The Administration’s FY 2012 Budget proposal includes almost $90 billion in tax increases on the U.S. oil and natural gas industry. Studies have shown that these tax increases would discourage oil and natural gas production, lead to fewer well-paying American jobs, increase our reliance on foreign imports and potentially contribute to higher energy costs to consumers. The oil and natural gas industry is one of the largest employers in the country, supporting more than 9.2 million jobs, contributing 7.5% to GDP, and already contributing almost $100 million a day to the federal treasury. Clearly, these proposals undermine efforts to turn our economy around, create jobs and ensure this nation’s energy security.

Taxpayers have had the option to expense IDC since the inception of the Tax Code. It has helped companies continue exploring for and producing oil and gas which have generated significant revenues for the federal and state governments. Studies show that repealing this deduction will reduce investment in the US and result in less revenue to the government, fewer US jobs and greater dependence on foreign energy sources.

The Budget’s international provisions include a proposal to modify rules for dual capacity taxpayers. This modification will subject companies to double taxation on income earned overseas and greatly impact both foreign and domestic investment. Studies indicate U.S. based oil and gas companies will be significantly restricted from growing and expanding in the world marketplace - costing US revenues and US jobs that support overseas operations.

This deduction was established to help U.S. manufacturers maintain and create well-paying U.S. jobs. The oil and natural gas industry provides or supports almost 6 million of those jobs. A full repeal of this deduction for just the oil and gas industry (rather than all taxpayers), places a number of those jobs at risk and undermines efforts to reduce our dependence on foreign oil.

The LIFO accounting method is not a “gimmick” or tax loophole. It is a well-established way to determine book and taxable income for companies that anticipate inflation or rising prices over the course of their operations. Repealing LIFO would require companies to redirect cash or sell assets in order to cover the tax payment – potentially destroying some businesses.

Taxpayers have had the option to expense IDC since the inception of the Tax Code. It has helped companies continue exploring for and producing oil and gas which have generated significant revenues for the federal and state governments. Studies show that repealing this deduction will reduce investment in the US and result in less revenue to the government, fewer US jobs and greater dependence on foreign energy sources.

The proposal to reinstate Superfund taxes would impose additional taxes on crude oil and petroleum products unfairly. These products do not account for a substantial portion of the Superfund liability yet would be responsible for most of the taxes. Accordingly, such taxes are unfair and do not ensure that remediation or cleanup will happen sooner.

Efforts to find oil and gas reserves in the U.S. can be very expensive and recovering those costs for tax purposes is important to keeping domestic oil and gas production strong. Increasing the amortization period for these exploration costs undermines that effort and jeopardizes the goal of reducing our dependence on foreign oil reserves.

Changing how these costs are recovered could force producers to shut in older fields and significantly impact local economies. In addition, this deduction supports using carbon dioxide in enhanced oil recovery projects, one of the primary methods by which carbon dioxide is stored to prevent its release into the atmosphere.