New data reveals that the majority of Americans continue to see great value in a strong domestic energy sector.
In fact, nine out of 10 respondents say that developing more domestic energy in the U.S. is important, according to a poll conducted by Harris Interactive on behalf of the American Petroleum Institute (API).
And 73 percent support increased access to domestic oil and natural gas resources.
But ongoing discussions in the nation’s capital may “threaten to put the strength of American energy at risk,” says Stephen Comstock, API director of tax and accounting policy.
“An energy and manufacturing revolution is taking place in America,” Comstock says. “Well-crafted tax reform could complement America’s rise as an energy superpower. But badly done, tax reform could significantly harm America’s energy production, cost jobs and revenue to the government, and make us less energy secure.”
Comstock’s comments – made in a recent conference call with reporters from a variety of news outlets, including Industry Today – were reflective of data extracted from the aforementioned poll, conducted via telephone near the end of September among 1,001 registered voters nationwide.
According to the poll, approximately 54 percent of Democrats, 63 percent of Republicans, and 56 percent of Independents oppose changes in the tax code that, in the eyes of API officials, may decrease investment in energy production and reduce energy development in the U.S.
“Whenever the debate in Washington turns to spending and debt, a few politicians repeatedly haul out proposals for punitive tax increases on oil and natural gas,” Comstock says. “This is not a popular idea.”
Comstock’s point of view is supported by finding from the poll, which says 81 percent of respondents agreed that politicians in Washington should solve the country’s budget issues without raising energy taxes.
“This may be because Americans naturally see a connection between energy taxes and energy prices,” Comstock says.
Indeed, this is true, according to the poll, which says 91 percent of those surveyed feel developing more domestic energy in the U.S. is important.
Meanwhile, 69 percent stated that raising taxes on oil and gas companies may drive up energy costs for consumers while 56 percent say the increases could negatively impact the country’s job market and hurt the economy.
“Many Americans are also likely aware that oil and natural gas have been a bright spot in an otherwise slow growth economy,” Comstock says, adding that the Energy Information Agency says the domestic oil and natural gas industry created jobs 40 times faster than the broader economy from 2007 to 2012.
REPEALING IDC DEDUCTION NOT A GOOD IDEA
Comstock says the API believes tax reform can help keep American competitive in a global marketplace – if done carefully.
“Cost recovery measures, like the deduction for intangible drilling costs or IDCs, are available to every business in America,” he adds. “The IDC deduction allows oil and natural gas companies to recoup labor and other costs spent on drilling a well. By improving cash flow, the deduction allows companies to invest more money into creating jobs and producing the energy that keeps our economy running.”
Comstock adds that for some companies in the retail and service sectors, reduced marginal tax rates might outweigh the loss of deductions that allow a business to recover costs. But for capital-intensive industries like energy and manufacturing, cash flow and cost recovery will typically be very important factors in how they decide to invest in their operations.
For more emphasis, he references a study released earlier this year by Wood Mackenzie, which showed that repealing IDC would result in fewer wells drilled, fewer Americans employed, and a decline in the amount of energy produced in the U.S.
In addition, about 190,000 Americans would be unemployed next year if the IDC deduction is repealed, growing to 265,000 jobs lost over a decade, according to the study. With nearly 10,000 fewer wells drilled and $407 billion in decreased investment, domestic oil and natural gas production would fall 14 percent below current expectations after 10 years.
“That kind of impact would be almost impossible to offset just by lowering marginal tax rates,” Comstock says. “If the federal government allowed greater access to domestic oil and natural gas resources – which our polling shows Americans strongly support – it could lead to even more revenue for the government and more energy and good-paying jobs for American workers.”
About the American Petroleum Institute
API is a national trade association that represents all segments of America’s technology-driven oil and natural gas industry. Its more than 550 members – including large integrated companies, exploration and production, refining, marketing, pipeline, and marine businesses, and service and supply firms – provide most of the nation’s energy. The industry also supports 9.8 million U.S. jobs and 8 percent of the U.S. economy, delivers $85 million a day in revenue to our government, and, since 2000, has invested over $2 trillion in U.S. capital projects to advance all forms of energy, including alternatives.