• Energy Tax Facts
  • 22 Oct 13

Oil and Gas Supply Chain Group Supports the IDCs Deduction

This week the Energy Equipment and Infrastructure Alliance (EEIA) sent a letter to leaders of the House Ways & Means and Senate Finance Committees urging members to reject any proposal to eliminate the expensing of intangible drilling costs (IDCs) as part of any comprehensive tax reform.  Significantly, the EEIA does not represent oil and gas producers, but rather supply chain companies and equipment providers to the industry. These companies do not directly benefit from the IDCs deduction, but they realize the critical role that tax policy plays in U.S. energy production.

The letter explains that the oil and natural gas industry leads the country as an economic stimulator and that this is only possible because of the IDCs tax deduction.  Stripping away these tax deductions would suppress future development of oil and natural gas in the U.S. and eliminate the economic benefits American’s are currently enjoying from increased production levels.

IDCs help promote continued reinvestment in the exploration and production of oil and natural gas, as the letter states, “this time-tested current tax treatment of IDCs allows producers to recover their investments costs quickly so they can be reinvested to explore for and produce new domestic oil and natural gas supplies.”  Without the IDCs deduction in place energy companies would have less capital on hand to invest in exploration and well site development, and thus, less energy would be produced.