The nation’s high rate of unemployment has spawned a dangerously bad idea: that higher taxes on oil and natural gas companies would reduce the federal deficit and pave the way for clean energy and job creation.
Neither Congress nor the people of this nation should fall prey to President Obama’s plan to hike oil-industry taxes so as to generate government revenue for developing clean energy technologies.
A study done by the research firm Wood Mackenzie determined that if the government were to increase the oil and natural gas industry’s taxes by $5 billion a year, it would mean a short-term net gain for the federal treasury. But it would lead to a loss of $10 billion in 2025, because increased taxes would make some marginal oil and gas wells uneconomic to produce. Because more than 60% of the nation’s energy needs are met by oil and natural gas, raising the industry’s taxes would affect a critically important part of the economy – and undermine efforts to free our dependence on Middle East oil. Instead it would stifle investment in oil and gas production and wind up throwing even more people out of work, especially if the Obama Administration refuses to open up more federally controlled oil and gas resources for production. A combination of higher taxes and less access to energy resources would curb energy production by the equivalent of 700,000 barrels of oil a day, sacrifice as many as 170,000 jobs, and reduce revenue going to the government by billions of dollars annually, according to the Wood Mackenzie study. It would also usher in higher oil and natural gas prices and harm the economic well-being of millions of Americans.
The flip side is that the government could take in an additional $150 billion in revenue by 2025 and as much as $1.3 trillion in the long term if it opened up access to oil and natural gas resources in the eastern Gulf of Mexico, the Arctic National Wildlife Refuge and offshore areas in the Atlantic and Pacific. The National Petroleum Council says that these areas have enough oil to replace current imports from the Persian Gulf for about 60 years. Instead of recognizing the continuing threat to U.S. energy security, the administration has been slow to issue permits to companies that are drilling in both deepwater and shallow areas of the Gulf of Mexico. Delays of one to two years are not uncommon. It also has put off oil and natural gas leasing in the Atlantic, Pacific and eastern Gulf for at least seven years, and it’s quite possible that this year the United States won’t hold an offshore lease sale for the first time since 1958. Regrettably, the result will be less domestic energy production and greater reliance on imported oil, which is costing Americans almost $1 billion a day. The Wood Mackenzie study warns that nearly one-third of deepwater oil production could become uneconomic if delays in issuing permits for offshore drilling continue.
Congress should know the seriousness of this situation — the harm to U.S. energy security, the cost to consumers, the threat to the economy, and the loss of jobs — and take prompt action to reverse the administration’s energy policy before it leads to a decline in oil and gas production that will no longer sustain us.