The People of America's Oil and Natural Gas Indusry

Jobs, Energy, Tax Revenues: The Right Direction

Mark Green

Mark Green
Posted September 16, 2011

Americans have a big choice looming in front of them on jobs and energy. Unfortunately, the administration appears to be missing the possibility of a huge, positive connection between the two.

Instead, the White House looks like it is headed 180 degrees in the wrong direction on the energy sector and jobs. Despite the fact oil and natural gas companies contribute more than $86 million a day in taxes to government, the administration wants $40 billion in energy tax increases to help pay for its proposed jobs bill.

This would miss a relatively easy path to triple the administration's revenue target. By letting America's energy companies develop federal areas that currently are off limits and fully utilizing Canada's oil sands, more than $120 billion in additional tax revenue would result by 2020, according to analysis by the Wood Mackenzie research and consulting firm.

So, two paths, two choices on jobs and energy, and the contrast could hardly be sharper. The choice was discussed during conference call with reporters by API Executive Vice President Marty Durbin on Thursday:

"As the president speaks every day about the need for job creation and deficit reduction, we'd like to once again make the case directly to the White House that America's oil and natural gas industry provides a critical opportunity to help address both issues. Unfortunately, the administration seems to be looking past this opportunity and making choices that take us in the wrong direction."

Let's recap:

Jobs

Right direction: Pro-development policies could result in 1 million additional jobs, created by the energy sector, by 2018, growing to 1.4 million by 2020, according to Wood Mackenzie.

Wrong direction: The energy tax increase strategy would increase costs for energy companies and could threaten investment and jobs. Wood Mackenzie said the job hit could be 48,000 by 2020.

Energy

Right direction: Pro-development policies could result in an additional 4 million barrels' worth of oil and natural gas per day by 2020. By 2026, according to Wood Mackenzie, 100 percent of our liquid fuel needs could be supplied domestically and from Canada. "Americans support domestic energy development," Durbin said. There's a reason for that. As Durbin said, "It makes sense to them."

Wrong track: The energy tax increase path could threaten investments in exploration and development, which could reduce energy production by 700,000 barrels' worth of oil and natural gas per day. America needs to be increasing its energy base, not reducing it.

Revenue to Government

Right direction: Pro-development policies could generate $127 billion in additional revenue to government by 2020. That kind of revenue generation already is occurring in energy states like Texas, Pennsylvania and North Dakota, where tax collections from oil and gas activity are growing the general fund balance in dramatic fashion.

Wrong direction: The energy tax increase approach could actually reduce proceeds to the government by $29 billion, Wood Mackenzie says. API's Kyle Isakower, who also spoke with reporters, said that when a new energy tax increase is first implemented, the tax base remains stable long enough to yield positive revenue results early on. But after that, with higher costs, marginal fields may become uneconomical and others may remain undeveloped - which could shrink the tax base and result in the kind of revenue reduction Wood Mackenzie projects.

So, the choice. It's America's choice, really. The oil and natural gas industry waits to be called on, to be put into the game. Durbin:

"Our industry can do more for our economy. It is ready to help. Hiring on some projects could begin immediately, creating thousands of jobs in the very near term. But energy policymakers - including and especially the administration - must have the courage to back this approach and support the changes in energy policy critical to making it happen."

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.