Restoring key tax provisions for energy development is critical to America’s future

Recent catastrophic world events, including Russia’s invasion of Ukraine, have made it clear that we should do more to bolster energy security here at home and abroad. However, the Inflation Reduction Act removed a provision in America’s tax code designed to encourage investments in American energy.  

That’s why we introduced the Promoting Domestic Energy Production Act, a bipartisan-led bill that would restore a tax provision known for intangible drilling costs or IDCs, which allow producers to deduct expenses associated with drilling new wells, just like other industries can immediately deduct their investments. This is critical, as the expenses in question typically constitute 60 to 80 percent of total well costs and cannot be recovered until the well begins to produce.  

To be clear: This provision isn’t a subsidy. It’s a question of when a tax is paid, not how much. Most other industries are able to immediately deduct their investments under a provision known as bonus depreciation. All we’re asking is that oil and gas investments — in this case, new wells — be given the same treatment. 

This key provision for IDCs has benefitted American families and businesses for decades through cheaper and more reliable American-made energy. U.S. household expenditures on energy fell by nearly 11 percent over the past decade as those on food, education and health care rose by as much as 83 percent, according to data from the Bureau of Labor Statistics.

IDC deductions are critical for energy producers. This change subjects American oil and gas producers to significantly higher taxes and could lead to the loss of thousands of jobs if we don’t take swift action to restore these important pro-energy deductions. What’s more, an additional 2.5 jobs are lost in industries such as hospitality and transportation for every natural gas and oil job lost by repealing IDCs.  

American energy security is neither a right nor left issue, but one that should unite us all. We have all seen the chaos in global energy markets since Russia’s invasion of Ukraine and the devastating effects it has had on European energy prices and economies. Do we want America to be beholden to foreign rivals like Russia and OPEC for our energy needs? Or do we want to ensure we have cleaner, more reliable, American-made energy at home to power our homes, businesses and economy? 

That’s why our bill to restore deductions for IDCs has been co-sponsored by Republicans and Democrats. They understand, as all American leaders should, that our country must be ready to face the energy challenges of the next few decades and that this important feature of our tax code has been a significant driver of America’s energy security for decades. It can continue to be a catalyst for America’s energy leadership and geopolitical advantage, but lawmakers must act to ensure the deductions are reestablished.  

Our bipartisan legislation provides the fix we need. At a time of sky-high inflation, the American people need any help they can get when it comes to lowering the cost of energy. This commonsense bill promotes our nation’s domestic energy production capabilities — ensuring we keep and create American jobs, lower energy prices and reduce our dependence on foreign energy sources. 

Mike Carey represents Ohio’s 15th District and is a member of the Ways and Means Committee. Henry Cuellar represents the 28th District of Texas.