The People of America's Oil and Natural Gas Indusry

More Taxes Jeopardize American Oil and Natural Gas Development

Jack Gerard

Jack Gerard
Posted May 3, 2011

Editors Note: Today API President and CEO Jack Gerard gave an update on the State of American Energy, outlining a path to success for lower gasoline prices, increased energy security and more American jobs.

Back in January, we reported on the State of American Energy and outlined two paths America could take on energy policy. The first path is to increase oil and natural gas production that brings jobs, energy security and government revenue. The second is to increase taxes on the industry, which would destroy jobs, diminish energy security and reduce government revenue.

We are now seeing Congress begin to debate these two starkly different choices. The administration and some in Congress have weighed in on the side of more taxes, arguing this is necessary in light of higher gasoline prices. Raising taxes on oil and natural gas companies--or even a handful of the biggest U.S. energy companies--won't reduce gasoline prices. And raising taxes can't be justified by false claims about industry tax breaks. This is a red herring designed to deflect criticism of the administration's ineffective energy policies.

As I've said before: Our government doesn't support our industry; our industry supports our government to the tune of $85 million a day. Our industry also continues to make enormous contributions to our economy. An updated study just completed by PriceWaterhouseCoopers shows that even during a time of severe job losses caused by the recession, our industry continued to support about 9.2 million American jobs and provide significant economic lift to our economy. The level of support from the oil and natural gas business to the economy actually rose from 7.5 to 7.7 percent.

Raising taxes by billions of dollars a year would jeopardize the many benefits we bring to our nation. It would substantially raise our costs, trimming investment in new oil and natural gas projects and driving investments elsewhere, and U.S. jobs as well. Over the longer term, higher taxes would also mean less revenue to the government, as less development would reduce taxable income and production on which royalties are paid.

Higher taxes would do nothing to reduce gasoline prices.

Supporters of higher taxes have a vision of our energy future that is out of synch with our energy reality. And out of synch with the administration's projections on energy consumption, which show the nation will use large amounts of oil and gas for decades even with aggressive expansion of renewables and more energy efficiency.

Raising taxes on oil and natural gas companies is not a serious strategy to deal with our energy challenges or higher gasoline prices. Producing more of our domestic energy resources is the right approach, and there are serious proposals pending in Congress supporting such an approach. Proponents of this approach are taking action because the administration has failed to act constructively on energy. Just as the President encouraged Brazil to develop its resources and Saudi Arabia to produce more of its oil, it's time to focus on America.

We believe that substantially greater access to America's ample oil and natural gas reserves, facilitating the importation of more Canadian oil, and full development of oil and gas shale could generate at least one million more U.S. jobs and trillions in additional revenue for our government.

By 2025, we could be producing at home another three million barrels of oil a day and substantially add to our natural gas production. Contrary to what some in Congress and in the administration contend, we have ample supplies of oil and natural gas right here at home. Development of these could set us on a course to much greater control of our energy destiny, greater energy security, and stronger economic growth.

We plan to continue to take this message to the American people and continue to encourage Congress as we push for an energy policy our nation deserves.


Jack N. Gerard is president and CEO of the American Petroleum Institute (API), the national trade association that represents all aspects of America’s oil and natural gas industry. He also has served as the president and CEO of trade associations representing the chemical and mining industries. Jack understands how Washington works. He spent several years working in the U.S. Senate and House, and co-founded a Washington-based government relations consulting firm. A native of Idaho, Jack also is very active in the Boy Scouts of America, a university graduate program on politics, and his church’s leadership. He and his wife are the proud parents of eight children, including twin boys adopted from Guatemala.