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  • Energy Tax Facts
  • 7 Jun 13

IDC Deduction Shoring Up American Energy Security

The shale revolution has been, and continues to be, led by America’s independent producers. And now, even the OPEC cartel is being forced to pay attention.

Since George Mitchell combined hydraulic fracturing and horizontal drilling in the Barnett Shale of Texas, the production from shale basins all across America has skyrocketed.  As the Houston Chronicle editorial board highlighted this week, the supply brought on by this development is beginning to make even OPEC worried:

“Things are getting interesting vis a vis OPEC and the U.S. shale industry. The once-omnipotent oil cartel is taking serious notice of the impact of the shale boom on global oil prices and markets. As well it should. Increased shale oil production domestically is pushing the U.S. toward potential energy self-sufficiency by 2018, analysts predict. Boosts in shale oil production in this country already are cutting deeply into OPEC’s share of the U.S. oil market.”

This is a remarkable achievement for America’s energy security – one that would have been impossible to achieve without the intangible drilling costs deduction (IDCs).

The standard IDC tax deduction enables independent producers to recover expenses an operator may incur at the wellsite, which helps to promote continued reinvestment in the exploration and production of oil and natural gas. This provision has enabled independents, like George Mitchell and others, to invest more aggressively in shale development across the United States.  As Deborah Myers stated in Forbes last year, “It is not an exaggeration to say that the IDC provision is one of the factors that has allowed the ‘shale revolution’ to ramp up so quickly.”

As the Houston Chronicle editorial board highlights, “the shale boom offers the country, and perhaps the world, the opportunity of slipping OPEC’s leash while stabilizing the U.S. and other economies.” Repealing the historic IDCs tax provision may put this opportunity for energy security at risk.

Read the full editorial from the Houston Chronicle and learn more about the importance of IDC’s from Energy Tax Facts.