The People of America's Oil and Natural Gas Indusry

Energy Tomorrow Blog

taxes  tax-policy  cost-recovery  intangible-drilling-costs  section-199  foreign-tax-credit  lifo 

Stephen Comstock

Stephen Comstock
Posted January 29, 2014

Contrary to what some in politics, the media and most recently, the president during the State of the Union, have said, the oil and natural gas industry currently receives not one taxpayer “subsidy,” “loophole” or deduction. Since its inception, the U.S. tax code has allowed corporate taxpayers the ability to recover costs. These cost-recovery mechanisms, also known in policy circles as “tax expenditures,” should in no way be confused with “subsidies” – direct government spending or “tax loopholes.”

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taxes  taxes-impact-on-business  oil-and-natural-gas-development  economic-policy 

Stephen Comstock

Stephen Comstock
Posted January 21, 2014

A new year unfortunately means the same old tired arguments from folks seeking higher punitive taxes on America’s oil and natural gas companies, in this case in the form of a post from the Center for American Progress (CAP), which seeks to simplify the complexity of comprehensive tax reform down to “end special tax breaks for the five biggest oil companies.” So what are these “special” tax breaks they want to end?

Well, the first identified by CAP is the “Section 199 deduction” created in 2004 to spur employment in U.S. manufacturing and is available for all U.S. taxpayers who manufacture in the U.S.  So, not special for oil and natural gas companies, and in fact oil and natural gas companies are already singled out for reduced used of the deduction, compared to other manufacturers. The second is the foreign tax credit deduction, which is designed to minimize double taxation and is available to all U.S. companies with operations overseas. So again, not special for oil and natural gas companies. Lastly, CAP wants to end the intangible drilling costs deduction (IDCs), which is a cost-recovery mechanism for oil and natural gas exploration and production expenses that has existed since 1913.  While drilling costs are unique to drillers, the deduction of costs is similar to cost-recovery provisions provided to every business, so not special, and as a bonus, IDCs are also not a tax break, as drillers pay the full amount of taxes that are owed. 

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section1504  hydraulic-fracturing  keystone-xl-pipeline 

Stephen Comstock

Stephen Comstock
Posted May 10, 2013

Two of the most strategic energy partners for the United States are undoubtedly Mexico and Canada. With the right policies toward our energy neighbors – approval of the Keystone XL pipeline and the U.S.–Mexico Hydrocarbon Transboundary Agreement (TBA) - we have the potential to be North American energy self-sufficient by 2030 and enhance our energy security.

Keystone XL has drawn a lot of headlines, and it is well known that the project is in the national interest. Less well known is the U.S.–Mexico TBA.

The U.S.–Mexico TBA will govern the treatment of resources in the Gulf of Mexico that are located near the maritime border with Mexico. Congress is currently reviewing the agreement and both the House and Senate have introduced implementing legislation.

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access  fairness  energy-taxes  lifo  section-199 

Stephen Comstock

Stephen Comstock
Posted April 11, 2013

Let’s dig into the details of the more than $90 billion (over 10 years) in new and targeted tax increases on America’s oil and natural gas companies that President Obama included in his FY2014 budget. Note: The tax provisions below are in no way “taxpayer subsidies” and are not unique to our industry. They constitute standard business deductions (some available to all other industries) and mechanisms of cost recovery – a fundamental and necessary component to a national income tax system. Here we go:

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energy-taxes  energy-policy  oil-taxes  natural-gas-tax 

Stephen Comstock

Stephen Comstock
Posted March 20, 2013

Associate editor at The Atlantic Jordan Weissmann had a provocatively titled piece yesterday on taxes and the oil natural gas industry which may have generated some traffic, but it certainly did nothing to contribute to an honest debate.  His premise was to identify tax increases on the oil and natural gas industry as a: “safe ground to set up camp for the budget negotiations.”

The US imposes tax on net income, not gross income, which means that all businesses, whether they are farmers, manufacturers or oil companies, are allowed to deduct their normal business expenses from income in calculating their tax due.  Accordingly, the oil and gas industry is eligible for business deductions that are the same as or similar to those available to other taxpayers.  Contrary to what others may say, the industry does not receive credits, does not benefit of mandates and is not directly subsidized by the federal government. Weissmann’s one-sided opinion piece attempts to state otherwise by identifying specific items – so let’s look at them:

Expensing Intangible Drilling Costs ($13.9 billion): Since 1913, this tax break has let oil companies write off some costs of exploring for oil and creating new wells.

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