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  • Energy Tax Facts
  • 1 Aug 21

World Oil: Industry must find ways to survive increasingly authoritarian U.S. government

By David Blackmon, Contributing Editor

DEMAGOGUING THE INDUSTRY ON MYTHICAL TAX “SUBSIDIES”

Nowhere has the intensification of this war on oil and gas become clearer than in Democrats’ current efforts to raise taxes on the industry. In its “Green Book” related to the administration’s gargantuan omnibus budget bill, the Treasury Department uses this coded language to describe one of the overarching goals of the program: “Replacing fossil fuel subsidies with incentives for clean energy production.” This, of course, is nonsense, as I have written many times over the past decade.

It is a simple fact that the oil and gas industry does not receive “subsidies” of the type that wind, solar and electric vehicles enjoy, i.e., direct transfer payments from the government to enormous corporations like Tesla, General Motors and Ford totaling billions of dollars every year. Some in the industry—mainly small producers and royalty owners—do benefit from the expensing of intangible drilling costs, which is similar to appliance manufacturers or pharmaceutical companies expensing their own costs of goods sold every year. Small independents and royalty owners also benefit from percentage depletion, a provision that is similar to depreciation of inventory in other industries.Fig. 4. Alaska is one of a number of states that could be impacted negatively by Biden administration plans to wipe out favorable tax provisions for the upstream industry. Image: Alaska Department of Natural Resources.

Despite these realities, Biden proposes to single out oil and gas by repealing those provisions, which have existed in the tax code for more than a century, along with every other tax treatment in the IRS tax code specific to the industry today. In all, the Green Book contains a whopping total of $147 billion in new industry taxes, which would negatively impact mainly the red states where oil and gas is produced in the U.S.: Texas, Alaska, Wyoming, Montana, Louisiana, North Dakota, Ohio and Pennsylvania.

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