Search Results:
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What are intangible drilling costs? Why does the oil industry get to deduct these costs from their taxes?
Answer:
When energy companies drill they incur costs for things like site preparation and labor. No physical asset is received for these costs, and over time they have been termed as intangible costs. Typically, they represent 60 to 80 percent of the cost of the well – the remainder being the physical steel, pumps and casing that become part of the well. Companies have long had the option of deducting these costs in the year they are spent – similar to deductions enjoyed by other industries. For example, many industries are able to expense research labor and other costs under the research and development deduction, and computer software companies can deduct the costs of developing code. In fact, the administration has been promoting a provision to allow for the immediate expensing of all capital costs that meet certain thresholds.
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What percentage of the oil reaching the Gulf Coast from the Keystone XL would actually remain in America vs. being exported to places like China?
Answer:
99.7 percent of crude oil produced or imported into the United States is processed here and, although the United States is a net exporter of finished petroleum products, about 92 percent of on-road transportation fuel refined in the United States is used in the United States. However, refineries produce lots of products from a barrel of oil – gasoline, diesel, heating oil, bunker fuel and more – and they need markets for each. The majority – 79 percent – of energy products the United States exports are things like propane, ethanol and kerosene, which are produced in amounts that surpass U.S. demand.
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Won’t Canadian oil just be exported to other countries after it is refined here? How does that provide the U.S. with any economic benefit?
Answer:
Currently, more than 90 percent of the on-road transportation fuel refined in the United States is used in America. The less than 10 percent of on-road motor fuel that is exported consists primarily of heavier products that aren’t in high demand here. There’s no evidence this ratio will change with increased supplies of oil sands crude.
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How will bringing in Canadian oil benefit the US economy?
Answer:
Developing Canadian oil sands is a capital intensive endeavor, requiring billions of dollars of investment over the next several decades. This investment will give rise to a long-lived, robust period of increased economic activity in Canada. And due to the deep and rich trading relationship between Canada and the United States, the United States will also get significant economic benefits from this increased activity, according to a Canadian Energy Research Institute (CERI) study. The benefits will manifest themselves in terms of increased economic output, GDP and job creation. By the numbers, full Canadian oil sands development and utilization would result in $775 billion to the U.S. GDP as well as 500,000 new U.S. jobs by 2035.
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Won’t most of the Keystone XL pipeline jobs be short-term?
Answer:
The Keystone XL pipeline is the largest shovel-ready project around, but the construction and permanent jobs it would create get little credit from people who oppose the pipeline or the Canadian oil sands crude it would carry. TransCanada has reported that the Keystone XL project will create 20,000 new jobs, and has even broken down that number to account for the welders and clerks that the project requires.
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Will China purchase Canada's oil sands crude if the Keystone XL pipeline isn’t built?
Answer:
Following Pres. Obama's decision to reject the Keystone XL permit, Canadian Prime Minister Stephen Harper is looking to ship oil sands crude to Asian markets and met with Chinese President Hu Jintao in February 2012.
Shipping oil sands to Asian markets is a loss for American job creation, the U.S. economy and overall U.S. energy security for years to come.
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How much did the 2010 Gulf deepwater drilling ban affect overall U.S. domestic production – in terms of output, jobs and economic activity?
Answer:
A 2011 Quest Offshore Resources study found that the 2010 deepwater drilling ban and subsequent permit slowdown reduced total Gulf of Mexico capital and operating expenditures by a combined $18.3 billion for 2010 and 2011, relative to pre‐moratorium plans.
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How much do U.S. oil companies pay in royalties to government?
Answer:
Oil and natural gas production royalties on federal lands are one of the largest sources of income to the federal government, delivering $86 million in rents, royalties and bonus fees every single day.
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How much natural gas is available in the United States?
Answer:
America’s vast proven reserves and undiscovered resources offshore include nearly 480 trillion cubic feet of natural gas, according to the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE). What does that mean? 480 trillion cubic feet of natural gas is enough to heat 10 million homes for nearly 656 years.
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What role does the U.S. tax code play in oil and natural gas industry investment in America?
Answer:
Risk is an integral part of exploring for oil and natural gas. There's no guarantee that drillers will find commercially viable amounts of energy. Before companies begin drilling, they must invest large sums of money to lease areas for development (onshore and offshore) get the needed permits, procure the rig, hire workers and assemble the necessary equipment. Sometimes they find energy, sometimes they drill a dry hole.
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What do oil companies do with their earnings?
Answer:
Earnings – what’s left after payrolls and other operating expenses are paid for – basically go two places. Of every dollar earned, 56 cents goes to shareholders and 44 cents goes to government in the form of income taxes. Shareholders include Americans with mutual funds, individual investments, pension funds and IRAs. Taxes at the national and state level help meet a number of public needs, including funding for roads, schools, parks and more.
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Our national debt is too high. Would increased taxes on oil and natural gas companies lower the deficit?
Answer:
Punitive tax increases on the oil and natural gas industry may provide short-term revenue, but they would undermine economic investment and cause the federal government to lose money in the longterm.
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If the industry is getting tax deductions, doesn’t that mean they aren’t paying their fair share?
Answer:
Absolutely not. The U.S. oil and natural gas industry pays more than $86 million every day to the U.S. Treasury in rents, royalties and income tax payments. That’s more than $31 billion a year. In 2011, the effective income tax rate for the oil and natural gas industry averaged 40.6 percent, compared to just 25.1 percent for other S&P Industrial companies.
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Oil company profits are very high; are they paying their fair share in taxes?
Answer:
The fact is, the oil and natural gas industry’s income tax expenses as a percentage of net income (before income taxes) averaged 40.6 percent in 2011, compared to 25.1 percent for other S&P Industrial companies. U.S. oil and natural gas companies pay approximately $86 million to the U.S. Treasury in rents, royalties and income tax payments every single day.
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How much does the oil and natural gas industry contribute to our gross domestic product (GDP)?
Answer:
The oil and natural gas industry’s impact on the U.S. economy is significant, supporting nearly 9.2 million American jobs and providing $1.1 trillion in U.S. economic activity—or 7.7 percent of America’s total gross domestic product (GDP) through spending and investments supporting U.S. manufacturing, transportation, technology and accounting services, among others. The shale revolution alone contributed more than $76 billion to U.S. GDP in 2010, and research shows this could triple to $231 billion in 2035.
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