

About the Independent Petroleum Association of America
The Independent Petroleum Association of America (IPAA) is the leading, national upstream trade association representing oil and natural gas producers that drill 95 percent of the nation’s oil and natural gas wells. These companies account for 54 percent of America’s oil production, 85 percent of its natural gas production, and support over 2.1 million American jobs.

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