2018 OFFICIAL PUBLICATION OF THE MONTANA PETROLEUM ASSOCIATION
Percentage depletion is a tax allowance that honors the recovery of
monetary investment over time. Not a subsidy or a tax credit, this cost
recovery mechanism extends beyond oil companies as a deduction
for investors and royalty owners to incentivize oilfield investment.
Like depreciation, percentage depletion allows an owner or operator
to account for the reduction of a product’s reserves.
The costs associated with maintaining wells are high, including
maintenance, disposal of water, and electricity costs to run pumping
units. The revenue retained by the percentage depletion deduction
is essential to meeting costs. For larger wells, percentage depletion
provides more revenue to be used on exploration and development
of new wells.
In addition to IDCs and Percentage Depletion, a new provision was
passed to allow businesses to expense the full cost of new investments
in certain projects for the next five years, before gradually phasing
out. At a time when updated infrastructure is of high priority, including
new energy infrastructure, this provision gives businesses
operating across the full spectrum of the private sector something to
For many in the industry, the state of American energy hasn’t
looked this bright since $100/barrel oil.
The United States has become the largest producer of natural gas
in the world, thanks to remarkable innovation in shale energy extraction
through horizontal drilling and hydraulic fracturing. America
is leading the way in emissions reductions and retrofitting the
largest pipeline network in the world to deliver petroleum resources
faster, safer, and more affordably to market.
With global economic growth on the rise, the Energy Information
Administration predicts oil output to grow by 111,000 barrels a day
(a 10 percent increase) pushing America to the forefront of global
energy producers, and surpassing Russia and Saudi Arabia for the
first time since 1975.
Increased production translates into opportunity. At the recent
State of Energy Industry forum, Jack Gerard, outgoing Chief Executive
of the American Petroleum Institute, said the oil and gas industry
accounts for 10.3 million high-paying jobs, and that by 2025, 40
percent of the industry’s workforce will be made up of millennials.
President Trump put it best in his January 2018 State of the Union
“The war on American energy is over!”
Jessica Sena is an independent communications consultant and spokeswoman
for the Montana Petroleum Association.
Tax Cuts – Results TRUMP Politics CONTINUEd