Practitioner's Corner

All of the Above | Oil & Gas Drilling


						                        
          
 
        

        

          



  
  
      

      

	By Gabe Rozsa



	Oil and Gas Drilling – “Drill Baby Drill” v. “Energy Tax.”  



	As a result of the Deepwater Horizon oil spill, the Obama Administration issued a moratorium on further drilling until improved safety requirements were in place.  While some permits have been issued since then, the pace of exploration has been significantly slowed and members of both parties from the Gulf Coast, except Florida, have pushed for more drilling to stimulate jobs and restore the economy.  The White House argues that oil and gas production is up significantly with higher production rates in the U.S. than ever before and that our dependence on foreign oil is down.  However, much of that increase in production is on private land where Federal permits are not required or as a result of new drilling practices like fracking that allow more oil and gas to be recovered from existing wells.  Also, lower imports may be due to the decline in fuel consumption because cars are more fuel efficient and a down economy that has put a damper on business and recreational travel.  



	 



	Another major issue for this sector is the fate of current incentives for oil and gas exploration and drilling and the effort by the Administration to eliminate most of those incentives as a way to pay for major components of the Administration’s energy and transportation initiatives.  The Administration is looking to generate $4 billion per year in additional revenues by eliminating these incentives, which the sector has painted as new energy taxes.  Republicans and industry interests argue that those incentives are not out of line with incentives for other sectors of the economy and that, if we want to stimulate new investment and production, those incentives are needed.  They also argue that increases in drilling on Federal land or in the OCS will generate additional royalty payments, which can help pay for increases in infrastructure spending.  Drilling policy will have to be addressed in any comprehensive energy bill, whether as a Federal leasing issue or a revenue generating activity – or probably both.