Letters
| September 8, 2021

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.   

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