U.S. Sen. Jim Inhofe (R-Okla.) today praised fellow Oklahomans former U.S. Sen. Don Nickles (R-Okla.) and Harold Hamm for testifying today before the Senate Finance Committee regarding corporate tax policy for the energy sector. Nickles is a former Republican Whip and senior member of the Senate Finance Committee. Hamm is the CEO of Continental Resources.
"Targeting oil and gas for tax increases gives Democrats a popular election-year talking point with their base," said Inhofe. "We've seen this approach before. I fought back an effort by Senator Sanders in 2010 that would have repealed tax provisions only for oil and gas producers both big and small. That effort was defeated 35-61. In both 2011 and 2012, Senator Menendez offered legislation to similarly do away with oil and gas tax provisions. Those were also defeated."
Inhofe continued, "The reality is, the worst thing we could do now -- aside from implementing bad federal regulations -- is raise taxes by doing away with items like cost recovery accounting provisions and corporate organization structures that are currently recognized in the tax code. Further, the industry -- and the economy as a whole -- must be allowed continued and diverse access to capital markets in the way that best suits the industry's needs. This includes preserving the Master Limited Partnership, a corporate structure that provides many capital-intensive companies with the financing they need in a way that is attractive to investors. Doing anything to jeopardize the ability of larger companies to operate as partnerships is not the way to achieve greater economic efficiencies through tax reform. In fact, it would do the opposite.
"Our country needs pro-growth comprehensive tax reform to help get our economy back on track. As we consider tax reform, however, it is important we carefully consider how proposed changes impact industry and job creators. Our tax code impacts competitiveness and that is particularly true for oil and gas. Many of these tax provisions, including expensing of Intangible Drilling Costs, are fully in line with sound accounting principles and should not be targeted simply because of their ties to the oil and gas industry. Every business in America is allowed to deduct the costs they incur to do business, and the oil and gas industry should be allowed to do the same.
"I appreciate both Don Nickles and Harold Hamm bringing important testimony to the Senate regarding these issues while being such strong representatives of Oklahoma."
What others are saying:
"America is blessed with an abundance of energy resources, but opponents of crude oil and natural gas development have repeatedly targeted independent producers' ability to deduct normal business expenses and depreciate well assets," said Mike Terry, OIPA President. "Such tax provisions are not subsidies. They have been long established in the tax code to ensure that this capital-intensive industry is treated like other U.S. businesses at tax time. Without the ability to deduct normal business costs and depreciate well assets, drilling and production will decrease and consumers' energy costs will increase. To further our push toward energy independence, we must continue to ensure that America's tax policies encourage domestic oil and natural gas production. Every $1 million of upstream capital expenditure by independent producers yields more than $5 million in overall contribution to U.S. GDP."
"Increased domestic oil and gas production creates a significant need for more pipeline infrastructure. Many of the nation's pipeline companies, including several based in Oklahoma, are structured as Master Limited Partnerships (MLPs). These are businesses that have created many long-term job opportunities in Oklahoma and other states. MLPs access the public equity markets for capital and are treated for tax purposes as partnerships. The MLP structure helps keep capital costs low, which facilitates funding of large-scale investments including pipeline, storage and distribution infrastructure. The continuation of this tax structure for energy infrastructure companies is critical as our nation strives to become more energy independent," said Mike Mears, Chairman & CEO of Magellan Midstream Partners, LP.
"The IDC deduction is a normal and necessary business expense and a key element in continuing investment in exploration and development projects, especially by independent companies that routinely invest more than their cash flow and more than they earn as they provide the oil and natural gas America needs," said Bill Whitsitt, executive vice president, public affairs at Devon Energy Corporation. "Elimination or reduction of IDCs would lead to reduced investment, less drilling and supply of oil and natural gas resources, higher consumer prices and reduced economic growth at federal and state levels."