Oil Industry Fears Reform Could End Its Tax Breaks

TAFT, CA - JULY 21:  An oil rig south of town extracts crude on July 21, 2008 in Taft, California. Hemmed in by the richest oil fields in California, the oil town of 6,700 with a stagnated economy and little room to expand has hatched an ambitious plan to annex vast expanses of land reaching eastward to Interstate 5, 18 miles away, and take over various poor unincorporated communities to triple its population to around 20,000. With the price as light sweet crude at record high prices, Chevron and other companies are scrambling to drill new wells and reopen old wells once considered unprofitable. The renewed profits for oil men of Kern County, where more than 75 percent of all the oil produced in California flows, do not directly translate increased revenue for Taft. The Taft town council wants to cash in on the new oil boom with increased tax revenues from a NASCAR track and future developments near the freeway.  In an earlier oil boom era, Taft was the site of the 1910 Lakeside Gusher, the biggest oil gusher ever seen in the US, which destroyed the derrick and sent 100,000 barrels a day into a lake of crude.  (Photo by David McNew/Getty Images)
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Alex Brown
Oct. 30, 2013, 6:34 a.m.

What’s good for busi­ness may not be good for the oil in­dustry. Oil and nat­ur­al-gas ex­ec­ut­ives fear ef­forts to lower tax rates will come at the ex­pense of breaks that be­ne­fit the fuel sec­tor, re­ports E&E (re­quires sub­scrip­tion).

House Ways and Means Com­mit­tee Chair­man Dave Camp, R-Mich., is lead­ing tax-re­form ef­forts, and he has ex­pressed a de­sire to cut tar­geted be­ne­fits to bring the over­all cor­por­ate rate down to 25 per­cent. Said one con­ser­vat­ive lob­by­ist of the oil in­dustry, “They are all ter­ri­fied.”

Still, passing any sort of tax-re­form this ses­sion will be an up­hill battle, and the oil in­dustry does not lack for con­gres­sion­al al­lies. But talk of spe­cif­ic cuts has some folks wor­ried. Among the breaks that may be get­ting the ax: man­u­fac­tur­ing cred­its, de­duct­ible “in­tan­gible drilling costs,” and per­cent­age de­ple­tion de­duc­tions.

Steph­en Com­stock, dir­ect­or of tax and ac­count­ing for the Amer­ic­an Pet­ro­leum In­sti­tute, said any cuts to oil-in­dustry tax breaks would “un­in­ten­tion­ally hit the brakes on Amer­ica’s en­ergy and man­u­fac­tur­ing renais­sance.”


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