July 31, 2014 SIGN IN | REGISTER

Energy Policy and Tax Policy Are Inseparable | Commentary

In the context of fundamental tax reform, special tax breaks for every industry should be scrutinized. Nonetheless, there are tax breaks that should be preserved and have been fundamental to creating new technologies and have been the driving force behind some of the great advances in medicine, scientific research, technology, and oil and gas exploration. For example, the tax code gives all industries a tax break tied to research- and-development costs. For the technology industry, especially for new high-risk ventures, the R&D tax break has been essential. Without it, American companies would be at a great disadvantage as they compete with foreign competitors. No one suggests that in the name of simplifying the tax code or raising additional revenues, this tax break should be eliminated.

On a policy level, there is no difference between the R&D tax break and a tax break tied to intangible drilling costs that benefits oil and gas companies. The purpose of the IDC tax break is to encourage oil and natural-gas production, which is a risky endeavor even under the best of circumstances. This has been especially true for small independent oil and gas producers. The IDC tax break has encouraged the necessary risk-taking that has been critical to the historic progress of which Obama is rightfully proud.

The IDC tax break has been in the tax law for 100 years, and it has been fundamental to the success of oil and gas exploration in America. The Obama administration wants to eliminate it. To sweep it away could profoundly impede the president’s goal of energy independence. It is not sound energy policy or wise tax policy.

In the coming months, the debate over taxes and our nation’s energy policy will intensify. They are inseparable. Decisions made about one will dramatically affect the other. There is much at stake.

Michael A. Andrews is an attorney with King & Spalding. He served in Congress from 1983 to 1995. He was a member of the Ways and Means Committee. Abraham N.M. Shashy Jr. is an attorney with King & Spalding. He served as chief counsel for the IRS from 1990 to 1993.

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