The nation’s domestic oil market, still reeling from the shock of declining oil prices, could suffer even more damage if proposed tax reforms are pushed through Congress, officials of the Independent Petroleum Assn. of America said Tuesday.
More than 3,000 independent producers, or wildcatters, have shut down, and more will be forced out of business if the decline is coupled with major tax reforms being pushed through Congress, said Alex Mills, director of communications for the association, which is holding its midyear meeting in Nashville. “The price decline along with tax reform has been the one-two punch that has really knocked us out,” Mills said.
He said the damage could force the United States to rely more heavily on foreign oil and ultimately jeopardize national security.
Congress is considering removing investor incentives for oil drilling, a move that threatens independent producers since their main source of income comes from drilling, he said.
“Why get involved in something you’ve only got a one out of nine chance of success with when you can put your money in a (certificate of deposit) and draw whatever interest and have no chance of failure?” Mills asked.
Another bill would allow immediate deductions on drilling losses only for dry wells, which means that other deductions would have to be written off over a 26-month period, he said.
“The reason why that’s important to us is that many people who are investors in oil and gas deals like to invest quickly so they can get a tax write-off for that year,” he said.
The tax bill “would be the crowning blow on top of these huge price declines we’ve had,” he said.