• Energy Tax Facts
  • 30 Jan 14

SOTU Emphasizes Importance of Continued American Energy Production

This week, President Obama took the stage for the 2014 State of the Union to reflect on the past year, project his plans for  2014, and – as he has done in many years prior – emphasize the critical role of American energy for the U.S. economy.

As the President highlighted, the United States is producing more oil here at home than we are importing – a phenomenon that has not occurred in over twenty years. Unprecedented production of natural gas, brought on by development of American shale plays, has also transformed our national energy outlook while cleaning up our air, reducing carbon emissions, and “bringing more jobs back” to the United States. Independent Petroleum Association of America (IPAA) President and CEO Barry Russell welcomed the Administration’s acknowledgement and support of this historic production in a statement following the address:

“{President Obama’s} embrace of natural gas as an essential part of his ‘all of the above’ energy strategy demonstrates the great gains America’s independent producers have made in bringing this energy potential to reality. America’s independent producers, who drill 95 percent of our nation’s oil and natural gas wells, developed hydraulic fracturing, the technology that spearheaded the shale energy revolution – a revolution that is indeed creating jobs and bringing manufacturing back to our shores. The President rightly praised the nation’s decreasing oil imports, another product of the groundbreaking gains in oil production achieved by the industry.”

As President Obama highlighted, the extraordinary production of natural gas and oil has enhanced the United States economy while providing tangible environmental and national security benefits. Yet as the President touted the importance of this energy resurgence, he repeated a contradictory call to repeal tax provisions that support America’s independent energy producers – provisions that support the over 4 million jobs and billions in revenue and taxes independent energy producers provide. As IPAA’s Barry Russell explains:

“We also encourage the President to rethink his call to repeal the industry’s tax provisions. These provisions are typical business deductions absolutely critical to growing oil and natural gas production and the boost in economic growth and energy security that stems from development. 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.”

Tax provisions such as the Intangible Drilling Cost (IDC) deduction and Percentage Depletion enable independent producers to continue their investments into the American economy, workforce, and future production of untapped oil and natural gas reserves – a capital intensive and risky venture.  Repealing the 100-year-old IDC deduction alone would strip away roughly 25 percent of the capital available for independent producers to continue looking for new oil and natural gas, while diminishing the many economic benefits created by those activities.

From new jobs to savings on home heating bills, the benefits of increased oil and natural gas production here in the United States are clear and abundant. Yet if rhetoric threatening to repeal IDCs and other historic tax provisions becomes reality these economic benefits could disappear. It is clear the President’s rhetoric supports the development of America’s oil and natural gas and the multitude of benefits this production is enabling; his policies should support this important industry too.