• Energy Tax Facts
  • 12 Feb 14

What They’re Saying: Reactions to the 2014 SOTU

As President Obama highlighted in his 2014 State of the Union, oil and natural gas production continues to provide new opportunities for the American economy and manufacturing sector while boosting our national security. Yet this year the president again repeated a call to repeal certain tax provisions provided to the oil and natural gas industry. Independent Petroleum Association of America (IPAA) President Barry Russell highlighted after the address that the energy renaissance the president takes pride in would never have been possible without the tax provisions he calls to repeal – the same provisions provided to a number of other American industries.

According to IPAA’s Barry Russell:

“The ability of America’s independent producers to develop domestic oil and natural gas resources is critical to the continued growth and health of the American economy. Yet if the historic tax provisions that support America’s independent oil and natural gas producers – companies with an average of 12 employees – are removed, this energy renaissance will be forced to stall.”

IPAA was not alone in their remarks. Chad Willis, CEO and chairman of Dallas-based Texas Energy Holdings, discussed his reaction to the SOTU in the Dallas Business Journal:

“One of the major incentives for these smaller oil companies as well as private equity shops, is the offset of risk in the form of tax deductions. Companies such as Texas Energy Holdings have relied on incentives such as intangible drilling cost deductions. Without said deductions, an already tough business would be extremely more difficult to succeed in.”

Sen. Mark Begich (D-AK) also expressed his frustration with the president’s remarks on taxes, noting in TIME that he objects to calls to end oil and natural gas tax provisions that are supporting continued energy production.  Sen. Mary Landrieu (D-La.) also emphasized the critical importance of American energy to providing jobs and opportunities for American families. From her statement:

“A true ‘all of the above’ energy strategy harnesses every energy resource, including renewables.  When we create energy from any source, we create jobs. The fact is that the energy industry pays more than four times the minimum wage. These jobs pay the kind of wages and salaries that allow families to buy homes and invest their futures.”

Jack Gerard, president of the American Petroleum Institute, also commented on the president’s plan in the Houston Chronicle:

“Jack Gerard, president of the American Petroleum Institute said Obama’s tax plan was misguided, because it would hurt ‘the oil and natural gas industry he needs to close the income gap and create jobs.’

“”Punishing energy companies by raising taxes is not sound energy policy and could lead to less energy, less government revenue and fewer jobs. The oil and natural gas industry already contributes $85 million a day to the federal government — a larger contributor of government revenue than any other industry in the United States.””

Marty Durbin, president of America’s Natural Gas Alliance, echoed that sentiment, highlighting the importance of continued natural gas production for the country:

“We continue to disagree with the president on how this industry’s tax provisions should be treated, but we stand ready to work with the Administration, Congress and policymakers around the country to see that our nation capitalizes on the many environmental, economic and national security benefits offered by natural gas.”

Katie Tubb at the Heritage Institute highlighted that the tax provisions the president calls to cut are also the same provisions provided to a number of other American industries:

“President Obama has part of the equation when he talked about cutting subsidies to oil companies, but he’s far from solving the problem. Most of the $4 billion in oil subsidies the President referred to are widely available in manufacturing. No energy source or technology, whether that be oil or solar, should get special subsidies or tax favors. Not only do subsidies inherently reward politically connected or favored industries, they waste tax dollars propping up companies and industries that should succeed or fail on their own merits. Congress should end all targeted subsides in the energy sector.”

Peter Ferrara, an American lawyer, policy analyst, and columnist who is the current general counsel for the American Civil Rights Union and analyst for the Heartland Institute, echoed that sentiment in Forbes. He also highlighted the key importance of American energy to supporting America’s middle class. From his column:

“But oil and natural gas producers taking deductions for the same costs of doing business that any other manufacturer takes is not ‘giving $4 billion a year to fossil fuel industries.’ What Obama cannot understand is that the federal government does not subsidize oil and gas companies. Oil and gas companies subsidize the federal government. Check out the federal taxes they pay, as compared to other businesses.”

“What the President is proposing here is increasing taxes still more on oil and gas companies producing low cost, reliable energy, to give crony capitalist handouts (more spending) to high cost, unreliable energy producers. That is not a concrete proposal to speed up growth, strengthen the middle class, and build new ladders of opportunity into the middle class. That is driving down the productive with higher taxes, to subsidize the unproductive, meaning less production, and more waste.”

The National Taxpayers Union also highlighted that the repeal of these vital provisions could ultimately harm the American tax code – along with our energy renaissance:

“…targeting oil and gas would make the Tax Code more, not less, complex. Obama is acting as if he can continue proposing the very policies that would have killed America’s energy renaissance, and still have economic gains to falsely take credit for the next time he makes such an address.”

As many American leaders have highlighted before, the continued production of America’s oil and natural gas is critical to the health and security of the nation. Repealing the historic tax provisions that help support this development– and the jobs energy production provides – would hinder the all-the-above, job-creating, energy plan the president’s rhetoric supports.