Congress quietly expands oil-industry tax breaks, cutting revenue for public services

What it does

This bill increases tax deductions for small oil and gas producers by raising the daily production threshold that qualifies for percentage depletion from 1,000 to 2,000 barrels, and modifies the depletion rate formula to provide larger deductions when crude oil prices fall below $70 per barrel. The deduction cap adjusts annually for inflation starting in 2028. Small producers and rural oil and gas operations benefit through lower tax liability.

Why we flagged it

The bill's operative mechanism is a permanent reduction in federal tax liability for oil and gas producers through increased depletion allowances and removal of taxable income limitations. This is a direct tax expenditure (foregone revenue) benefiting a specific industry, not a broad economic or public-safety measure.

What the text implies

• The removal of taxable income limitations (§613A(c)(6)(H)) allows depletion deductions to exceed net income from the property, creating a loss carryforward that can offset unrelated business income — effectively cross-subsidizing other ventures.
• The PPI adjustment mechanism (tied to drilling-cost inflation) may increase the deduction cap significantly in high-inflation years, creating a countercyclical subsidy that grows when energy costs rise, potentially amplifying producer margins during supply shocks.
• Doubling the depletable quantity threshold (1,000→2,000 barrels/day) expands the definition of 'marginal' wells, bringing larger, more profitable operations into the preferential tax treatment originally designed for genuinely marginal producers.

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 a specific industry sector without offsetting public benefit or broader economic stimulus. The tax relief flows to oil and gas producers as a permanent structural subsidy, reducing funds available for public services, infrastructure, or deficit reduction. While framed as protecting rural jobs, the mechanism is a targeted industry tax carve-out benefiting a narrow private sector.

Who stands to gain

• independent oil and gas producers
• small-to-mid-cap E&P companies
• oil and gas drilling contractors and service providers (indirect, via producer cash retention)

Named in the bill

Internal Revenue Code §613A, IRC §613, IRC §45K, Bureau of Labor Statistics, Producer Price Index for Drilling Oil and Gas Wells, oil and gas producers, marginal oil and gas wells

Where it stands

7 cosponsors: 7 Republicans.

• May 20, 2026 — Introduced · Congress.gov: “Introduced in Senate”
• May 20, 2026 — 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

1 lobbying clients named this bill on 1 disclosure filings across 1 quarter, Jun 2026 to Jun 2026. Those filings disclosed $250,000 in lobbying spend. A filing names 27 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 0% of bills with at least one filing.

Roger Marshall, the sponsor, reported $1,777,391 in PAC receipts in the 2026 cycle.

• Independent Petroleum Association of America — $250,000 on 1 filing

Lobbying Disclosure Act filings through Jul 18, 2026. A filing shows who paid to lobby on a bill it names, not what changed.