Oil and Natural Gas Industry Takes Issue With Tax-Reform Proposal

Max Baucus (D-MT) speaks at a Senate Finance Committee meeting on March 20, 2007.
National Journal
Clare Foran
Dec. 13, 2013, 8:21 a.m.

The oil and nat­ur­al-gas in­dustry is tak­ing is­sue with a tax-re­form pro­pos­al put for­ward by Sen­ate Fin­ance Com­mit­tee Chair­man Max Baucus, D-Mont.

The pro­pos­al, which Baucus re­leased as a dis­cus­sion draft last month, would ex­tend the cost re­cov­ery peri­od for tax-de­duct­ible op­er­at­ing and labor costs in­curred by the in­dustry, in­clud­ing drilling ex­penses. It would also put an end to com­monly used ac­count­ing prac­tices such as the last-in, first-out meth­od of ac­count­ing, which serves to de­term­ine a com­pany’s tax li­ab­il­ity.

In a let­ter to Baucus on Fri­day, in­dustry stake­hold­ers say these changes could spell dis­aster for them. Spe­cific­ally, the let­ter states that if the changes go through, they could slow in­dustry growth and dis­cour­age private in­vest­ment in oil and nat­ur­al-gas pro­duc­tion.

“Our in­dustry is posed to make even great­er cap­it­al in­vest­ments in do­mest­ic en­ergy pro­jects all across the United States, gen­er­at­ing jobs and rev­en­ues for loc­al com­munit­ies throughout the coun­try,” the let­ter states. “We must have a tax code that not only en­cour­ages growth in such in­vest­ments, but al­lows us to con­tin­ue our track re­cord of cre­at­ing jobs, grow­ing the eco­nomy, and strength­en­ing our en­ergy se­cur­ity.”

Sig­nat­or­ies in­clude Jack Ger­ard, pres­id­ent and CEO of the Amer­ic­an Pet­ro­leum In­sti­tute, the largest trade as­so­ci­ation for the oil and gas in­dustry, and Mar­tin Durbin, pres­id­ent and CEO of Amer­ica’s Nat­ur­al Gas Al­li­ance, a ma­jor trade group rep­res­ent­ing in­de­pend­ent nat­ur­al-gas ex­plor­a­tion and pro­duc­tion com­pan­ies.

Read the full let­ter here.

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