The oil and gas industry is a driver of every other sector in the U.S. economy and supports millions of high-paying American jobs, according to a new study prepared by PricewaterhouseCoopers (PwC). This study shows why Americans should be alarmed at efforts by President Biden and Congressional Democrats to raise taxes on oil and gas businesses through the repeal of various tax provisions, including the deduction for intangible drilling costs (IDCs).
IDCs allow independent producers to immediately deduct business expenses related to drilling such as labor, site preparation, repairs, and survey work. The deduction for IDCs is consistent with immediate expensing offered to all business investments.
If this provision is repealed, it could have significant, negative economic impacts in several states. As the study notes, the onshore upstream oil and gas sector, which relies on the deduction for IDCs, contributes 3.2 million jobs across the economy, including 690,500 direct jobs.
In certain states, the economy depends heavily on these onshore projects, including in West Virginia, Texas, and Oklahoma:
- In West Virginia, there are 39,000 onshore supported jobs, accounting for 4.5% of the state’s total employment.
- In Louisiana, there are 153,000 onshore supported jobs, accounting for 7.0% of the state’s total employment.
- In New Mexico, there are 72,000 onshore supported jobs, accounting for 6.5% of the state’s total employment.
- In North Dakota, there are 58,000 onshore supported jobs, accounting for 10.0% of the state’s total employment.
- In Oklahoma, there are 257,000 onshore supported jobs, accounting for 11.0% of the state’s total employment.
- In Texas, there are 1,549,000 onshore supported jobs, accounting for 8.6% of the state’s total employment.
Investing in these drilling projects is risky. After all, drilling a well does not guarantee that oil and gas will be found. IDCs enable American producers to continue exploring even after unsuccessful endeavors. As Energy Tax Facts explains, “Removing this 100-year-old tax provision from the code would not only strip away roughly 25 percent of the capital available for independent producers to continue looking for new oil and natural gas, but also diminish the many economic benefits created by those activities.”
If the IDC deduction is eliminated, as President Biden has proposed, many of the jobs the PwC study highlights could be eliminated. As noted in a 2014 study by Wood Mackenzie consulting, repealing the immediate deduction for IDCs would cost 265,000 jobs in the long-term.
More broadly, the PwC study notes that the oil and gas industry supports 11.3 million total American jobs across all 50 states and accounts for nearly 8 percent of GDP.
These jobs are high paying. In 2017, these jobs paid an average salary of $102,000, 85 percent higher than the average private sector salary.
Democrat members of Congress whose districts rely on this industry should stand with their workers and reject efforts to raise taxes on American manufacturing. For example, Democratic members of Congress from Texas represent numerous districts where the oil and gas industry employs thousands of Americans:
- Texas District 7: Rep. Lizzie Fletcher –
- 43,760 Direct Jobs, 152,080 Total Jobs, 19.8% of Jobs in District
- 33.3% of District’s Total Labor Income
- Texas District 15: Rep. Vicente Gonzalez –
- 11,840 Direct Jobs, 47,860 Total Jobs, 11.6% of Jobs in District
- 14.9% of District’s Total Labor Income
- Texas District 28: Rep. Henry Cuellar –
- 15,020 Direct Jobs, 48,660 Total Jobs, 13.8% of Jobs in District
- 20.0% of District’s Total Labor Income
- Texas District 29: Rep. Sylvia Garcia –
- 11,320 Direct Jobs, 53,760 Total Jobs, 15.3% of Jobs in District
- 24.6% of District’s Total Labor Income
- Texas District 32: Rep. Colin Allred –
- 19,620 Direct Jobs, 99,110 Total Jobs, 14.1% of Jobs in District
- 24.7% of District’s Total Labor Income
- Texas District 33: Rep. Marc Veasey –
- 7,000 Direct Jobs, 44,720 Total Jobs, 8.3% of Jobs in District
- 10.1% of District’s Total Labor Income
For decades, progressive Democrats and activist groups have undertaken a coordinated attack on reliable sources of energy produced in the United States, including oil and natural gas, through schemes like cap-and-trade, bans on hydraulic fracturing, the Green New Deal, and tax hikes all aimed at “keeping it in the ground.” These kinds of schemes are a direct threat to millions of high-paying manufacturing jobs, which the Left has claimed to be a champion of.