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Chris Prandoni

Democrats Attempt to Subvert Congress in Hopes of Carbon Regulation


Posted by Chris Prandoni on Thursday, March 11th, 2010, 5:09 PM PERMALINK


What a difference a year makes. A year into Obama’s presidency we were suppose to have universal government-run health care, an energy tax (Cap-and-Trade), and a slew of other  intrusive programs, mandates, and decrees. The thing is, Americans don’t want their lives turned upside-down at the whim of Washington politicians. But Democrats refuse to listen. They talk themselves into thinking that they know better than thou; that the American people don’t know what they really want. It is this tragic example of groupthink that is the impetus for all of the Democrats' political tactics.

Instead of passing healthcare reform through conventional means, Democrats have dragged the country through a convoluted sausage packing that may manifest itself in a reconciliation vote. Cap-and-Trade passed the House last June by the slimmest of margins, 219-212, only to stall in the Senate – Harry Reid never had the votes. During simpler times Cap-and-Trade would be dead, but no. Unable to pass cap-and-trade through traditional legislative measures, the Obama administration has called upon the EPA to do its dirty work, to unilaterally instate a national energy tax. In a February 22, 2010 letter to Senator Rockefeller, EPA Director Lisa Jackson wrote:

“I expect that EPA will phase-in permit requirements and regulation of greenhouse gases for large stationary sources beginning in calendar year 2011... In any event, EPA does not intend to subject the smallest sources to Clean Air Act permitting for greenhouse-gas emissions any sooner than 2016.” –EPA Director Lisa Jackson

Subverting the will of Congress and the American people, the EPA has decided that it will dictate America’s energy policy. Luckily, this move has received substantial scrutiny. Senator Lisa Murkowski (R-Alaska) and Representative Joe Barton (R-Texas), in their respective chambers, each introduced legislation that would bar the EPA from regulating (taxing) greenhouse gases. Americans for Tax reform sent out the following letters urging Members to sign on to Sen. Murkowski and Rep. Barton’s resolutions of disapproval. Americans for Tax Reform also sent out this letter to the White House asking for President Obama and Lisa Jackson to yield to the will of Congress. This is an important fight. If the EPA is allowed to enact what Congress couldn’t, it would open the floodgates to a new era of governance, one dictated not by Representatives of Congress but by bureaucratic appointees.

Below is the letter Grover Norquist sent to the Senate:
 

Dear Senator

On behalf of Americans for Tax Reform, and millions of taxpayers nationwide, I am writing to urge you to support Senator Murkowski’s submission of disapproval regarding the Environmental Protection Agency’s carbon dioxide endangerment finding. Senator Murkowski’s resolution of disapproval is an attempt to stop the Environmental Protection Agency from regulating greenhouse gas emissions under the Clean Air Act.   

Unable to pass greenhouse gas regulations through Congress, members of the current administration have attempted to shape American energy policy via the EPA. In a February 22, 2010 letter sent by EPA Director Lisa Jackson to Senator Rockefeller, she wrote:

“I expect that EPA will phase-in permit requirements and regulation of greenhouse gases for large stationary sources beginning in calendar year 2011... In any event, EPA does not intend to subject the smallest sources to Clean Air Act permitting for greenhouse-gas emissions any sooner than 2016.”

Unabashedly stating her intentions to begin issuing carbon permits next year, Lisa Jackson looks to enact controversial cap-and-trade like legislation on her own. This administrations attempt to subvert Congress, and the will of the American people, by enacting backdoor carbon regulations is reprehensible. The EPA should not act as chief regulator of America’s economy, it was never intended to.

Acting as a safeguard for the American people, Senator Murkowski’s resolution of disapproval would ensure that the EPA could not overhaul America’s energy industry, and subsequently the American economy. With the American economy still sluggish and unemployment hovering around 10 percent, any carbon regulation would be disastrous.

Facing carbon regulations, energy producers would have no choice but to raise energy prices, passing the cost of EPA’s regulations to consumers. Undoubtedly, higher energy prices would result in lost productivity and jobs while reducing America’s global competitiveness. Energy taxes divert money from the most productive sectors of the American economy to less efficient energy sources. Companies considering investing in the U.S. already must weigh America’s inexplicably high corporate tax rate. Compounding an energy tax to an already high business taxes would certainly deter foreign investment -- further prolonging the current downturn. 

