We find ourselves in the middle of one of the greatest wealth transfer periods of all time. Those with wealth must decide whether they want to make transfers, and if they do, they must decide how much, to whom, when and in what structure?
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The association, along with 33 other industry groups nationwide, including Denver-based Western Energy Alliance, sent the five-page letter to members of two congressional committees this week. They expressed concern about the potential elimination of tax deductions for their “intangible drilling costs” as lawmakers consider ways to avert a fiscal cliff.
The letter is the latest in a strategy that has also included television commercials aimed at pressuring lawmakers to continue oil industry tax breaks.
The Independent Petroleum Association of America has said preserving the provisions is its No. 1 priority. The heavily taxed industry pays $86 million in taxes daily, according to the association.
Critics of the tax breaks point out that the profitable oil industry no longer needs the century-old subsidy. Eliminating the subsidies would save nearly $9 billion from 2011 to 2015, according to Taxpayers for Common Sense.
“This is a welfare check that the oil and gas industry has been getting for 100 years,´ said Matthew Garrington, co-director of Denver watchdog group Checks and Balances Project. “I think it’s time that Encana and Anadarko got off welfare, and they pay for their own cost of doing business.”
Encana, which drills natural-gas wells around Erie, has argued that increasing the industry’s tax burden as it contends with low gas prices imperils jobs at a time of high unemployment.
Oil and gas producers benefit significantly from the intangible drilling cost subsidy enacted in 1913. Aimed at attracting investment to the industry, the credit allows producers tax deductions on costs such as labor, fuel, repairs and hauling.
“They are ordinary and necessary expenses and are no different from expense deductions taken by other businesses,” the letter reads.
The industry argues that it supports millions of U.S. jobs, accounts for nearly 8 percent of the nation’s gross domestic product and makes large investments in equipment and facilities.
“Restrictions on the deductibility of these ordinary and necessary expenses would discourage the massive investment that is needed from this industry to deliver the supplies of American energy to American consumers and industry and to promote America’s energy security,´ said Bruce Thompson, president of the American Exploration & Production Council.