The People of America's Oil and Natural Gas Indusry

Americans: Don't Raise Energy Taxes

Mark Green

Mark Green
Posted March 21, 2013

In a nutshell, here’s what Americans think of raising taxes on the oil and natural gas industry: Not much.

A new Harris Interactive national survey of registered voters finds that big majorities think higher taxes on the industry – as have been proposed by the administration and some in Congress – would be harmful to consumers and the economy. What’s more, respondents believe the idea is fundamentally unfair. Details:

  • 74 percent – Think Washington should solve the country’s fiscal problems without raising energy taxes, potentially hurting consumers and taxpayers. Opposition to energy tax hikes is consistent across age, gender and party affiliation groups.
  • 69 percent – Agree that increasing energy taxes, like those proposed for oil and natural gas companies, hurts everyone because they could drive up costs for consumers.
  • 57 percent – Agree that tax hikes on energy, like those talked about for oil and natural gas companies, could kill jobs and impact the economy in a negative way.

 Now, an interesting result – especially with regular conversation in Washington about tax fairness. Harris found that 63 percent agreed that raising taxes only on U.S. oil and natural gas companies – or singling out a handful of companies for tax hikes – would be unfair and discriminatory, as well as just bad tax policy.

Stephen Comstock, API’s director of tax and accounting policy, discussed the poll results and proposals to raise energy taxes during a conference call with reporters:

“Our poll shows that raising taxes on the industry is just not something most Americans support. And not only are most Americans skeptical about industry tax hikes, but the increases simply wouldn’t be effective. And we could raise far more revenue another way without putting additional burdens on the American people or on the economy.”

That more effective way to raise revenue from the industry is to let America’s oil and natural gas companies produce more energy at home, from U.S. reserves. Comstock:

“By encouraging more development of our nation’s ample oil and natural gas resources rather than relying so much on imports, we could deliver substantially more revenue to the government in the form of income taxes and royalties and lease bid payments.”

Indeed, research such as this report by Wood Mackenzie shows that revenues to government from increased domestic oil and natural gas development would dwarf those that might be generated by raising taxes on the industry. Wood Mackenzie says nearly $127 billion in cumulative revenue could be generated by 2020 with pro-development policies. By 2025 that total would swell to $363 billion, Wood Mackenzie says. That compares with $4 billion a year in revenue cited in some of the proposals to hike industry taxes.

And, actually, the estimated revenue gains from higher energy taxes probably are overstated over time – because increased taxes on the industry would discourage investment in new oil and natural gas projects, reducing revenues and killing jobs. This chart shows how, after a brief period of revenue generation, Wood Mackenzie projects industry tax hikes likely would produce longer-term negative results:

Economic Consequences of Higher Taxes 

 Evidence of the benefits of pro-energy development policies is seen in this week’s federal lease sale for the Central Gulf of Mexico. More than 50 oil and natural gas companies submitted bids for the right to drill, with high bids totaling $1.2 billion. That’s one lease sale. Think about the potential revenue to government if more areas currently held off limits by policy were opened for development – such as areas off the mid-Atlantic coast. Comstock:

“We could do much better by investing more in domestic energy production. We could generate more revenue along with more energy and jobs. That would require opening up more federal areas to oil and natural gas development and keeping regulations reasonable. But if policymakers are willing to get energy policy right, our industry can generate the revenue. … That $1.2 billion recognizes the potential for significant additional investments that will help the economy. … That’s the kind of economic engine we’re talking about.”

Policy comes down to choices. Discriminatory, job-killing, investment-chilling tax increases on the companies that find and deliver the energy we need for our modern way of life – that’s the wrong choice. Policies that increase access to America’s energy wealth – creating jobs, stimulating the economy and generating far more revenue for government – and fostering a tax climate that encourages investment and development, are the right and smart choice.



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.