Alliance Presents Comments to US Senate Finance Committee on Percentage Depletion, IDCsJune 9, 2021 The US Senate Finance Committee met in Washington in late May to consider Chairman Ron Wyden’s (D-OR) Clean Energy for America Act which, among other things, seeks to change various tax provisions for US independent oil and gas companies, both small and large. Most notably, the bill would fully eliminate the percentage depletion deduction for small independent operators, and would change the deduction for Intangible Drilling Costs (IDCs) from full 100% deduction for those costs in year one, to spreading them out over a five-year period of time. The Alliance made the point to the Committee that eliminating percentage depletion and altering the treatment for intangible drilling costs would cost Texas jobs, reduce industry investment, lower production, reduce tax revenues and economic activity to Texas and its producing regions, and reduce the level of energy independence we worked so hard to achieve. Our comments can be found here on our website. To: The US Senate Committee on Finance Statement by the Texas Alliance of Energy Producers to the United States Senate Committee on Finance for the record on the hearing, Open Executive Session to Consider an Original Bill Entitled The Clean Energy for America Act, held Wednesday, May 26, 2021 On behalf of our members and our Board of Directors, the Texas Alliance of Energy Producers appreciates the opportunity to comment on the Clean Energy for America Act, and the hearing that took place on Wednesday, May 26. The Texas Alliance of Energy Producers (“the Alliance”) represents about 2,600 member companies and individuals. The Alliance represents primarily the “upstream”, or exploration and production sector of the oil and gas industry in Texas, including operators and producers of crude oil and natural gas, oilfield service companies, and drilling companies. Our direct membership is approximately 2,600; however, we represent thousands more than that in terms of the total employment of our member companies. More broadly, we represent an industry that presently directly employs approximately 160,000 Texans, on the payrolls of oil and gas extraction (operating and producing) companies, oilfield service companies, and drilling companies. That number is climbing as the US and global economies recover from the COVID pandemic of 2020 in which nearly 62,000 upstream jobs were lost in Texas alone between February and September of last year. What this means is that the present 160,000 jobs total is not the ceiling for upstream oil and gas employment in Texas. Thousands more stand to be added as the industry recovers from the deep downturn of last year, perhaps tens of thousands in a sustained period of recovery in which presumably a great many of those 60,000 jobs lost last year may be added back. That means, of course, that the number of jobs potentially at risk from harmful US domestic energy policies is considerably higher than the current upstream employment levels would indicate. Further, those are not the only jobs in Texas dependent on the upstream oil and gas sector. The upstream companies engage in purchases from a second tier of suppliers – pipe, pumping equipment, compressors, office supplies, automobiles, sand, tubing, drilling rigs, transportation services, etc. – and these jobs are at risk as well, along with jobs elsewhere in the economy dependent on wages paid to direct upstream companies and their suppliers of goods and services. A conservative estimate would be to multiply upstream jobs by 2.5 to approximate the number of jobs that may be affected by movements in direct upstream employment. For example, were upstream employment in Texas to increase to, say, 200,000, a very real possibility as industry activity expands in the post-COVID recovery, the total number of jobs connected to oil and gas exploration & production activity would actually be 500,000 or more. Click here to download PDF of written comments.
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