The way some experts look at the tax reform measure introduced in the U.S. House is that oil and natural gas companies might get a better deal than solar companies and buyers of electric cars.
Tax rates for most corporations will be cut nearly in half and under the bill, shale drillers and solar panel makers will be able to write off equipment. Bloomberg News reports it keeps most of the oil industry’s most cherished tax breaks intact as well as investment and production tax credits for renewable energy.
However, the big loss getting most of the attention is a $7,500 credit for electric vehicles. Under the bill, it will no longer exist. And a credit for solar and geothermal projects is gone too, something that will make it likely more difficult to attract financing for renewables.
The bill could also have a major impact on wind farm development in Oklahoma as well as Texas, Kansas, Nebraska and Iowa.
“With wind power-heavy states being predominantly Republican, few predicted a reduction in tax benefits for wind farms in the first draft,” Angie Storozynski, an analyst with Macquarie Capital USA Inc., wrote in a note to clients Friday. “If the changes are adopted, which is a big if, we could see a meaningful deceleration in the wind new build in the US and (potentially) lower than expected profitability of wind farms.”
Bloomberg analysts studied the bill and said the House bill could save billions for energy explorers every year. It preserves the use of last-in-first-out accounting rules which let companies value crude stockpiles at the price they’re selling for, not the original purchase price.
The measure will also allow continued deductions of intangible drilling costs and also keeps a rule letting explorers reduce taxable income to reflect the depreciation of reserves.
Had the drilling and depletion provisions not been included, energy companies would have had to cough up nearly $25 billion more in taxes between 2016 and 2026.
Another part of the bill however, ends two breaks for “marginal” oil wells and enhanced oil recovery projects. That covers older oil and gas fields and would cost drillers about $371 million over ten years.