Action against the EPA’s imminent carbon regulation is necessary. I urge you to proactively fight this measure and support Senator Murkowski’s resolution of disapproval. 

Onward,
 
Grover G. Norquist

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Energy Tax Hike Series: Use it or Lose it Tax


Posted by Chris Prandoni on Thursday, March 4th, 2010, 11:07 AM PERMALINK


The President’s FY 2011 budget contains hundreds of billions of dollars in new taxes on energy production and consumption. These taxes will result in higher prices at the pump, increased utility bills and less American energy jobs as companies flee the U.S. to avoid these industry crippling taxes. The full energy tax booklet is available here.

One of these changes is reinstating the “use it or lose it” tax, a proposal that will raise billions of dollars of taxes.

Considering the federal government owns around 30% of all land in the United States, many of the nation’s minerals reserves lay in government owned territory. When oil reserves are discovered on federal land, oil companies bid for government leases in order to develop newly found oil deposits. Generally, these leases are for ten year periods.

The proposed “use it or lose it” policy looks to tax oil companies that have leased federal land but have not begun, or are not mining enough, oil. The “use it or lose it” tax is to be levied and administered by the Department of the Interior and will raise taxes by $1.2 billion during the 2010-2020 period.

There are numerous problems with the proposed “use it or lose it” policy. Under the 1992 Comprehensive Energy Policy Act (CEPA) oil companies are already required to use government leased land in a timely manner or they risk forfeiting their lease. Without punitive punishments, CEPA and its threat of lease termination has proved to be an adequate means of encouraging expedient development of oil reserves, the rational behind the “use it or lose it” tax hike.

Secondly, the “use it or lose it” tax disregards the complex oil mining process. Companies purchase leases knowing very little about the land they are renting, “only 1 in 3 onshore wells finds enough oil or gas to produce profitably; in deep water, only 1 in 5 wells is commercial. Thus, only a small percentage of the leased acres end up producing oil.” The Obama budget furthers the misconception that every lease contains oil when less than 30% of all leases are ever developed.

Taxing oil companies for running the complex, expensive, and necessary geological tests used to determine the profitability of leased land makes little sense and can only lead to wasteful spending. In order to avoid “use it or lose it” penalties, oil companies may prematurely develop unprofitable oil wells effectively relocating capital to substandard wells.

Check out the full table of energy tax increases and the industry impact numbers and a PDF document further explaining the use it or lose it tax.

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Energy Tax Hike Series: Raises Taxes on Tertiary Injectants


Posted by Chris Prandoni on Wednesday, March 3rd, 2010, 12:15 PM PERMALINK


The President’s FY 2011 budget contains hundreds of billions of dollars in new taxes on energy production and consumption. These taxes will result in higher prices at the pump, increased utility bills and less American energy jobs as companies flee the U.S. to avoid these industry crippling taxes. The full energy tax booklet is available here.

One of these changes is a repeal of the tertiary intectants tax deduction, a proposal that will raise billions of dollars worth of taxes.

In order to mine inaccessible oil reserves, oil producers often inject liquids and gasses into an oil well’s surrounding area, a process called tertiary injection. Domestic oil producers deduct the costs incurred from the tertiary injection process. Expenses that oil companies claim as deductions are: the cost of acquiring or producing the tertiary injectants, the costs associated with injecting, reinjecting, and recovering the purchased and produced tertiary injectants.

The administration has proposed to repeal tertiary injectants deductibility status. Doing so would raise taxes on energy producers by $5 million in 2011 and $67 million by 2020.

Changing how tertiary injections are listed under the tax code, from deductible to capital, will raise the initial investment required by producers looking to extract oil. Section 193 of the IRS code states that oil producers should be able to deduct “costs related to injecting a substance with a transitory effect on production” and “costs of producing and reinjecting gas or hydrocarbon liquids utilized in a recycling process.” Thus, if tertiary injectant deductions bolstered oil production, as the IRS code explicitly states, then rescinding it will have the oppose effect – stifling production.

