Top Issues

Energy Tax Facts

With oil and natural gas production increasing in the United States, we finally have a chance to eliminate our dependency on sources of energy from unstable regions of the world. However, if Congress and the Administration remove critical energy tax provisions, which stimulate investment in safe domestic energy production, they could wipe out 25 percent of future investment, and thus reduce our ability to produce more energy here at home.

Intangible Drilling Costs

Quite simply, Intangible Drilling Costs (IDCs) represent all expenses an operator may incur at the wellsite that don’t – by themselves – produce a physical asset for the producer. In the oil and natural gas business, those costs include things like labor and site preparation, renting drilling rigs – costs that have no salvage value after they are spent.

Percentage Depletion

The percentage depletion deduction has been a part of the U.S. tax code since 1926. Depletion is a form of depreciation for mineral resources that allows for a deduction from taxable income to reflect the declining production of reserves over time.

Passive Loss Exception

The passive loss exception enables working interest owners in oil and natural gas production to some parity between their investments and those of corporate shareholders. By counting any working interest investment losses as active instead of passive, investors are able to treat the normal business deductions from their investment in the same way that a corporation would.

Regulatory Issues

The oil and natural gas industry continues to be confronted by a regulatory framework that is complex, extensive and growing. Industry detractors continue to use the regulatory process to halt American energy production through the federal agencies.

The states have effectively regulated the production of oil and natural gas for the past century and continue to do so. The current administration is looking to federalize the regulation of oil and natural gas production under laws that have not been used before – creating duplicative, costly burdens that will be detrimental to America’s independent producers. Twelve federal agencies are currently taking aim at American oil and gas production. Such actions would hamper production and result in a loss of jobs, loss of revenue, decreased American energy supply, increased reliance on foreign imports and a weakened economy and national security. – IPAA

Hydraulic Fracturing

States have regulated the fracturing process for more than six decades now, and by any legitimate measure have compiled an impressive record of enforcement in that time. There has not been one case of groundwater contamination caused by hydraulic fracturing.

Unfortunately, and for reasons that have nothing to do with that record of performance, some believe that EPA should step in and create a new role for itself — directly regulating the process from its offices in Washington, D.C.  In addition, in 2013 the U.S. Bureau of Land Management will issue a new proposed rule to regulate hydraulic fracturing on federal lands.  Visit for the latest updates.

Endangered Species Act (ESA)

The ESA was intended to conserve the habitats and to foster the recovery of threatened or endangered animal and plant species across the U.S. based on sound data and science. It is not supposed to be used by anti-industry groups as a litigation tool. Listing a species under the ESA can be very damaging to the production of oil and natural gas by restricting use of hundreds of thousands of acres of land for development. This would damage or destroy economic growth and job creation in the affected areas.