The U.S. Senate has defeated legislation that would have had detrimental affects on Oklahoma’s crude oil and natural gas industry and the state as a whole.
U.S. Senator Bernard Sanders , I-Vt., proposed an amendment to the American Jobs and Closing Tax Loopholes Act of 2010. The Sanders Amendment would have repealed expensing of intangible drilling costs, a provision that’s been in place since 1913, and percentage depletion. These tools are used by small oil and natural gas companies and are vital to producing clean-burning natural gas and crude oil domestically.
The measurefailed to muster even a simple 51-vote majority, although 60 votes were needed to pass it. Only 35 senators backed the Sanders' amendment as a number of Democrats joined the Republican opposition to defeat it.
“These sweeping tax policy changes would have crippled independent crude oil and natural gas producers, killed hundreds of thousands of good paying U.S. jobs, shut-in marginal wells, increased consumer costs, and made America more dependent on foreign oil,” OIPA Chairman Mike McDonald said.
McDonald applauded U.S. Sen. Jim Inhofe, R-Okla., for his support of the state’s oil and natural gas industry after Inhofe opposed the amendment on the Senate floor.
“I was pleased to lead the fight to stand-up and defend American energy production and American jobs on the Floor of the United States Senate today,” Senator Inhofe said. “I predicted the devastating spill in the Gulf of Mexico would be used as an opportunity by liberals to shut down all domestic oil and gas wells – many of which are owned and operated by independent oil and gas producers throughout the country. But our focus must remain on those who caused the disaster, not on punishing the industry as a whole. For the sake of domestic energy independence and American jobs, I am pleased to see an overwhelming majority of my colleagues join me in defeating this effort.
“As the Senior Senator from Oklahoma, I am well aware that the oil and gas companies employ Americans and fund our communities. In fact, oil and gas companies employ over 9 million people in the U.S. Approximately 3 million land and mineral owners from coast-to-coast are the beneficiaries of monthly checks from the royalties produced on their properties. Many of these individuals are small property owners and family farms. States annually collect billions of dollars in oil and gas excise and severance taxes that furnish critical funding of roads, schools, and law enforcement. By punishing America’s oil and gas industry, this amendment only puts employment and state and local funding in peril.”
McDonald said disallowing the expensing of normal business costs such as fuel, repairs, or hauling supplies would make it more difficult to attract capital for high-risk, cost-intensive operations like horizontal drilling in the state’s Woodford shale or deep wells drilled 15,000 feet and deeper into Oklahoma’s ground. He added that disallowing percentage depletion of oil and gas wells as their production decreases over time would force producers to shut down small, less economically viable wells and robs America of their resources.
The removal of the tax policies would also have a negative impact on the state, where lawmakers have struggled with a $1 billion shortfall. McDonald said an estimated 25 percent of all taxes paid in Oklahoma come directly from the state’s oil and natural gas industry and federal efforts aimed at punishing “Big Oil” in the wake of the Gulf oil spill will only serve to drive small, independent oil and natural gas producers out of business, decreasing the number of good paying jobs in the state.
Independent producers make up the majority of Oklahoma’s oil and natural gas industry, accounting for 96 percent of the state’s crude oil production and 88 percent of the natural gas produced here. Nationally, independent producers drill 90 percent of the wells in the United States and account for 82 percent of domestic natural gas production and 68 percent of domestic crude oil production.
