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  • 18 Oct 13

My West Texas: IPAA Highlights Importance of Tax Code at Conference

A budget stalemate may have slowed government activity, but the oil and gas industry still should carefully watch several initiatives that could dramatically impact activity.

Opening the annual Executive Oil Conference at the Horseshoe Tuesday, Ryan Ullman, director of government relations and political affairs at the Independent Petroleum Association of America, listed three areas for the industry to watch: A change in the tax code impacting tax treatment for the industry, hydraulic fracturing and the Endangered Species Act.

“These are something the public doesn’t usually see,” Ullman told the audience, referring to taxes, but producers invest well over 100 percent of their capital in their business, drilling wells, buying equipment and hiring employees.

He said the Obama administration has tried to eliminate tax deductions used by the industry and other businesses, including deductions for intangible drilling costs and percentage depletion.

Efforts by Republicans to reduce the corporate tax rate would actually have an adverse impact on the capital-intensive industry, he said. The IPAA estimates any changes to tax structure would reduce capital available to operators by 20 to 25 percent. He expressed concern that once the budget impasse is over, legislators may return their focus to rewriting the tax code.

Ullman said there are concerns federal regulators are trying to “federalize” oversight of hydraulic fracturing, with the Bureau of Land Management recently issuing new rules for use of the technology on federal lands.

“We are having some success in the Senate,” he said, with Democratic Sen. Ron Wyden, of Oregon, recently hosting a roundtable discussion on energy, with topics ranging from future energy demand to exporting domestic production to regulations.

The industry has begun to push back against opposition to hydraulic fracturing through education efforts, Ullman said.

In relation to the Endangered Species Act, Ullman said the IPAA is calling for the use of sound science in determining whether a species is threatened or endangered and for all shareholders, including landowners and industry representatives, to have a say in conservation plans.

John Fund, former Wall Street Journal columnist who continues to contribute to the publication and is a writer for National Review and contributor to Fox News, said President Obama’s “All of the Above” energy policy “is actually ‘Against all that’s below ground.”

Fund said that two former Obama administration secretaries and one current secretary support hydraulic fracturing. He also said that 95 percent of the international panel on climate change acknowledge that there is no explanation for why climate-change models have failed and acknowledge that the sun may indeed have an impact on rising temperatures and that the climate may be cyclical.

The best way to defend the industry, Ullman said, is to emphasize “jobs, jobs, jobs.” The industry has added more than 1 million jobs since 2002 and is responsible for 9.2 million jobs, he said, citing the reopening of a steel mill in Youngstown, Ohio, to make tubular goods for the oil fields. The nation has also just surpassed Russia as the world’s largest oil producer.

“This is a stunning turnaround that will fundamentally change the global economic landscape in terms of energy, “ he said.

The industry is the cornerstone to building the U.S. economic recovery and to supporting the middle class, he said.

“It’s having an industrial sector to go to that pays $60,000 to $80,000 salaries. That lets people buy houses, fund their retirement, send their kids to college.”

Fund advised moving beyond pointing out the number of jobs created and point to the recent launch of the website allowing uninsured Americans to search for health insurance. The site has experienced glitches since it launched.

“They can’t develop a website” to help compare health insurance, “and you would entrust them with energy policy?” Fund asked. “You need to trumpet what works versus what doesn’t work. You need to keep fighting for energy. Energy production is not just about economics. It’s fighting for freedom. You take away energy, you take away freedom.”