WASHINGTON D.C. - U.S. Congressman Dan Boren issued the following statement today regarding the specific energy provisions outlined in the President’s Budget. They include the repeal of several tax provisions that are critical the country’s domestic energy industry, which will harm Oklahoma’s state economy, and will increase the United States’ dependence on foreign energy. Among many other harmful energy provisions, the budget specifically includes the repeal of the Intangible Drilling Cost (IDC) deduction and the repeal of the percentage depletion income tax deduction.
“It is impossible for me to stand-by silently and allow these proposals to destroy my state’s economy and have devastating impacts on consumers and small businesses across the nation. It is also impractical for anyone to believe that oil and natural gas will not be the bridge that connects our current energy economy to the future and how we will power our daily lives. Energy prices affect all Americans, not just the ones that harvest and produce it. The President’s budget is not a formula for job creation or energy independence. It will destroy Oklahoma’s independent producers and our domestic energy industry by forcing them to significantly cut their exploration and production activities. This would have a drastic negative impact on state and local tax revenues, and would eliminate the goal of energy independence and economic recovery,” Boren said.
The repeal of IDC would eliminate a producers’ ability to deduct certain costs associated with drilling and developing wells. The first-year impact of this proposal could be a reduction in drilling by 25 percent, a drop-off which when compounded with the 30 percent natural decline of wells producing annually will create a devastatingly rapid fall of in production. This abrupt loss of supply would most certainly increase energy prices for consumers and businesses and greatly discourage the development of domestic resources.
The percentage depletion provision for natural gas and oil has been in the tax code since 1926. Unlike percentage depletion for all other resources, natural gas and oil percentage depletion is highly limited. It is only available for American production, and only available to independent producers who produce less then 1000 barrels of oil per day. According to the National Association of Royalty Owners, this tax provision is predominantly used by royalty owners who are overwhelmingly retirees, seniors, and widows living on a fixed income that receive an average royalty check of less than $500 a month. This proposal runs counter to the President’s campaign promise not to raise taxes on those who make less than $250,000 a year.
Small independent energy producers are the mom-and-pop outfits that operate a handful of wells, the young entrepreneur seeking to expand his operation, and the regional company employing thousands of people.
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