Vicki Lightcap: Fix the Biden-era tax penalty on American energy production and secure American energy dominance

I have long believed that unleashing domestic energy production is fundamental to our success, both nationally and here in Pennsylvania.

We have abundant resources to fuel our lives and economy right under our feet; only bad policy can stand in the way of us harnessing it. Thankfully, we now have an administration in the White House that cares about unlocking American-made energy and the jobs that come with it. But there are still barriers in the federal tax policy keeping us from fully realizing Trump’s domestic energy agenda. The Promoting Domestic Energy Production Act will fix this, and I urge our policymakers in D.C. to get the job done.

Any comprehensive plan to promote domestic energy production in the United States must involve our independent oil and gas producers, which account for the majority of this nation’s energy output. Over the past few years, punitive policy has restricted our producers’ ability to do what they do best — produce American-made oil and gas. There’s no better example than the Biden-era tax penalty on Intangible Drilling Costs (IDCs).

This targeted change in tax policy was slipped into Biden’s 2022 Inflation Reduction Act. It removed producers’ ability to immediately deduct their IDCs — which are ordinary business expenses in the exploration, development, and production of new wells.

Perhaps the most important thing to know about IDCs is that most of these expenses represent wages for the men and women out working in the field. In other words, these costs are far from “intangible”—they provide good paying jobs for workers in Pennsylvania and across the country. 

Most of the cost of drilling a new well — up to 80 percent — falls under the IDC category. So, when changes are made to how producers make deductions for IDCs, it has a severe impact on their ability to create new jobs and energy for America. 

Not only was this Biden-era change counterproductive for domestic energy production, it was unfair. Most industries that rely on big outlays of capital in the course of business still have access to these immediate deductions. This is vital, because it gives companies the chance to reinvest capital quickly. 

But the Inflation Reduction Act singled out our independent oil and gas producers. It amounted to a penalty against the producers we rely upon to bolster energy production and energy jobs right here in Pennsylvania. Worse still, it put American producers at a competitive disadvantage globally. 

The Promoting Domestic Energy Production Act (S. 224) will undo this tax penalty on oil and gas producers, incentivizing greater investment in good paying Pennsylvania jobs and helping secure America’s energy future. As a Pennsylvanian, I urge Senator Dave McCormick (R-PA) to include this common-sense policy solution in the Senate’s reconciliation package. Doing so will create new investment, new production, and new jobs in the Commonwealth. 

Vicki Lightcap is the former mayor of Pennsburg.