The purpose of the deduction was to help producers pay for the high costs associated with tertiary injection. Changing how producers recover their initial investment could force companies to shut in older fields which would adversely affect local economies. In many tertiary injection projects carbon dioxide is the gas used to gain access to oil deposits. Utilizing carbon dioxide in enhanced oil recovery projects is one of the primary ways to prevent carbon dioxide from escaping into the atmosphere; keeping deductions for tertiary injectants would encourage this process.

Considering America’s oil and natural gas industry is one of the largest, supporting more than 9 million jobs, taxing tertiary injectants increases the cost of energy for every American family.

Check out the full table of energy tax increases and the industry impact numbers and a PDF document further explaining the tertiary injectant tax deduction.

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Andy Stern Update: US Attorney Reviewing Case & Obama Appoints Stern to Debt Panel


Posted by Chris Prandoni on Tuesday, March 2nd, 2010, 2:08 PM PERMALINK


In an effort to control the growing deficit, President Obama has called for the creation of a “Debt Panel.” Inappropriately, but not surprisingly, the White House selected Service Employee International Union President (SEIU) Andy Stern to sit on the 18-member committee. Investors Business Daily, also confused by Stern’s appointment, wrote:

“The appointment of Andy Stern, president of the Service Employee International Union (SEIU), to a bipartisan commission to come up with ways to deal with the rapidly rising federal budget deficit is like having a serial arsonist organize Fire Prevention Week.”

Prematurely revealing his hand, Stern told Congress last week what he thought about deficits:

"As (New York Times columnist) Paul Krugman says, and I believe, 'We are in the aftermath of a severe financial crisis which has led to mass job destruction. And right now we need more of that deficit spending because millions of Americans are blighted by high unemployment, and the government should be doing everything it can to bring unemployment down.'"

Mr. Stern shows little concern for the objectives of the “Debt Panel,” to reduce the deficit. So how did Andy Stern sneak onto this committee? The President and Andy Stern go way back. In fact, when the White House released its visitor logs last October, he was found to be the most frequent guest, popping in 22 times. You would think that after Stern’s seemingly unfettered access to the White House he would need to register as a lobbyist or risk violating the Lobbying Disclosure Act. Think again. Stern suspiciously deregistered as a lobbyist in 2007.

On November 13, 2009 the Alliance for Worker Freedom and Americans for Tax Reform requested an investigation into Andy Stern’s potential violation of the Lobbying Disclosure Act. A brief summary of what has happened since then:

Nov. 16, SEIU spokesperson Michelle Ringuette acknowledged the validity of claim and, without offering evidence responded: “Andy Stern spends less than 20 percent of his time talking to elected representatives.”

Jan 5 Andy Stern told Carol Costello in a one-on-one interview on CNN: “We’re going to send them a letter and tell them the truth, which is we’ve complied with the law. And we assume whenever the investigation is done it will be fine.”

Jan 25, SEIU spokesperson Kawana Lloyd contradicted what Mr. Stern had said on CNN, saying: “SEIU had likely said all it would say on the matter.”

Feb 1, the US Attorney’s office confirmed to CNSNews.com that they are “reviewing the matter.” Ms. Ringuette retorted: “The charges were meritless; we have been informed by the Senate that the complaining parties were notified.”

Despite being promised vindicating documents, neither ATR nor AWF has received any information from Andy Stern or the SEIU refuting our claims. With the charges levied against Mr. Stern being reviewed by the US Attorney’s office, AWF sent a letter to the White House Counsel Robert Bauer asking if it was appropriate for Mr. Stern to sit on the Debt Panel. AWF also sent a letter to the Secretary of the Senate Nancy Erickson and US Attorney Channing D. Phillips requesting additional information about the status of the investigation. 

Given Mr. Stern’s inflexible liberal ideology and his precarious lobbying activities, his appointment to the debt panel is completely inappropriate.

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Energy Tax Hike Series: Superfund Tax Reinstated


Posted by Chris Prandoni on Monday, March 1st, 2010, 9:37 AM PERMALINK


The President’s FY 2011 budget contains hundreds of billions of dollars in new taxes on energy production and consumption. These taxes will result in higher prices at the pump, increased utility bills and less American energy jobs as companies flee the U.S. to avoid these industry crippling taxes. The full energy tax booklet is available here.

