How Higher Energy Taxes Threaten US Shale Boom & Economy



Cody Davis
05/28/2013

Shale Production is Driving Growth

The Shale Oil & Gas boom has created an energy renaissance in the U.S. Domestic oil production has raised to the highest output levelin 20 years, and the United States may finally become an energy independent nation by 2035.

Furthermore, the development of domestic oil and natural gas from shale helped the U.S. meet roughly 83 percent of its energy needs in 2012, and has reduced net oil import figures to the lowest level in roughly 20 years.

By the end of 2014, the Energy Information Administration expects oil production in the U.S. to outpace imports by 2 million barrels per day. If this occurs, this will be the first time production will surpass oil imports in roughly 20 years.

Independent oil and natural gas producers in the U.S. are doing their part to ensure a sustainable growth that will match our future energy needs.

Nevertheless, the looming threat of increased taxes as well as the congressional removal of oil and natural gas tax provisions remains a constant threat to our industry’s success.

The removal of oil and gas tax "subsidies" will likely compromise the industry’s job creation, economic growth, and development capabilities, which are necessary to offset the rapidly expanding population in the U.S.

The Truth about Oil and Gas Tax Provisions

Tax deductions are not the same as subsidies. Unfortunately, this is something that is oftentimes misunderstood in the United States.

Oil and natural gas companies in the U.S. do not actually receive subsidized payments from the federal government to produce oil and gas. However, there are a number of provisions in the federal tax code that enable companies to recover their operational costs.

This means that the oil and natural gas industry takes advantage of the same kinds of tax deductions and treatments that are available to every other manufacturing or extractive industry in the United States.

The policies outlining cost recovery options in the federal tax code are being used legitimately by the oil and gas industry. The benefits are no different than those received by other industries and are necessary to ensure oil and gas expenditures are treated no differently than other business operational costs.

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