Drill? Or go green? I say do both.

[MaggieMae]

Yup the IPAA is like the Farm Bureau. But who would better know about industry and the effects of particular tax measures? They maintain offices and a full time staff in D.C. and have board members all around the country.

It's not that O&G "relies" heavily on so called subsidies, but rather it's a very complex industry with unique cost centers that require just as unique tax treatment. It's not a question of "how little will we tax an industry", but "how much of your revenue will we let you keep?".

Generating revenue requires expensive practices and expensive materials. Shouldn't these costs be deducted from revenues and taxes assessed on net revenues? Over the years, more and more of these costs have been disallowed, some retained, and some regained. The notion of "subsidies" arose when an industry successfully argued for the retention of cost deductions.

It looks like oil and gas is one major industry that would not benefit if any other method of taxation were ever instituted. If they had to dip into just profits for all that maintenance, including tax on every step in the process under a fair tax system, prices at the retail level would be out of sight, and the consumer would pay an enormous tax for the end product. I confess seriously that I have no idea how all that would actually come down as far as accounting practices, but it sure appears on its face that it would be a lose-lose situation.

 

[Mr. H.]

Yup the IPAA is like the Farm Bureau. But who would better know about industry and the effects of particular tax measures? They maintain offices and a full time staff in D.C. and have board members all around the country.

It's not that O&G "relies" heavily on so called subsidies, but rather it's a very complex industry with unique cost centers that require just as unique tax treatment. It's not a question of "how little will we tax an industry", but "how much of your revenue will we let you keep?".

Generating revenue requires expensive practices and expensive materials. Shouldn't these costs be deducted from revenues and taxes assessed on net revenues? Over the years, more and more of these costs have been disallowed, some retained, and some regained. The notion of "subsidies" arose when an industry successfully argued for the retention of cost deductions.

It looks like oil and gas is one major industry that would not benefit if any other method of taxation were ever instituted. If they had to dip into just profits for all that maintenance, including tax on every step in the process under a fair tax system, prices at the retail level would be out of sight, and the consumer would pay an enormous tax for the end product. I confess seriously that I have no idea how all that would actually come down as far as accounting practices, but it sure appears on its face that it would be a lose-lose situation.

With respect to the tax provisions outlined at the IPAA website, the focus is of course on the independent producer- the small companies that take oil and natural gas out of the ground. These businesses have absolutely no control over the price of their product and therefor are referred to price takers, not price makers.

Over time, costs of operating such businesses goes up (as does most everything LOL), but markets for crude oil and natural gas continually change. It's nearly impossible to do any forcasting or to assemble business models when you don't know for sure what the price for product will be next month let alone 5 years from now.

To that end, the tax provisions are critical to keeping these companies in business.

Independents drill 90% of the wells in the U.S. If they go out of business or scale back operations then domestic production would fall and imports would increase.