• Energy Tax Facts
  • 12 Apr 13

PennEnergy: ANGA tells OMB drilling tax plan undercuts economic energy goals

The Obama administration’s plan to repeal a deduction for intangible drilling costs (IDCs) is inconsistent with President Obama’s plan to make greater use of our nation’s clean, abundant natural gas resource, America’s Natural Gas Alliance said in a letter today to acting director of the Office of Management and Budget Jeffrey Zients.

The letter, signed by ANGA’s acting President and Chief Executive Officer Greg Pensabene, said there is a disconnect between the president’s support for safe and responsible development of natural gas, and the imposition of billions of dollars in new taxes on this capital intensive drilling process. The upshot is that considerable economic, national security and environmental advantages could be lost, at odds with the president’s recognition of the important role natural gas must play in America’s energy future and in creating jobs.

“Eliminating the deductibility of IDCs would reduce new natural gas exploration and reserve growth, put a damper on jobs creation and undermine U.S. energy security,” Pensabene wrote.

“It would put our nation at risk of higher and more volatile energy prices, and result in less state and federal revenue and a more tepid economic recovery.”

Intangible drilling costs typically amount to 60 percent to 80 percent of the cost of drilling and completing a well. It is estimated that the elimination of this deduction would reduce development activity by 4,000 wells in the first year alone—roughly a quarter of total wells drilled annually in the U.S. today. By contrast, safe and responsible natural gas development in the United States is accounts for 2.8 million American jobs, billions in investment on U.S. soil in chemicals, steel, plastics and more; and $930 billion in federal, state and local revenue and royalty payments over the next 25 years—just from shale gas.

“Natural gas offers our nation a cleaner, vast and domestic resource capable of fueling our homes, businesses and vehicles for generations to come,” the letter said. “Its full potential should be encouraged, rather than discouraged by counterproductive tax increases.”

A copy of the letter can be viewed here.