New legislation with bipartisan buy-in in Congress would restore tax breaks that were canceled by President Biden’s tax-and-climate spending law that critics say unfairly punished Big Oil.
The measure would restore tax deductions for expenses that come with drilling new wells, expenses known as intangible drilling costs.
It was one of the largest tax breaks for the industry and had been in place for more than a century, allowing energy companies to write off costs such as wages, fuel, repairs, site preparation, engineering and supplies for drilling oil wells.
Mr. Biden’s tax-and-climate law, which Democrats’ dubbed the Inflation Reduction Act, ended that tax break.
Reimplementing those deductions would mean the world’s largest oil and gas companies could write off billions of dollars in exploration costs, a move the industry argues would spur more production and lower energy prices.
Proponents of the legislation say it’s an issue of fairness and that fossil fuels were singled out as part of Mr. Biden’s push for clean energy. Other industries can deduct similar costs associated with their specific fields.
Opponents counter that the tax break lined the pockets of uber-wealthy energy companies at the expense of taxpayers.
The measure is sponsored by Republican Rep. Mike Carey of Ohio and Democratic Rep. Vicente Gonzalez of Texas.
Mr. Carey said the IRA “unfairly penalizes America’s energy producers” by excluding the tax write-off.
“American energy independence is neither a right nor left issue, but one that should unite us all,” Mr. Carey said. “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.”
Mr. Gonzalez, who frequently bucks his party over Mr. Biden’s green energy policies, called the proposal a “common-sense bipartisan bill.”
He said it would “keep and create American jobs, lower energy prices, and decrease our dependence on foreign energy sources.”
Mr. Carey and Mr. Gonzalez expect more bipartisan support and the backing of the industry.
The American Petroleum Institute previously lobbied against repealing the tax break and said intangible drilling costs account for 60% to 80% percent of a well’s expenses, which typically run in the millions of dollars.
Shell, for example, invested roughly $12 billion last year in its integrated gas and oil exploration and raked in a record $40 billion in profits.