Official web site of the Western Energy Alliance

Last week, the U.S. House of Representatives passed legislation that would extend expiring tax provisions and modify the tax treatment of “carried interest”. The Independent Petroleum Association of America (IPAA) has indicated much of the rationale for changing carried interest relates to its use by investment funds.  In the natural gas and oil industry, small businesses often use a carried interest approach to create drill funds to develop new resource areas.  The proposed legislative changes would alter the tax treatment for these projects and likely will not contain small business exclusions.  IPAA has issued an action alert and IPAMS strongly encourages all members to click here and contact your representative in Congress.

Congress is already considering numerous revenue raising policies that impact all independent operators: the backbone of the western natural gas and oil supply.  Inspection Fees, Non-producing Acreage Fees, Royalty Rates and permanent Application for Permit to Drill (APD) fees have all been proposed in the President’s FY 2011 Budget still under review by Congress.

Coupled with $36.5 billion in additional taxes on industry, these new fees and taxes will disproportionately impact the small businesses that produce 82% of America’s natural gas and 68% of the oil.  The increased costs will remove capital from the development and production of American energy and result in further job losses.

Industry already more than pays for the administration of the onshore natural gas and oil program by returning $46 for every $1 BLM spends.  In fact, if you factor in other federal taxes, industry returns about $123 dollars for every dollar the government spends.  What other federal program provides such value to the American taxpayer?  After the IRS, natural gas and oil production is the second highest source of revenue to the federal government.

To help better understand all the potential ramifications on industry, click here to read IPAMS position paper on fee and royalty rate increases.

IPAMS is traveling back to Washington D.C. to discuss the impact of these taxes and fees on small independents.  Please consider joining IPAMS June 14-16 for a special legislative trip to meet with Congress about these proposed changes. Please contact IPAMS Director of Government Affairs, Kathleen Sgamma, if you’re willing to help us out.  As always, please let me and the IPAMS staff know what else we can do to help independents thrive in the West.