Senate Floor Speech
Senator Kay Bailey Hutchison
February 3, 2005 -- Page: S984

MRS. HUTCHISON. Mr. President, I rise today to offer a bill that will bolster our energy independence by clarifying current tax law regarding domestic oil and gas production.

We need to promote domestic energy supplies because we are increasingly dependent on foreign oil to meet our energy needs. We currently import almost 60 percent from foreign countries. Promoting domestic production is both an economic and national security issue.

The rational treatment of costs associated with exploration and production of energy resources is vital to attracting and retaining financing in an inherently capital-intensive industry. The bill I am introducing helps in this regard by allowing accelerated deduction of geological and geophysical (G&G;) costs and delay rental payments. Specifically, this legislation will allow these expenses to be amortized over a 2 year period. This will encourage further development of the United States oil and gas industry.

There is no reason G&G; expenditures should be considered capital expenditures with a long amortization period rather than treating them more like research and development costs. Our current tax code needlessly limits the ability of domestic producers to develop our national petroleum reserves.

Congress also needs to clarify that delay rental payments are deductible as ordinary and necessary business expenses. This is important for developers who cannot afford to run continuous operations on the properties they hold. The current uncertainty of how these costs are to be treated has led to costly litigation; prompt clarification will eliminate needless administrative burdens on taxpayers and the Internal Revenue Service.

I urge my colleagues to support this bill as an important step in developing energy independence. I ask unanimous consent that the text of the bill be printed in the RECORD.