Letter to Finance Committee on Percentage Depletion Deduction
As the Finance Committee considers possible tax changes in connection with budget reconciliation legislation, the undersigned organizations urge you to retain the presentlaw percentage depletion tax deduction. The percentage depletion deduction contributes significantly to the role U.S. mineral, coal, natural stone, aggregates, and independent oil and gas producers play in fostering continued American economic prosperity. Maintaining a strong natural resources production sector and limiting our dependence on foreign production is critical to the growth of the U.S. economy. Eliminating or reducing the depletion deduction would, among other impacts, raise taxes on small energy operators and millions of oil and gas royalty owners who benefit directly from percentage depletion and make less than $400,000 per year. It would do particularly acute damage to rural economies while also damaging the 10 percent of domestic oil and natural gas production which currently comes from stripper wells. Such a policy change would also produce negative environmental consequences. Global Oil and gas emissions would rise as domestic production shifts overseas to operations with less stringent environmental standards. Where there had been community supporting domestic energy production, there will be a growing number of abandoned or orphaned domestic oil and gas wells.