[Congressional Record Volume 156, Number 88 (Monday, June 14, 2010)]
[Senate]
[Page S4876]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
OIL AND GAS PRODUCTION
Mr. INHOFE. Mr. President, there doesn't seem to be anybody else
here, so I will make one comment about amendments coming up that are
closely related to the subject we just discussed. It is Sanders
amendment No. 4318. I knew this would happen--that the bill would be
used to pass another agenda. Sure enough, that is what is happening.
The Sanders amendment is aimed at stopping oil production altogether.
It does three things: It repeals expensing for tangible drilling costs,
it repeals percentage depletion for marginal oil and gas wells, and it
repeals the manufacturing deduction for oil and gas production.
I predicted the spill in the Gulf of Mexico would be used as an
opportunity to shut down domestic oil and gas wells owned and operated
by independent oil and gas producers throughout the country. That is
what is happening with this amendment.
Repealing expensing of intangible drilling costs eliminates the
ability to expense intangible drilling and development costs, called
IDC, which would force at least a 25- to 30-percent reduction in
drilling budgets, leading to lost jobs, lost production, and higher
prices for consumers. We have not talked much about higher prices to
the consumers.
With cap and trade--if they were successful in that--we would feel
that in a matter of weeks. Despite the rhetoric, IDC expensing is
firmly grounded in sound accounting practices and principles, and it
has been in the Tax Code since 1913. IDC expensing is similar to
expensing by other companies for technology, wages, and fuels which
other industries expense for operations. So they are singling out the
oil and gas industry, just willfully, to stop them and put them out of
business.
Likewise, since 1926, small producers and millions of royalty owners
have had the option to utilize percentage depletion to both simplify
and account for the decline in the value of minerals produced from a
property. It is complicated, but percentage depletion recognizes that
oil and gas reservoirs are depleted by production, so it is the amount
which small producers can expense to reinvest in production. Percentage
depletion is particularly important for the production of America's
over 600,000 low-volume marginal wells.
I am particularly interested in this because in my State of Oklahoma
we have mostly marginal well production. Marginal wells produce less
than 15 barrels a day. It is a smaller type of production. The average
marginal well produces barely two barrels a day--we have been talking
about millions of barrels in the gulf--yet, cumulatively, they account
for nearly 28 percent of domestic production in the lower 48 States.
Since every on-shore natural gas and oil well eventually declines
into marginal production, the economic lifespan and corresponding
production of nearly all natural gas and oil wells would be reduced
through the elimination of percentage depletion.
Finally, Congress has already frozen the manufacturers' tax deduction
specifically for only oil and natural gas companies less than 2 years
ago. All other domestic manufacturing can deduct income at a higher
rate than oil and gas companies. Repealing the entire reduction for oil
and gas companies is only targeting oil and gas production, and it
shows what the motivation is.
We have to remember a couple of very important points when we seek to
target certain industries for tax treatment. First, oil and gas
companies employ Americans and fund our communities. Oil and gas
companies employ over 9 million people in the United States.
Approximately 3 million land and mineral owners from coast to coast are
the beneficiaries of monthly checks from the royalties produced on
their properties. Many of these individuals are small property owners--
very small--and some are just small family farms. In fact, just today
the National Association of Royalty Owners ranked this as its No. 1
concern on its Web site. That was today.
They say the Sanders amendment is their No. 1 target. These are not
rich people. They are small farm owners and landowners. States annually
collect billions of dollars in oil and gas excise and severance taxes
that furnish critical funding for roads, schools, and law enforcement.
By punishing America's oil and gas industry, this amendment only puts
unemployment and State and local funding in peril.
Secondly, punishing our oil and gas industry only makes us more
dependent on foreign sources of energy. After President Jimmy Carter
imposed a windfall profit tax on the oil and gas industry in 1980, the
nonpartisan Congressional Research Service later determined that its
results were hugely counterproductive, saying:
The windfall profit tax reduced domestic oil production
between 3 and 6 percent, and increased oil imports from
between 8 and 16 percent. . . . This made the U.S. more
dependent upon imported oil.
America's natural gas and oil companies are already paying taxes at
the highest rates. Figures from the Energy Information Agency indicate
that America's major oil producers already pay, on average, more than a
40-percent income tax rate.
The EIA also reported in December of 2009 that, on average, 53
percent of the net incomes of oil and gas companies are paid in taxes
compared to 32 percent from others in the manufacturing sector.
Now is not the time to group the entire oil and gas industry together
for punishment. Punishing the entire industry in the sledge hammer
approach this amendment uses only increases the cost of energy for all
Americans, and it makes us more dependent upon foreign countries to run
this machine called America, as I often say.
People say they don't want oil, gas, coal, or nuclear. Well, in the
final analysis, how do you run the country without it? You can't. If we
retard in any way the ability to produce oil and gas, it will make us
more dependent upon foreign countries for us to drive this machine
called America.
With that, I yield the floor.
The ACTING PRESIDENT pro tempore. The majority leader is recognized.
Mr. REID. Mr. President, would the Chair be kind enough to have the
bill reported.
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