Phone: (405) 669-6646
As a proactive leader in our industry, we want to urge you to join us in the Domestic Energy Producers Alliance (DEPA).

The American public benefits from the tax provisions furnishing the capital to drill for the energy that all Americans need.

Intangible Drilling Costs (IDCs)

IDCs permit companies to deduct the entire cost of drilling a well during the first year, rather than spreading it out over a period of years. This is only available on wells drilled in the United States. It is not available to major oil companies on any wells drilled outside the United States.

Why its important: IDCs have been available since 1913 and are consistent with how other businesses are allowed to treat similar costs to help manage risk. Examples include R&D for the technology industry and development costs for the coal mining industry.

Most importantly, IDCs mean JOBS because they provide the capital needed to drill the next well. The negative economic impact of a repeal would be substantial, placing thousands of jobs at risk 58,000 direct, indirect and induced jobs this year alone. And 165,000 direct, indirect and induced jobs by 2020.

Percentage Depletion

This is a 15% deduction utilized by independent producers and royalty owners. Its limited to the first 1000 barrels a day of production. Congress eliminated percentage depletion for major oil companies more than 30 years ago.

Why its important: Percentage depletion has been available to independent producers since 1954 as an incentive to stimulate continued investment in a high-risk industry. It provides the capital and outside investment small producers need to maintain marginal wells. These wells make up 20% of our production.

Effects of eliminating IDCs and percentage depletion

A loss of IDCs and percentage depletion for independent producers would likely result in the following:

  • Loss of thousands of high-paying industry jobs in drilling, oilfield supplies (pipe), transportation and trucking and oilfield manufacturing, as well as in technical fields related to energy production, like engineering, geology and the geosciences.
  • A 30% decrease in drilling activity.
  • Increased energy costs for consumers, resulting in decreased overall GDP.

Tertiary Injectants

Additionally, DEPA supports the preservation of the ability to deduct the cost of the purchase of tertiary injectants as currently provided in IRC 193. Independent operators use this tax deduction to develop high-cost carbon dioxide (CO2) enhanced oil recovery (EOR) in depleted US oilfields. The purchase of high-cost anthropogenic (industrial) CO2 may no longer be an option by taking away this cost-effective tax incentive. The 193 tax deduction actually serves a dual purpose by providing incentives for both domestic oil producers and manufacturers whose processes emit CO2.