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Politics : Politics of Energy
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To: Brumar89 who wrote (5587)3/4/2009 3:00:59 PM
From: RetiredNow  Read Replies (1) of 86355
 
This is a red herring. Obama isn't proposing to eliminate ability to expense intangible drilling costs. They can still capitalize those costs and depreciate them over a 60 month period. It's very similar to the R&D spent in pharmaceuticals. They can capitalize all the R&D in the lead up to public sale and then amortize them for a period of time.

Oil & gas is just complaining because they'd rather expense them all on a cash flow basis, instead of an accrual basis, which more accurately reflects revenue to cost matching. I think the real impact is that it will increase the risk of drilling, since they can't deduct all those costs in the first year. That may mean less of an ability to attract capital to drill.

But here's the rub. It puts oil companies on an even playing field as solar and wind, which get no such special first year deductions. This is all about leveling the playing field, so that the free market can work.
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