The current conflict in the Middle East only underscores the need for increased domestic energy production.
Unrest in oil producing regions around the world will always cause fluctuations in the price of oil. Markets will always react to uncertainty, whatever the source.
At its core, U.S. energy independence is about freedom. When the United States is not reliant upon oil from conflict regions, we have more flexibility in responding to these inevitable crises. More energy independence gives the U.S. the ability to walk away from or not be drawn into regional conflicts in order to impose oil market stability.
Current policy on oil and gas tax provisions – namely cost recovery mechanisms like percentage depletion cost recovery and expensing of intangible drilling and development costs (also known as IDCs) – has produced an American oil and gas revolution that has resulted in a spectacular expansion of domestic energy production and has moved our country to a point where energy independence is within reach.
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U.S. oil imports are now less than 37percent, when they were more than 60 percent just five years ago. And we measure natural gas reserves in centuries. Thanks to more domestic oil and natural gas development, we are becoming more energy independent every day.
The proper response to market fluctuations resulting from war and rumors of war is to redouble our efforts at achieving energy independence. Misguided proposals to eliminate critical oil and natural gas tax provisions would serve only to undermine U.S. energy production. The solution is to allow American oil and natural gas companies to produce at home more of the oil and natural gas we know our nation is demanding. By encouraging more development of our nation’s ample oil and natural gas resources rather than relying so much on imports, we could significantly enhance our national security.
Contrary to what some in politics and the media have said, the oil and natural gas industry currently enjoys no unique tax credits or deductions.
Since its inception, the U.S. tax code has allowed corporate taxpayers the ability to recover costs and to be taxed only on net income. These cost recovery mechanisms or tax provisions, also known in policy circles as “tax expenditures,” should in no way be confused with “subsidy,” i.e., direct government spending.
Oil and natural gas tax provisions like percentage depletion and IDCs are neither “loopholes” nor “subsidies,” but are simply cost recovery mechanisms similar to those used by other industries. These tax provisions are critical for independent oil and natural gas producers to sustain capital availability and formation to promote continued oil and natural gas exploration and production activity.
Market-created jobs, rather than those directly created and supported by the government, are a key benefit of increased oil and natural exploration and production activity.
Energy access, not taxes, remains the key to moving our nation toward energy independence and unlocking new jobs for Americans.
America has spilled far too much blood and treasure in conflict regions due to our dependency on foreign oil. Oil and natural gas tax provisions like percentage depletion and IDCs allow American energy producers to put that money back into exploration and development of U.S. oil and natural gas supplies, creating jobs and strengthening freedom.
Edward Cross is president of the Kansas Independent Oil & Gas Association.