The People of America's Oil and Natural Gas Indusry

Energy Tax Two-Step

Mark Green

Mark Green
Posted May 16, 2011

One step forward ... and two steps back. A simple but effective analysis of the administration's proposal to ramp up offshore oil drilling while it continues calling for higher taxes - on the industry that does the drilling. Now there's a policy muddle!

In his weekly Saturday radio address, President Obama said the government would do a number of things to promote offshore drilling: extend existing leases in the Gulf of Mexico and off Alaska's coast and hold more frequent lease sales in a federal petroleum reserve in Alaska.

The ideas are OK, but not great. (Especially when you throw in another new one from the administration, a graduated fee structure to prod energy companies to use existing leases - even though they already pay thousands of dollars for the right to hunt for oil and natural gas only to be held up by government red tape.)

House Natural Resources Committee Chairman Doc Hastings called the administration's drilling announcements "baby steps" toward positions set out in three House bills passed earlier this month (which the administration opposed). API Upstream Director Erik Milito commended the drilling proposals but said more is needed. "While this is a step forward for the national discourse on America's energy future, we hope that these proposals are only the first in a series towards a more robust national energy plan," Milito said.

So, one (baby) step forward.

Two steps back is the administration's continued call for higher energy taxes on a number of the very same producers it wants to go out and find new sources of oil and natural gas. Some logic: increasing taxes on an industry that's already providing more than $85 million a day into the federal treasury.

Higher taxes won't increase energy production or create new jobs. "Including increased taxes will lead to a drop in domestic production, domestic jobs and domestic revenues," Milito said. "The oil and natural gas industry already supports 9.2 million American jobs, and with a dedicated approach to domestic energy production our industry can put more Americans to work and help decrease the deficit."

This week the Senate is expected to vote on raising oil and natural gas industry taxes by ending tax deductions that have been extended to a broad range of U.S. businesses. The U.S. Chamber of Commerce weighs in against the tax hike as "punitive" in an open letter here.

Additional resources:

The offshore drilling timeline

API research on taxes

ABOUT THE AUTHOR

Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.