Tucked into a sweeping fiscal package backed by President Donald Trump, Senate Republicans are pushing a new tax provision that could deliver over a billion dollars in relief to domestic oil and gas companies. The measure is designed to shield independent producers from the burdens of a minimum corporate tax, while also reinforcing Trump’s broader energy agenda that favors traditional fossil fuel production over renewables.
The tax break is part of a larger legislative push unveiled this week by Senate Republicans on the tax-writing committee. It would allow companies affected by the 15 percent corporate alternative minimum tax to continue deducting specific drilling costs when calculating their taxable income. Energy giants like ConocoPhillips, Ovintiv, and Civitas Resources have actively lobbied for the change.
The proposed relief mirrors a separate piece of legislation introduced by Republican Senator James Lankford of Oklahoma, one of the nation’s top oil-producing states. Known as the Promoting Domestic Energy Production Act, Lankford’s bill carries an estimated $1.1 billion price tag over the next decade, according to an analysis from the non-partisan Joint Committee on Taxation, as reported by the Tax Foundation.
Critics Call It a Handout, Producers Call It Essential
While Republican lawmakers and industry groups are celebrating the measure as a long-overdue correction to what they view as an unfair burden on domestic producers, Democrats and environmental groups have been quick to blast the proposal as a fossil fuel handout.
Senator Elizabeth Warren of Massachusetts labeled the provision a “giant giveaway to the oil industry,” warning that it would allow large producers to escape paying their fair share of taxes. Advocacy groups like Friends of the Earth and Public Citizen echoed that criticism, suggesting the bill prioritizes fossil fuel profits over fiscal responsibility and climate policy.
Supporters, however, argue the relief is necessary to maintain steady domestic production, particularly at a time when energy prices and global supply chains remain unpredictable. The American Exploration and Production Council, which represents independent operators including Oklahoma-based Devon Energy, praised the bill as a step toward energy stability. Anne Bradbury, the council’s CEO, said the legislation would help producers invest more quickly in drilling and support affordable energy supplies across the country.
Oklahoma oilman Harold Hamm, a longtime Trump ally and founder of the Domestic Energy Producers Alliance, also supports the measure. Hamm has been a vocal advocate for reducing what he sees as regulatory and tax barriers that threaten U.S. energy independence.
The corporate alternative minimum tax, originally enacted during the Biden administration, was intended to close loopholes that allowed some corporations to avoid paying federal income tax entirely. But critics within the energy industry say the tax disproportionately affects independent drillers and smaller operators who rely on deductions for upfront drilling and development costs. Without some form of carveout, they argue, these companies would be less competitive and could face long-term challenges in expanding operations.
Lankford’s bill and the Senate proposal both aim to exempt certain intangible drilling costs such as labor, site preparation, and surveying from the alternative minimum tax calculation. That carveout could make a substantial difference for producers navigating volatile commodity markets and rising input costs.
Still, the bill faces an uncertain future. The House version of the fiscal package does not include the same provision, and negotiations between the chambers could reshape the final legislation. But for now, the inclusion of the drilling tax break signals a strong push from Senate Republicans to double down on oil and gas production while scaling back on renewable energy incentives.
The full Senate bill also includes proposed rollbacks on tax credits for solar, wind, hydrogen, and electric vehicles, further underlining a shift in legislative priorities toward traditional energy sources. While the fate of the tax break remains unclear, its presence in such a high-profile package highlights the growing influence of the oil and gas industry in current policy discussions.
If passed, the bill would represent one of the most significant tax shifts for the U.S. energy sector in recent years, reinforcing the central role of fossil fuels in the country’s economic and energy strategy.
