WASHINGTON — North Dakota Sen. Kent Conrad couldn't thank Harold Hamm enough.
“Thank you for what you've done for our country,” Conrad, a Democrat, told the chairman and CEO of Continental Resources at a Senate hearing Tuesday. “Thank you for what you've done for our state. … Thank you for making the investment. Thank you for taking the risk.”
Hamm, whose company has helped lead a resurgence in the domestic oil industry with its production from the Bakken formation in Conrad's home state, told Senate Finance Committee members they could also thank the federal tax deduction used by independent oil and gas companies to write off expenses.
The ability to deduct intangible drilling costs, Hamm told the tax-writing panel, allowed his company to persevere in the face of repeated early failures in extracting oil from the Bakken. Should that provision in the tax code be repealed, he said, the company would drill one-third fewer wells.
“If we do away with these (tax breaks), we'll stop the march to energy independence we've begun,” said Hamm, whose company is based in Oklahoma City.
Hamm is the energy adviser to Mitt Romney, the presumed Republican presidential nominee, but he said he was not testifying on behalf of the Romney campaign.
His testimony came at a hearing about how tax reform could affect the energy industry. Congress is expected to tackle individual and corporate tax reform late this year or early next year as part of a broad effort to reduce the debt and revive the economy.
Sen. Max Baucus, D-Mont., chairman of the committee, said the tax code now has provisions supporting a broad range of energy options, and he suggested they might need to be “technology-neutral” to make them fair.
“Tax reform is an opportunity for the energy sector to make real progress,” Baucus said. “It can move us further from foreign oil. It can lead us down a road to diverse, clean and secure energy resources.”
Sen. Ron Wyden, D-Ore., questioned whether there was a level playing field for all forms of energy since the tax provisions for oil and gas companies are permanent parts of the tax code while ones related to renewable energy, such as wind power, must be renewed.
Harvard University professor Dale W. Jorgensen testified that Congress should impose environmental taxes on coal, oil and natural gas to raise government revenue and encourage the use of renewable energy.
The Obama administration has for the past three years proposed eliminating tax breaks for the oil and gas industry, but Congress has rejected the idea, even when limited to the five biggest oil companies. The administration has argued the tax breaks encourage the production of fossil fuels at a cost to the environment and “long-term energy security.”
Former Oklahoma Sen. Don Nickles, a Republican who now owns a lobbying firm in Washington, told the committee the administration's reasoning was “crazy.”
The revolution in extracting oil and natural gas from shale is “one of the best things to happen to this country in years,” Nickles said. “Congress shouldn't mess it up.”
Sen. Tom Coburn, R-Muskogee, a member of the committee, said the energy boom could strengthen the nation's position in manufacturing, while removing tax incentives could hurt production and therefore cost the government tax revenue.