Oil Lobbyists Zero in on Democrats in Tax Plan Fight

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Oil and Gas
Landscape image of a oil well pumpjack wiith an early morning golden sunrise and American USA red White and Blue Flag background.

In the continual war against fossil fuels, various tactics have been wagered to cripple the oil and gas industry.  As a result, fossil fuel support entities have targeted Democratic lawmakers in its full-court press to preserve important tax breaks and hinder the popular view on tax savings that opponents identify as fossil fuel subsidies.

President Biden and his Democratic constituents plan to squeeze the oil and gas industry tax breaks to help provide funding for their reconciliation plan that carries a $3.5 trillion budget. They fuel their argument stating that the tax breaks unfairly prop up fossil fuels that spark climate change.

Democrats view the prospective tax break cuts as an opportunity to gain $35 billion over a ten-year period. Those tax breaks include intangible drilling costs, percentage depletion, and enhanced oil recovery. Partnered with the infrastructure bill, Senate Majority Leader Chuck Schumer suggests the reconciliation package would cut domestic greenhouse gas emissions by 45% by 2030.

The opposition in the form of oil and gas companies and their allies have geared up their lobbying efforts to defend those needed tax breaks arguing they are similar in origin to those that support other industries. Arguing they are being singled out and treated unfairly, the opposition is also attacking the Democrats’ proposal for additional fees associated with methane emissions. American energy costs could see a significant increase if victory is not achieved.

The American Exploration and Production Council represents companies within the oil and gas sector. It has directed its congressional advocacy efforts towards preserving the threatened intangible drilling costs (IDC).

“We thought it was critically important to push back on this false narrative that IDCs are a subsidy to the oil and gas industry,” said Anne Bradbury, the American Exploration and Production Council CFO. “Nothing could be further from the truth. IDCs are normal business expenses, similar to other types of expenses that all other industries are able to recover.”

The council has proposed that moves like the Democrats are threatening could potentially reduce newly drilled wells by approximately 25%.

“That’s a pretty significant impact on our activities, on our operations, and that would translate very directly into less oil and gas produced here in America, fewer of these high-paying American jobs, and driving costs up for American families, consumers, and business,” said Bradbury.

The council has concentrated its efforts on focusing predominantly on democratic states with a significant level of oil and gas drilling. Collaboration is also being directed at its member companies and is assisting in informing the public of the consequences that could be caused by the proposed revoking of tax breaks.

“We have significantly less convincing and education to do with Republicans,” said Bradbury. “So we have been focusing a lot of our efforts on Democrats in our footprint areas, just to ensure that they fully understand the false narratives around what the other side is claiming.”

While opposition typically does not take root within the Democratic party, some affiliates have expressed disagreement. Senator Joe Manchin (D-W.Va.) chairs the Energy and Natural Resources Committee and remains skeptical regarding the reconciliation budget of $3.5 trillion. Senator Kyrsten Sinema (D-Ariz.) echoes those same concerns.

The Independent Petroleum Association of America’s Executive Vice President, Dan Naatz, stated the group is attempting to resolve issues by speaking with lawmakers from both the Republican and Democratic parties.

“Independent producers across the country are really concerned that the action will decimate American oil and natural gas producers,” said Naatz. “When you talk about taking away intangible drilling costs, percentage depletion, and adding in a lot of other fees and costs, it really would have a negative effect on the ability of our members both to operate onshore, offshore, on federal land, on private land.”

Naatz further added that the provisions are designed to fuel reinvestment activity, saying, “We’re trying to talk to Democrats who are willing to listen to the consequences of passing these provisions, including significantly reduced American petroleum, unstable consumer prices, loss of manufacturing jobs, the revenue to states.”

Targeting Methane

Although the oil and gas industry has lobbied in the past to preserve its tax breaks, it is also combating the Democrats’ maneuvers in levying new fees on methane emissions. The American Petroleum Institute has teamed up with other organizations and drafted a letter to the Senate Environment and Public Works Committee indicating that “reducing methane emissions is a priority for the oil and natural gas industry to address the risks of climate change.”

They further argued its lack of relevances as the Environmental Protection Agency is writing pending methane regulations for the industry, and it “could unintentionally set the U.S. back with respect to the significant GHG reductions we have realized in the electric power sector.” They also fear the negative effect on approximately 155,000 jobs.

The American Petroleum Institute is doing its fair share by speaking directly to lawmakers. The institute’s President, Mike Sommers, rationalized that the proposed methane fee is nothing more than just a tax on American energy production.

“It is not a tax on emissions,” said Sommers. “We think that this is a misguided and punitive tax on natural gas. And it’s not only duplicative on top of federal regulation, but we think it will also harm our economic recovery by increasing energy costs on Americans.”

Encouraging people to email lawmakers, the American Gas Association is combatting the methane fee and initiated their own letter of opposition.

“Now more than ever, Americans need affordable energy as one-third of the U.S. households face a challenge in meeting their energy needs,” said the American Gas Association. “The methane tax that is included in the budget reconciliation bill would increase costs and make it harder to produce the reliable energy that millions of Americans use every day.”

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