Energy executives: Proposed tax changes would hurt independent producers

Oil and gas executives said Tuesday that proposed changes to drilling tax breaks would wreck independent producers’ economics and put the brakes on jobs in an industry that’s paying workers far more than average wages.

“Changing the existing tax laws and regulations to increase taxes, fees and create higher costs to the detriment of the oil industry in the U.S. will only cause the oil and gas companies to move their future capital spending to other countries that provide a better economic return to the investor,” said Lee Jackson, a former riverboat pilot and owner of Jackson Offshore LLP. Jackson Offshore, a minority-owned company, operates supply boats. Jackson said he has six state-of-the-art boats under construction.

Jackson and other executives of independent producers and service companies testified Tuesday at a field hearing of the Senate’s Small Business and Entrepreneurship Committee, held in Lafayette and overseen by Sen. Mary Landrieu, D-La., who chairs the committee.

Landrieu and others said wages earned by oil and gas workers exceed those of other blue-collar American workers. Those wages, she said, would be in danger if energy companies lost tax breaks.

“The facts are that jobs in the oil and gas industry pay more than four times the minimum wage, which has been stuck at $7.25,” Landrieu said in a prepared statement. “These jobs pay the kind of wages and salaries that allow families to invest in homes and their futures.”

Though nothing been passed by Congress, there are proposals to reduce or do away with tax breaks designed to recoup some of the money spent on drilling and producing wells. The money recouped is plowed back into drilling projects.

“Reinvestment is essential to maintain and grow U.S. production,” said GiGi Lazenby, chief executive officer of Bretagne LLC, an exploration and production company based in Kentucky.

“Without (reinvestment), U.S. production would decline rapidly because wells deplete as they are produced,” she said.

Lazenby also said the cash that producers reinvest is vital because there are few funding sources. Small town banks, she said, don’t have the wherewithal or stomach for lending money for risky endeavors like drilling.

Landrieu said a Bloomberg Government report, released in 2011, concluded that doing away with tax breaks would have little effect on the five major oil U.S. oil companies, but it would severely hurt independent producers.

An oil and gas company is defined as independent if it has no downstream businesses such as pipelines and refineries.

Landrieu, an incumbent Democrat who is being challenged in the race for Senate this year, said she would oppose attempts in Congress to repeal the tax breaks.

Landrieu’s office, citing a report by IHS Global Insight, said the thousands of independent producers in the U.S. support 4 million direct and indirect jobs onshore and 200,000 jobs offshore. The wage earners pull in more than $100 million a year.