Responding to House Ways and Means Committee Chair Dave Camp’s (R-MI) tax reform proposal released Wednesday, an oil and gas group said that while they support some provisions, there are others that could negatively impact producers, royalty owners and the country’s ability to keep up with domestic oil and gas demand.

Camp issued the draft legislation “to fix America’s broken tax code” by lowering tax rates while making the code “simpler and fairer” for families and job creators. He said the latest draft of the nearly 1,000-page Tax Reform Act of 2014 “spurs stronger economic growth, greater job creation and puts more money in the pockets of hardworking taxpayers.”

Based on analysis by the independent, nonpartisan Joint Committee on Taxation (JCT), without increasing the budget deficit, Camp said the Tax Reform Act of 2014:

As far as oil and gas activity is concerned, the draft seeks to repeal:

The draft also seeks modification of the oil spill liability trust fund.

Independent Petroleum Association of America (IPAA) CEO Barry Russell said the document marks an early step in a long process to develop appropriate revisions to the federal tax code to both simplify taxes and continue to encourage U.S. economic development. He added that several elements of the proposal will affect U.S. independent oil and natural gas producers.

“IPAA commends the proposal to retain the current tax treatment of intangible drilling costs (IDC),” Russell said. “This longstanding tax deduction provides producers with the ability to reinvest 150% of their cash flow into new U.S. production.” He added that retaining the IDC provision will enhance the American production that is now being recognized as driving much broader investment in U.S. manufacturing.

On the negative side, Russell said the IPAA is “troubled by the change” in the percentage depletion deduction and specifically its impact on U.S. small business producers and royalty owners of oil and natural gas resources. “These stakeholders have relied on the percentage depletion deduction to maintain America’s marginal wells, which generate 20% of American oil and more than 12% of American natural gas. IPAA is concerned that the overall result, notwithstanding the change in the individual tax rate, could imperil America’s essential marginal well production.

He added that the association is also concerned about the impact of the proposal’s change of the passive loss exception. “This was originally instituted to ensure that small producers who rely on private investors for financing could compete with larger companies and their access to capital from banks and other larger financial institutions,” Russell said. “As IPAA examines the proposal, it will be assessing its impact on the small businesses that must rely on these investors to develop their projects.”