Oil and gas companies get permanent tax break on drilling costs
S. 224 — Promoting Domestic Energy Production Act · Filed by James Lankford (R-OK) · 18 cosponsors · Introduced Jan 23, 2025 · Referred to committee
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What it does
This bill amends the tax code to allow oil and gas companies to deduct intangible drilling and development costs (costs of drilling wells, not physical equipment) when calculating their adjusted financial statement income for tax purposes. Currently, these costs are treated differently for tax and financial reporting, creating a mismatch. The bill aligns the two by letting companies count these drilling expenses as deductions, reducing their taxable income and federal tax liability.
Why we flagged it
The bill's operative mechanism is a targeted tax deduction for a single industry sector. It reduces federal tax liability for oil and gas producers by allowing them to deduct intangible drilling costs against financial statement income, a narrowly tailored benefit with no public-interest offset.
What the text implies
- The bill creates a permanent tax preference for oil and gas drilling costs, locking in lower tax rates for the sector indefinitely unless Congress acts to repeal it.
- By aligning tax treatment with financial reporting, the bill may increase the attractiveness of drilling investments to institutional investors, potentially accelerating domestic oil and gas production.
- The deduction applies retroactively to taxable years beginning after December 31, 2025, meaning companies will claim refunds or credits for 2026 and forward, creating immediate revenue loss.
- The bill does not limit the deduction to marginal or high-cost wells; it applies uniformly to all intangible drilling costs, including those for highly profitable conventional operations.
Section numbers refer to the bill text the analysis read — linked under Primary records below.
Who it affects
The bill reduces federal tax revenue from oil and gas producers without a corresponding public benefit or offset. Ordinary citizens bear the cost through either higher deficits, reduced public services, or compensatory taxes elsewhere. The bill is a direct tax subsidy to a profitable extractive industry.
Who stands to gain
- oil and gas exploration and production companies
- integrated energy majors
- independent oil and gas producers
Named in the bill
Internal Revenue Code of 1986, Section 56A(c)(13), Section 167, Section 168, Section 263(c), oil and gas industry, U.S. Department of the Treasury
Where it stands
18 cosponsors: 18 Republicans.
- Jan 23, 2025 — Introduced · Congress.gov: “Introduced in Senate”
- Jan 23, 2025 — Referred to Senate Committee on Finance · Congress.gov: “Read twice and referred to the Committee on Finance”
Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.
Money around this bill
2 lobbying clients named this bill on 3 disclosure filings across 2 quarters, Dec 2025 to Jun 2026. Those filings disclosed $600,000 in lobbying spend. A filing names 20 bills on average, so that figure is what each filing reported, not a share belonging to this bill.
More lobbying clients named this bill than 41% of bills with at least one filing.
James Lankford, the sponsor, reported $368,500 in PAC receipts in the 2026 cycle.
- Independent Petroleum Association of America — $500,000 on 2 filings
- Republican Jewish Coalition — $100,000 on 1 filing
Lobbying Disclosure Act filings through Jul 20, 2026. A filing shows who paid to lobby on a bill it names, not what changed.
How this was measured
Analysis — Quorum's AI read the bill text published by Congress.gov (1,317 characters) on May 21, 2026. Section numbers in the findings refer to that text, linked below; transparency and hidden-provision scores are compared against the median of 16,222 analysed bills.
Status and sponsors — Congress.gov's bill record — actions, committee referrals and cosponsors — loaded nightly. The timeline shows status changes, not every procedural action.
Money — Senate Lobbying Disclosure Act filings whose specific-issue field names this bill for quarters ending Dec 2025 to Jun 2026. A filing's amount is reported whole beside the median number of bills a filing names; it is never divided across them. PAC receipts are FEC-reported contributions to the sponsor's candidate committee in the 2026 cycle.
As of — lobbying records through Jul 20, 2026 · page rendered 2026-10-20.
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