Congressman Cole Introduces Natural Gas Producation Act
Washington, D.C. – Congressman Tom Cole introduced legislation yesterday evening that will provide a tax credit for producing natural gas on-shore from a depth of more than 15,000 feet. The Natural Gas Production Act will help increase domestic natural gas supplies making natural gas more affordable to American families, farms and businesses.
"The natural gas resource potential below 15,000 feet is about 135 trillion cubic feet (Tcf) and most of it is onshore. This is a significant amount of untapped resources that could help lower natural gas prices for consumers and decrease our dependence on unstable foreign energy supplies," Congressman Cole said.
Wells below 15,000 ft are very expensive and time consuming to drill – more than $6.1 million on average, increasing with depth to more than $16 million for wells deeper than 20,000 feet. Shallower wells cost between $86,000 and $1.9 million.
"Natural Gas production at levels below 15,000 feet involves significant additional costs and high risks. But with a tax incentive, it would become more economically feasible and advantageous to natural gas explorers and producers," Congressman Tom Cole said.
The Natural Gas Production Act would extend Section 29 of the U.S. Tax Code to provide a tax credit for natural gas produced onshore from a formation of more than 15,000 feet. The current Section 29 credit includes production from other unconventional methods such as: tight sands, oil-produced from shale and tar sands and gas from geo-pressured brine.
"There is still a tremendous amount of natural gas in Oklahoma but the target reservoirs are very deep, the cost very high and the risk very great," Tom Price, Sr. Vice-President, Investor and Government Relations, Chesapeake Energy Company, said.
In the last Congress, the House-passed Conference Report on H.R. 6, The Energy Policy Act, contained a provision providing royalty relief for natural gas produced from formations deeper than 15,000 in the shallow waters of the Central and Western Gulf of Mexico. This legislation will provide incentives for deep production onshore where the resource potential is more than 400% greater.
Natural gas is utilized residentially, industrially and commercially. Over one-half of U.S. homes use natural gas as their main heating fuel.
"This legislation will help Oklahoma producers provide natural gas for more Oklahoma families and businesses at an affordable price," Congressman Cole said. "It will also be a great for Oklahoman's economy, providing jobs and pumping money into our local economy."
"With a tax advantage, deep drilling would be the best of all worlds. Not only would the production be significant, it would have a tremendous positive impact on rural Oklahoma, especially in the Western part where there is the most need for jobs and economic stimulus. Also because the drilling would not be on public lands and is expected to take place in existing natural gas fields it will be environmentally benign."
Economists estimate that each dollar invested by energy producers creates economic growth and returns two to three-fold to the local and state economy. Each deep well production site will employ about 45 people directly. In addition to those direct jobs, some economists estimate that 60 to 75 indirect jobs will be created as well.
Congressman Cole introduced this legislation in the last session of Congress.