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IPAA Asks Congress to 'Do No Harm' to Oil and Gas Industry

An independent oil and natural gas producer group called on Congress last week to reject proposals seeking to impose a tax on the excess profits of oil and natural gas companies.

"We urge Congress to do no harm to this industry and its ability to develop America's energy resources," wrote Michael Linn, chairman of the Independent Petroleum Association of America (IPAA), in a letter to Sen. Charles Grassley (R-IA), chairman of the Senate Finance Committee. "Searching for and investing in new domestic oil and natural gas supplies must be encouraged by the federal government rather than discouraged through new taxes or price control policies."

Linn was responding to a recent letter from Grassley who, while expressing his opposition to a windfall profits tax, called on major energy companies to voluntarily contribute a percentage of their huge quarterly earnings to fuel fund programs that supplement the Low-Income Home Energy Assistance Program (see NGI, Nov. 7).

"In the aftermath of Hurricanes Katrina and Rita, our industry donated hundreds of millions of dollars to relief efforts and we've created a special 'job network' for those displaced from employment. Of course, at the same time we will also be spending up to $30 billion to rebuild the infrastructure that was damaged and that resulted in an interruption of supply," Linn told Grassley.

"Above and beyond these efforts, I will forward your request for contributions to IPAA member companies," he said.

Grassley also asked for energy associations to provide a status report on their members' charitable contributions. "Although we do not survey our members regarding their charitable contributions, we have relayed your inquiry as requested, and anticipate that any relevant information will be provided by our members individually," said R. Skip Horvath, president of the Natural Gas Supply Association (NGSA), which represents major producers.

Horvath said the NGSA shared Grassley's concerns about assistance for low-income energy customers, but "[we] believe full government funding for LIHEAP -- $5.1 billion, as authorized by the Energy Policy Act of 2005 -- is the most efficient way to help those in need."

The IPAA's Linn addressed the criticism of energy companies' record profits. "It is important to note that while some companies are recording substantial earnings, much -- if not all -- of this capital is reinvested into new oil and natural gas supplies." He cited a recent independent study that concluded 150% of producers' domestic cash flow is being invested in new U.S. exploration and production projects.

Linn reminded Grassley that producers also are paying billions of dollars to the U.S. Treasury and individual states annually for the right to drill on public lands.

The IPAA represents independent producers who drill 90% of the nation's oil and natural gas wells, accounting for 68% of domestic oil output and 82% of domestic natural gas production, according to Linn.

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