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Page added on February 27, 2009

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New Taxes for Oil and Gas Companies: Where Does this Lead Us?


The oil and gas industry is already pulling back sharply. If one looks at drilling rig counts, the number of drilling rigs operating in the United States has dropped by close to 40% from peak levels in 2008. Now changes to the tax law which would make it more expensive for oil and gas companies to operate are being proposed by the Obama administration.


What is the likely outcome? I fear it is an even steeper drop in US produced oil and gas supplies than would otherwise be the case. This drop will come primarily because of the likely impact on small oil and gas companies that dominate the US production market, especially for natural gas.
I have read that Speaker Nancy Pelosi and Senate Majority Leader Harry Reid are asking that the Capitol Power Plant change from coal to natural gas for producing electricity. With the proposed tax policy, I am afraid that they will find themselves asking to switch back to coal within a few years, because sufficient natural gas will not be available. If the natural gas industry is to maintain or raise production levels, it will need assistance, not higher taxes.


The Oil Drum



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