Proposed Changes To Tax Law Will Suffocate US Economic Recovery

This opinion piece presents the opinions of the author.
It does not necessarily reflect the views of Rigzone.

The head of the Texas Alliance of Energy Producers said Friday the proposed changes in the tax law released by Senate Finance Chairman Max Baucus will have dramatic negative implications for domestic energy, jobs and the U.S. economy as a whole.

“Percentage depletion and expensing of intangible drilling costs (IDCs) have been key provisions in the tax code that allowed independent oil and gas producers to finance the technological developments that the industry is using to unleash record amount of domestic crude oil and natural gas in Texas and the U.S.,” Townes Pressler, chairman of the Alliance and owner of Pressler Consulting in Houston, said.  “These tax provisions are critical to the future of the independent oil and gas producer, who drilled 96 percent of the wells in Texas last year, not the major oil companies.”

“The single greatest driver in the U.S. economy for the past 24 months has been the drilling and production of domestic oil and gas, and if these ill-advised proposals become law, they will cripple our momentum toward achieving U.S. energy independence.”

Mike McDonald, co-owner of Triad Energy, an independent oil and gas producer based here and president of Domestic Energy Producers Alliance, said Baucus’s tax document dramatically curtails the key tax provisions which have helped provide the capital for small independents that have led the current domestic energy renaissance. “Were his ideas to become law, Senator Baucus will have single-handedly suffocated the U.S. economic recovery,” McDonald said.

“The draconian changes proposed in Sen. Baucus’s draft would drain as much as 30-35% of the risk-capital we use to sustain the current shale energy boom. What will Americans get if these proposals are adopted? Higher gasoline prices … higher costs to heat our homes. A return to greater dependence on OPEC oil. That’s for starters!” he said.

The enactment of provisions contained in the discussion draft released by Sen. Baucus today would change the face of domestic oil and gas exploration and production, McDonald added. “Inside our industry, it’s a jobs killer. But the impact to consumers will be even more dramatic. These proposals will cause energy prices to spike, impacting every American industry and every consumer who drives a vehicle or turns on a thermostat.

Alex Mills is President of the Texas Alliance of Energy Producers. 


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Bobby Holland  |  November 25, 2013
This is typical of the current administration to increase taxes, and make this country as weak as possible. With the current leadership we are headed for the biggest down fall of one country in history.
JRB  |  November 25, 2013
I participate in the drilling of at least 10-15 wells per year in the lower US, all conventional, vertical wells targeting condensate rich gas and oil. If the tax laws change, I will no longer participate in these drilling ventures......many of my fellow operators and investors feel the same way. This will kill the true "independent" oil man in the USA.

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