- Industrial Sand
- Silicosis Prevention
|NISA Position on the Percentage Depletion Tax Deduction|
The tax reform discussions drafts that have been released in the House and Senate would both repeal the percentage depletion deduction. The National Industrial Sand Association (NISA) along with its sister association, the Industrial Minerals Association – North America (IMA-NA) strongly encourages Congress to reject these unwarranted proposals that would significantly harm the competitiveness of American resources producers. U.S. mineral, coal, aggregates, natural stone, and independent oil and gas producers play an integral role in sustaining American economic prosperity and energy security. The percentage depletion deduction is vitally important to these U.S. natural resources operations and must be retained.
Industrial sand, in the form of frack sand, plays a crucial role in natural gas development. The maintenance of the percentage depletion deduction is critical not only for industrial sand producers but also for the downstream consumers of industrial sand, namely small and marginal oil and natural gas producers. Under current law, the percentage depletion deduction can only be claimed by small and marginal oil and natural gas producers and is essential to keeping these wells in operation. A change in existing law to deny percentage depletion could make many wells unprofitable on an after-tax basis and result in early abandonment (i.e., resources becoming shut in). Once shut down, marginal wells cannot be re-opened. Currently, the U.S. marginal oil and natural gas base is significant. Approximately 80 percent of oil wells in the U.S. are marginal wells that produce 20 percent of U.S. oil, and 67 percent of natural gas wells produce 12 percent of U.S. natural gas. The closure of these wells would not only impact the domestic and international energy markets, but importantly would effect the demand for industrial sand in the US.