Reinstating the Superfund tax, resulting in billions of dollars of new taxes, is one of the President’s 2011 proposals.

Superfund excise taxes were imposed in years before 1996.  They included a tax on domestic crude oil and imported petroleum products at a rate of $9.7 per barrel; a tax on hazardous chemicals at a varying rate of $0.22 to $4.87 per ton; and a tax on imported substances that use hazardous materials in their production.

The Superfund Environmental Income Tax refers to a corporate environmental income tax imposed before January 1, 1996 at a rate of 0.12 percent for corporations whose incomes exceeded $2 million.

The revenue from these taxes was assigned to the Hazardous Substance Superfund Trust Fund. Money from the Superfund Trust Fund was available for expenditures related to hazardous substances released into the environment.

The Obama budget reinstates the Superfund taxes which are expected to cost approximately $19 billion over 10 years.

Superfund was initially conceived as a way to target companies as potential victims of trial lawyer activists. Companies who have been accused of alleged improper hazardous waste disposal are not only targeted by bureaucrats, but trial lawyers milking the Superfund with extraneous lawsuits, trolling for potential “victims” of the alleged environmental violation.

Not only are the owners of said company liable for alleged damages, so is anyone who was operating or working at the site at the time, any worker or non-employee who took part in arranging the alleged improper disposal, or any person who transported any material to the site.

Simply put, if you are the unfortunate worker who happened to be transporting materials or signed a shipping order on the day the trial lawyers show up, not only could you lose your job, but face a massive EPA-backed lawsuit.

Superfund is nothing more than a slush-fund for trial lawyers by which they use the tools of the government to identify potential “victims.”

Check out the full table of energy tax increases and the industry impact numbers and a PDF document further explaining the Superfund tax.

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Energy Tax Hike Series: IRS Sec. 199 Repeal


Posted by Chris Prandoni on Friday, February 26th, 2010, 9:31 AM PERMALINK


The President’s FY 2011 budget contains hundreds of billions of dollars in new taxes on energy production and consumption. These taxes will result in higher prices at the pump, increased utility bills and less American energy jobs as companies flee the U.S. to avoid these industry crippling taxes. The full energy tax booklet is available here.

One of these changes is repealing IRS Section 199, the Domestic Production Activities Deduction. This change will result in billions of dollars of new taxes.

The Internal Revenue Code (IRC) Section 199, the Domestic Production Activities Deduction, benefits all companies who produce goods on American soil – yet only energy companies are targeted for the cuts in deduction rates.

Prior to harmful energy legislation passed last Congress, businesses engaged in a qualifying production activity were eligible to take a tax deduction of 3% of the profits from this qualifying activity in tax years 2005 and 2006. The deduction increases to 6% of profit in 2007, 2008, 2009, totaling 9% in years 2010 and beyond.

However, the Pelosi-Reid energy agenda has implemented a Sec. 199 “freeze” at 6% - only for energy companies, thus further carving out their niche for non-traditional energy.

  • Impact on oil and natural gas: Repealing Sec. 199 will result in a $851 million corporate income tax increase in 2011 and a  $17.314 billion tax increase by 2020
  • Impact on hard mineral fossil fuels (coal): Repealing Sec. 199 will result in a $3 million corporate income tax increase in 2011 and a $57 million tax increase by 2020
  • Total impact: Repealing Sec. 199 will result in a $854 million tax increase by 2011 and a $17.371 billion tax increase by 2020

Culling America’s most productive energy sources for the purposes of taxation can only lead to higher energy prices for Americans. Energy companies will not pay the tax increase a repeal of Sec. 199 prompts, consumers will. This tax will be passed on to every domestic manufacturer, business, and American. Furthermore, a repeal of Sec. 199 undermines the 6 million workers that makeup the oil and natural gas industry in the U.S. as it effects only domestic oil production.

Check out the full table of energy tax increases and the industry impact numbers and a  PDF document further explaining Section 199.

