IOGA Members:

The Illinois Department of Natural Resources has proposed a 5% tax on oil production.  IDNR refers to the tax as an “Environmental Regulatory Fee”.  Regardless of what they choose to call it, the proposal is a severance tax and it would collect 5% of the gross revenue from oil production.  This would raise over $33 million dollars (based on 2007 average IB posted price).  Obviously, this is much more than what is needed to adequately fund the oil & gas regulatory program.  In fact, the amount of money that this tax would raise is equal to the entire IDNR stated budget shortfall.  I have attached a document from IDNR that outlines the proposal.  Also attached is an IOGA letter which rebuts each claim made by IDNR. 

This tax is essentially another gross receipts tax, except this time the oil industry is being singled out.  And like the GRT, it is a poorly conceived initiative to generate revenue for the state with no consideration given to the damage it would do.  Their primary rationalization is that other oil producing states have a severance tax, so why not Illinois?  Unfortunately, the persons responsible for this proposal either didn’t take the time to understand the complexities of oil taxation in comparable states or simply don’t care.  IDNR claims that the average severance is 5%.  What they don’t say - and perhaps don’t know – is that mature producing states with a large number of stripper wells either also don’t have a severance tax or they exempt marginal wells (Pennsylvania and Kansas are examples of each).  Your legislators need to understand this.  They need to understand that the majors left Illinois a long time ago- not because they tired of the Midwest, but because they weren’t making enough money.  Illinois producers have some of the highest operating costs in the country and lawmakers need to know this. 

And they need to be reminded that the oil industry is important to their district.  They need to be reminded that there are many beneficiaries of a healthy Illinois oil industry – from the farmers and widowers who depend on their royalty checks, to the gas stations and grocery stores in oilfield towns across southern Illinois who depend on the money that flows through their community as a result of oil production. 

I urge you to contact your legislators and let them know that this tax is absolutely unacceptable.  We need to make sure that every southern Illinois lawmaker hears from people opposed to this tax.  This message needs to come from not only oil producers and oilfield service companies, but also from mayors, bankers, economic development professionals and everyone that will be adversely impacted by this new tax.  This is a tax that would take money from some of the most disadvantaged parts of the state and deposit it in a fund used to pay for state parks all over Illinois. Our Governor is fond of saying that he won’t raise taxes on people.  Let your legislators know that the last time you checked you were people. 

The attached letter can be used as a template when writing to your legislators.  Feel free to change it or to write your own letter.  I also urge you to make phone calls.  The legislature is in recess through next week, so most lawmakers will be back in their district.  To find contact information go to www.ilga.gov.  Simply click on “Members” and you will be directed to a list of all Senators and Representatives.  If you need any assistance, please do not hesitate to contact IOGA.  Also, our email database is not all-inclusive.  Please forward this to anyone that might also be interested in making their voice heard.

Brad Richards

Executive Vice President

Click here for the new April Bulletin with information on the IDNR Tax Proposal

IDNR Tax Proposal        Draft Letter    Legislator-IDNR-Governor Contact Information   

Position Paper (IOGA Letterhead)        Position Paper (Word Document)

Royalty Owner Draft Letter (Word Document)        Legislative District Map