Oil, Natural Gas and Taxes - The Choice Revisited
Posted February 5, 2013
Energy is essential to running our economy and securing our standard of living. At a very basic level we can get the energy we need in one of three ways:
1. We can produce it domestically;
2. U.S. companies can produce it abroad for sale in the U.S.;
3. Foreign companies can produce it abroad for sale in the U.S.
Two of these three ways offer a clear advantage in creating American jobs, boosting the American economy and supplying revenue to American governments. Unfortunately, again today, some are suggesting raising taxes on domestic energy production and production by U.S. companies abroad. And, as the saying goes, when you tax something you get less of it.
The latest push, from U.S. Rep. Chris Van Hollen of Maryland, would replace the current statutory requirement for federal budget cuts with alternative revenue raisers, including a number of tax increases on oil and natural gas companies. There’s a better way, and it starts with this chart:
The graph shows non-tax federal rent, royalty and bonus revenues from oil and natural gas activity plummeting in 2008-2009 – and beginning to climb again in 2010. The decline was due to reduced oil and natural gas development on federal lands.
The better path to additional revenue for the federal government from the industry isn’t higher taxes, it’s getting the line in the chart above back to where it was in 2008 – by opening more federal lands for development and installing a reasonable structure for obtaining drilling permits. The latter is needed for the regulatory stability and certainty needed to foster energy investment.
According to a number of analyses, including one by Wood Mackenzie, increased domestic oil and natural gas development could supply revenues for government that would dwarf the proceeds from energy tax hikes like those proposed by Rep. Van Hollen – $127 billion by 2020 and more than $800 billion by 2030.
More revenue for governments, as well as more jobs and economic stimulus, come from choosing right on energy development – by fostering more activity, not less.
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. Previously, Mark was a reporter, copy editor and sports editor at an assortment of newspapers. 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 have two grown children and six grandchildren.