The Oil and Gas industry has enjoyed unprecidented tax breaks and tax incentives over the past 30 years. With Dick Cheney, and the Bush family heavily invested in the industry, the government passed out as many favors as it could to enrich these industry leaders. And they have posted billions of dollars of profits, especially in the past 12 years. We are thrilled that they have made millions and billions. But it appears that some of the "bonus" fluff has been identified and may be reduced by the government.
Not only do oil and gas drillers get to deduct their business expenses, and depreciate the cost of their equipment, the have had a deduction for "intangible" drilling costs which offers great opportunity for abuse, and is often considered a "gift" to the industry for political contributions. Oil and gas companies have also been able to claim "domestic manufacturing" deductions (even though they are in mining, not manufacturing), and then they have been given a percentage depletion for wells. Many of these have been abused by the industry, and oil and gas drillers often make more from tax advantages than the actual production of the wells.
Many global energy experts believe that a strong message should be sent from Washington, D.C., that changes the direction in America, to show that the future of new energy production is in alternative and renewable energy production. This change in law is a step in that direction.
Many believe that these "Christmas Tree" gifts to the gas and oil industry, could be used to help stimulate other parts of the economy, such as alternative and renewable energy. President Barack Obama wants to raise more than $30 billion over nine years by nixing some of these exceptional tax incentives used by oil and gas developers. The administration has asked Congress to repeal deductions for intangible drilling costs, block oil and natural gas companies from claiming domestic manufacturing deductions and repeal the percentage depletion for wells, among other changes.
As the old addage goes: "If you throw a rock into a pack of dogs, the one that howls is the one that got hit." The oil and gas drillers are howling, and rushing to Washington to protest these changes. Rather than encourage alternative energy, they want to continue the exceptional deductions, to assit their profitability.
The Interior Department approves or disapproves of many of these tax breaks, on public lands, and it's leader, Salazar said he agreed to a meeting of oil executives with the API. "it’s important to listen to everybody who has a future in the stake of energy in America, and certainly API … and its members have a huge stake in energy development for this country.”With 400 corporate members, API is the industry’s largest trade association.
“My message to the oil companies will be simple: They are and will remain an important part of our energy future,” Salazar said Monday. “We need to work together on energy solutions.”
Salazar’s Interior Department manages 500 million acres of public land and has jurisdiction over 1.76 billion acres of the Outer Continental Shelf.
Salazar has said the country needs to balance investments in alternative and renewable energy technology with continued development of traditional fuels essential to the U.S. economy.
Industry leaders have said the tax hikes would make domestic drilling less profitable, driving American jobs overseas and increasing U.S. dependence on foreign energy. Administration officials have argued that perhaps other energy sources such as wind, solar and other, might show growth and profitable expansion if they are offered similar tax breaks. And if new energy from wind and solar should not have these tax breaks, than perhaps we should take the tax breaks away from traditional oil and gas. Oil and gas today is earning billions in historic high earnings, and still is slow to admit that petroleum hydrocarbons are a diminishing resource.