Feinstein - Eliminate Oil Drilling Tax Incentive Now!

Senator Feinstein Seeks to Repeal Drilling Incentive for Major Oil Companies

Senator Dianne Feinstein of CA and nine other Senators today introduced an amendment to eliminate a tax incentive for major integrated oil and gas companies which allows them to get a credit for the costs of their exploration and development at a charge to taxpayers of $2.4 billion over five years.

“Why should the oil and gas industry get tax breaks from the federal government when they are making record profits?” Senator Feinstein said, while introducing the amendment. “In the third quarter of 2005 alone, the five biggest companies earned a staggering combined total of more than $30 billion.”

Cosponsors of the amendment were Senators John Sununu (R-N.H.), Judd Gregg R-N.H.), Ron Wyden (D-Ore.), Maria Cantwell (D-Wash.), Russell Feingold (D-Wis.), Richard Burr (R-N.C.), John Kerry (D-Mass.), John McCain (R-Ariz.), and Susan Collins (R-Maine).

Specifically, the amendment strikes a tax credit for only the major integrated oil companies—ExxonMobil, Shell, ConocoPhillips, Chevron and BP, which these companies have already testified to the Senate Energy and Natural Resources Committee that they do not really need.

This credit:

-- Costs the Federal Treasury up to $2.4 billion over 5 years, according to the Joint Committee on Taxation;

-- Allows companies that are engaged in the exploration and development of oil and gas to deduct intangible drilling and development costs (such as fuel, labor, repairs to equipment, and supplies);

-- Is largely claimed by integrated oil and gas producers, which get to expense 70% of their drilling costs up-front, then the next 30% over the course of five years; and

-- Lowers the oil industry’s effective tax rate. Rather than paying taxes on 35% of their profits, the oil and gas industry have only paid taxes on 13.3% of their profits on average between 2001 and 2003.