On Wednesday, September 27, Republicans in Congress introduced a plan for sweeping tax reform, proposing to cut the corporate income tax from 35 percent to 20 percent, among other significant changes. Reducing the corporate income tax, currently among the highest in developed nations, seems like a home run for oil and gas producers in Texas. But for a national industry that receives over $4 billion of tax exemptions annually, simplifying the tax code to eliminate loopholes might not be uniformly positive. The fate of key exemptions during negotiations will determine how much Texas oil and gas producers actually benefit.

Importantly for oil and gas companies, the proposed reform maintains deductions for “intangible drilling costs” (IDC), the largest exception they enjoy under the current tax code. IDCs, which include costs from drilling new wells like labor and chemicals, can be immediately deducted from taxable income. That offers an advantage relative to other industries who have to deduct upfront expenses over time. Rather than repeal the exception, the proposed tax plan expands immediate expensing across all industries, allowing them to “write off the cost of new investments” for at least five years to incentivize domestic investment. Under the new plan, oil and gas companies will continue deducting IDCs and will get to deduct other investment costs as well.

Some deductions will go away under the new plan, including one for domestic manufacturing. These deductions cost the federal government about $152 billion per year overall, of which $1.25 billion comes from the fossil fuel sector. Numerous other, smaller tax exemptions for the O&G industry are also vulnerable to repeal, including deductions for using special injectants and credits for small wells or wells that use enhanced oil recovery techniques.

The future of an allowance known as “percentage depletion,” which favors how smaller producers depreciate their assets, is uncertain. The exception is large, costing the U.S. government about $1.3 billion of lost revenue per year. The proposed tax plan is sparse on details, but could allow “special tax regimes” for certain industries, meaning even percentage depletion might survive. A statement from the Independent Petroleum Association of America suggests exemptions like the percentage depletion allowance are important and “will be crucial to evaluating this tax reform plan.”

One additional component—a new territorial tax system—could be especially compelling for large, integrated oil and gas companies. By exempting overseas profits, American firms would no longer face U.S. taxes on profits earned abroad and later transferred into their American accounts (profits might still be taxed by the country where they are earned). For companies with international oil and gas operations, the potential benefit might be large.

Notably, renewables like wind and solar appear less advantaged under the new plan. The proposal leaves out tax credits for renewables and electric vehicles that are currently phasing out and might also eliminate tax exceptions pertaining to clean-fuel vehicles, carbon capture, renewable energy bonds and more. Concurrently, two recent initiatives from the current administration could harm the market for renewables. The first would prop up the domestic solar industry by introducing tariffs on foreign-made solar panels to make them more expensive. The second would assist coal and nuclear power plants by guaranteeing cost recovery, potentially reducing the opportunity for renewables.

Taken together, the proposals combined with the tax plan would bode well for fossil fuels, but might create headwinds for renewables in the near term.

Scott Vitter is a Ph.D. candidate at the University of Texas at Austin, where he studies urban water systems and their potential to provide demand-side services to the electric grid.