For the last five years Artex Oil Company, a small, independent producer in Southeast Ohio, has successfully generated the necessary internal funds to keep one rig drilling continuously. The company’s budget required to explore, drill and operate its oil and natural gas wells is $30 million per year. It is these expenditures that generate 400-500 jobs, which are extremely important to the local economy in this rural area along the edge of Appalachia.
“The newly proposed taxes on the oil and natural gas industry from President Obama’s administration will have a dramatic effect on drilling activity,” says Jerry James, president of Artex Oil Company. “Artex currently invests over 100 percent of its cash flow for goods and services. If we lose the ability to deduct our intangible drilling costs in the year we pay the bills, and we lose percentage depletion, our tax bills will increase to 30 percent of our current investments. Our only choice will be to reduce activity in order to pay our taxes. One hundred and fifty people will lose their jobs. These jobs will not only be in the oil and natural gas industry, but in our allied and supply industries as well. For example, Artex uses over five million pounds of steel per year. If the funds go to increased taxes, our requirement for steel alone will be reduced more than 1.5 million pounds of steel annually.”
“O’Neal Drilling Company is a small, independent operator located in Ft. Worth, Texas,” says Patricia J. O’Neal, President. “We have been in the oil and natural gas business for more than 50 years and without both depletion and depreciation tax provisions, we would not have survived. President Obama has stated the importance of tax cuts for small business, but I am concerned about his sincerity when he cuts the two most important tax incentives the small, independent operator must have in order to survive. Elimination of oil industry tax provisions will, undoubtedly lead to decreased domestic oil and natural gas production and increased dependency on foreign supplies. This is counter to our national security and will further add to the United States’ trade imbalance.”
Bob Sullivan, owner of Sullivan and Company, LLC, shares his experience. “President Obama’s proposed tax code changes would significantly damage our small, family business and the production we have established over the past 50 years. Specifically, the elimination of intangible drilling costs as a tax deduction and the change in the depletion deduction would do away with the money that we have to devote to additional drilling for domestic barrels of oil. Furthermore, the elimination of geologic and geophysical expenses as tax deductions would eradicate funds that would otherwise support high paying jobs in our small organization. These normal businesses expenses, which have been misnamed ‘subsidies’
“The proposed legislation by the Obama Administration uses a shotgun approach instead of a rifle. Congress is aiming at the major oil companies and hitting the small independent ‘mom and pop’ producers,” said Somerlyn Cothran, Executive Director of NSWA. “President Obama has touted how much he wants to help small business. If these proposed tax provisions are put in place he would be putting many small businesses out of business in at least 35 states across America,” she said.
“In these difficult times, all of our revenue is being invested to keep people working,” adds James. “If our taxes are increased, then jobs will have to decrease. There is no other option.”
At present approximately 60,000 jobs are directly or indirectly dependent upon America’s stripper oil and natural gas wells. In fact, although an individual stripper oil well produces only 15 barrels (or less) of oil per day, collectively U.S. stripper oil wells produce 20 percent of the country’s oil or 1.2 million barrels per day – as much as the U.S. imports from Saudi Arabia. Production from marginal natural gas wells (wells that produce less than 60 mcf’s per day) make up 12% of U.S. production. The U.S. stripper well industry reduces America’s dependence on foreign oil, generates both state and federal taxes, pays royalties to land and mineral owners and keeps jobs and dollars here in the United States.
For additional information or to speak with a representative from NSWA, please contact Angela Fisher at 404-819-4917 or firstname.lastname@example.org .
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The National Stripper Well Association is the nonprofit trade association which represents producers and operators of marginally economic crude oil and natural gas wells in the United States. NSWA represents members in more than 35 states. For additional information, please visit www.nswa.us .