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Senator Inhofe Urges EPA to Reconsider Endangerment Findings


Posted by Chris Prandoni on Thursday, February 25th, 2010, 1:41 PM PERMALINK


[PDF Document]

Dear Senator Inhofe:

On behalf of Americans for Tax Reform, and millions of taxpayers, I would like to thank you for your report titled Consensus Exposed: The CRU controversy, which formally requested the Environmental Protection Agency (EPA) to reconsider its endangerment finding on the basis that they relied on the United Nation’s Intergovernmental Panel on Climate Change (IPCC) reports, which have now been revealed to be full of faulty science.

Your response to the EPA’s endangerment findings is wholly appropriate given the de-legitimization of the once esteemed University of East Anglia‘s Climatic Research Unit (CRU), and subsequently, the United Nation’s IPCC reports, many of which were authored by CRU scientists or drew heavily from CRU findings.  

Unable to pass comprehensive climate legislation through Congress, members of the current administration have attempted to shape American energy policy via the EPA, a contentious point your report confronts head on. Questioning the EPA’s authority to implement broad energy regulation while challenging the justification for such regulation, your thorough report rebuts EPA’s most convincing arguments.

This refutation of the EPA is critical because of the enormous impact EPA regulation or cap-and-trade like legislation would have on American people and American businesses. The EPA should not be the chief regulator of America’s economy. 

The effect of suggested energy taxes would be devastating; resulting in lost income, lost jobs, and higher energy prices. Energy taxes deter foreign investment negatively impacting future growth. In order to compensate for higher energy prices, American companies would be forced to raise the price of their products, reduce their payroll, or ship jobs overseas. Higher energy prices directly affect consumers as Americans will see their energy bills soar. None of these results are desirable.

I would like to commend your efforts in standing up for taxpayers, small businesses, consumers and American family’s nationwide. Thank you for your leadership.
  
Onward,
 
Grover G. Norquist
GGH/bmj

Cc:    All Members of the US Senate
          Lisa Jackson, EPA Administrator
 

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Energy Tax Hike Series: Repeal of Percentage Depletion Deduction


Posted by Chris Prandoni on Thursday, February 25th, 2010, 10:54 AM PERMALINK


The President’s FY 2011 budget contains hundreds of billions of dollars in new taxes on energy production and consumption. These taxes will result in higher prices at the pump, increased utility bills and less American energy jobs as companies flee the U.S. to avoid these industry crippling taxes. The full energy tax booklet is available here.

One of these changes is repealing the percentage depletion tax deduction. This change will result in billions of dollars of new taxes.

The IRS defines depletion as “the using up of natural resources by mining, quarrying, drilling, or felling. The depletion deduction allows an owner or operator to account for the reduction of a product’s reserves.” For over a century there have been two ways to calculate deductions: cost depletion and percentage depletion.

The preferred method of deduction, percentage depletion allows the producer to deduct the gross income derived from extracting fossil fuels or other minerals. Originally implemented to encourage domestic development of natural resources, percentage depletion allows for producers to collect a percentage, depending on the resource being mined, of their income tax-free.

Traditionally, oil producers have been able to deduct approximately 15% of their income while coal producers have deducted 10%. Comparatively, sulphur and uranium producers deduct 22%.   

  • Impact on oil and natural gas: Repealing percentage depletion will raise taxes by $522 million in 2011 and 10.026 billion by 2020
  • Impact on hard mineral fossil fuels (coal): – Repealing percentage depletion will raise taxes by $57 million in 2011 and $1.062 billion by 2020.
  • Total impact: $579 million tax increases in 2011 and 11.088 billion in tax increases by 2020

    Mining natural resources continues to be one of the riskiest investments and requires enormous amounts of capitol. Furthermore, it may take years to recuperate investments because resource extraction does not begin immediately. Percentage depletion has gone a long way to alleviate the concerns of investors and small companies, its repeal will only add uncertainty to already weary producers.    
    While producers of other minerals (gravel, clay, gold, etc) will be allowed to continue percentage depletion discounts, oil, natural gas and coal producers will face enormous tax increases.

Check out the full table of energy tax increases and the industry impact numbers

and

a PDF document further explaining percentage depletion.

