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Thursday, July 11, 2013

API Foretells Doom and Gloom if IDC Deductions Are Repealed

From the American Petroleum Institute:

IMPACTS OF IDC CHANGES

Repealing the deduction for intangible drilling costs (IDCs) would have significant and immediate effects, a new study by Wood Mackenzie shows. The oil and natural gas industry would be forced to make fewer investments, drill fewer wells, employ fewer Americans, and produce less of the energy that fuels our economy.
The analysis shows an additional 190,000 Americans would be unemployed next year if the IDC deduction is repealed. That is equivalent to taking away an entire month of job creation at current growth rates. The reduction in employment rises to 265,000 by the year 2023, averaging 225,000 jobs per year over the ten year period. Employment directly in the oil and natural gas industry would be reduced by an average of 65,000 jobs per year, reaching 75,000 jobs in 2023. 
Projected industry investment in the U.S. falls by $407 billion over the ten year period, driven by a 15 to 20 percent annual reduction in future domestic drilling. By 2023, Wood Mackenzie estimates that nearly 10,000 wells will not be drilled. The result is a significant decline in future U.S. energy supply with oil and natural gas production in 2023 coming in 14 percent below current expectations.
A few politicians have repeatedly tried to repeal the IDC deduction while keeping similar cost recovery measures in place for all kinds of other businesses. Bipartisan efforts to accelerate cost recovery in other sectors of the economy have meanwhile become almost routine. Despite this fact, some continue to incorrectly refer to the IDC deduction as a ‘subsidy,’ spreading that false notion that this provision is somehow unique to oil and natural gas.

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