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Pay Your Taxes—So the Oil and Gas Industry Doesn’t Have To

Energy

Food & Water Watch

By Hugh MacMillan

If you won’t be getting a refund this year, like I won’t, you’ve probably just finalized your tax return and signed a sizable check. I don’t necessarily agree with many of the things that U.S. taxpayer funds support, but that’s democracy, and the benefits of our democracy are manifold.

But it is especially hard for me to stomach the enormous U.S. tax expenditures that pad the record-setting profits of the oil and gas industry. The tax breaks enjoyed by the industry do nothing to lower the price of gas, but we taxpayers are left to fill the gaping hole these tax breaks create in federal revenues.

The tax breaks are many. Here are a couple that make it cheaper for the oil and gas industry to frack:

  • Expensing of intangible drilling costs: The oil and gas industry can deduct up to 100 percent of what they spend to make and haul fracking fluids, and can do so in the year they use the fluid (in other words, they don’t have to spread the deduction over the life of a new well.) By giving the oil and gas industry this deduction up front in the first year, and not making them spread it out over several years like all other businesses have to do, we taxpayers are essentially giving the industry an interest free loan to frack.
  • Percentage depletion allowance: Alternatively, many oil and gas companies are allowed to recover the total cost of drilling and fracking a new well based on their revenues, not based on what they actually spent to prepare the well for production. This is called percentage depletion (as opposed to cost depletion), and it means that a company that drills and fracks a well that gushes with oil and/or gas could recover, as a percentage of revenues from the well, more than it actually cost to drill and frack the well.

These and other taxpayer giveaways to the oil and gas industry will likely add up to an estimated $11 billion in Fiscal Year 2013. Of course, this is in addition to the costs that drilling and fracking pose to public health and the environment.

For more information, click here.

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