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Energy Tax Hike Series: Passive Loss Exception Repeal


Posted by Chris Prandoni on Wednesday, February 24th, 2010, 1:41 PM PERMALINK


The President’s FY 2011 budget contains hundreds of billions of dollars in new taxes on energy production and consumption. These taxes will result in higher prices at the pump, increased utility bills and less American energy jobs as companies flee the U.S. to avoid these industry crippling taxes. The full energy tax booklet is available here.

One of these changes is repealing the passive loss tax exception for energy companies. This change which will result in billions of dollars of new taxes.

A generation ago, “tax shelters” were popular and legal tax-avoidance strategies.  The most common form a tax shelter took back then was for someone to become a limited partner in a partnership that had losses year after year.  These losses would be passed along to the partner-investor, who would use them to offset other income.  There were few restrictions on this practice.

That all changed in 1986 with the passage of the Tax Reform Act.  Congress required “passive losses” (losses incurred by businesses in which the taxpayer didn’t have any material participation) to be carried forward, not used against other income.  The losses from the passive activity now can only be realized if the activity eventually turns a profit, or when the investor sells his interest in the activity.  This legislative change drove a stake through the heart of the tax shelter industry.

Congress made several exceptions to the passive loss rule, though.  One of these was a working interest in an oil or gas property.  For these investments, the rules are much like they were before 1986.

Repealing the passive loss exception for working interests in oil and gas properties will result in a $20 million tax increase in 2011 and $180 million tax increase by 2020. 

This is a clear and blatant attempt to increase taxes on America’s energy manufacturing sector.  The policy rationale behind the passive loss exception in current law is debatable, but repealing it should only be done in the context of further tax reform.  If the federal government is going to be a full partner in your profitable years, and a deferred partner in your losing years, then you ought to at least get lower tax rates out of the deal.  Under no circumstances should this exception be repealed in the context of a net tax hike.

Check out the full table of energy tax increases and the industry impact numbers and a PDF document about passive loss.

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Energy Tax Hike Series: Marginal Well Tax Credit Repeal


Posted by Chris Prandoni on Tuesday, February 23rd, 2010, 2:21 PM PERMALINK


The President’s FY 2011 budget contains hundreds of billions of dollars in new taxes on energy production and consumption. These taxes will result in higher prices at the pump, increased utility bills and less American energy jobs as companies flee the U.S. to avoid these industry crippling taxes. The full energy tax booklet is available here.

One of these changes is repealing the marginal well tax credit which will result in billions of dollars of new taxes.

Marginal oil wells are those which produce 15 barrels of heavy oil or less per day or those that produce less than 95 percent water and 25 barrels per day or less. Marginal gas wells are those which produce 90 Mcf or less in one day.

The tax credit is $3/barrel for the first three barrels of daily production and $0.50 per Mcf tax credit for the first 18 Mcf of natural gas. The tax credit phases in and out in equal increments as prices fluctuate. Price triggers are based on average annual wellhead prices.

The FY 2011 Administration Budget, approved and submitted by President Obama, calls for a full repeal of the tax credit for oil and gas produced from marginal wells.

The benefits of this tax credit to smaller producers cannot be overstated. The Department of Energy estimates that the repeal of this tax credit will cost 140,000 barrels of oil per day or a loss of $10.5 million per day. Despite the smaller production from these wells, there are an estimated 650,000 marginal oil & gas wells in the United States employing millions of people. Raising taxes on energy production will cost jobs and increase the price of energy.

America’s marginal oil wells produce the amount equivalent to 50 percent of the amount imported from Saudi Arabia – increasing this tax credit will hurt domestic supply.

Repealing this tax credit without offsetting tax relief is a net tax increase and a Taxpayer Protection Pledge violation.  This tax credit is not a spending program, and eliminating it is not a reduction of government spending—it is a tax increase. 34 Senators and 172 Congressmen have signed the Taxpayer Protection Pledge.  In so doing, they promised to their constituents and the American people that they would “oppose any net reduction or elimination of deductions or credits…”

Check out the full table of energy tax increases and the industry impact numbers and a PDF document about the marginal well tax credit.

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