Develop domestic oil reserves for energy independence
President Obama is in favor of moving towards “energy independence,” but his new 2010 Budget specifically seeks to raise taxes on domestic oil exploration by $31 billion over 10 years, a larger tax increase than on any other industry. In addition, oil and gas producers would bear a disproportionately heavy share of other tax increases on business, more than $320 billion.
Surely a president who desires energy independence would leave oil companies alone so that America could develop greater domestic reserves. But this is not the case.
The ostensible rationale for the tax increases is that the current tax system “distorts markets by encouraging more investment in the oil and gas industry than would occur under a neutral system. To the extent expensing encourages overproduction of oil and gas, it is detrimental to long-term energy security…” This wording, with reference to credits, lower tax rates, special treatment, and accelerated depreciation, is repeated eight times in the Treasury Department’s Green Book, a description of proposed spending and revenue changes in the budget.
President Obama believes that subsidies for renewable energy are acceptable, even though renewable energy is only responsible for 4 percent of America’s supply. He does not consider expenditures of $60 billion on “clean energy investments” to be distortions. But oil, which accounts for almost 40 percent of America’s energy usage, is a different matter, apparently deserving of higher taxes to limit overproduction. With fuel prices close to $5 a gallon last summer, we could have used a little overproduction.
If America is to reduce use of imported fuels, it needs to raise domestic production to increase long-term energy security. Every additional barrel of oil produced in America is one barrel fewer that needs to be imported. The oil and gas industry already employs more than 1.5 million workers, and has the potential to employ many more.
Estimates of American oil and natural gas reserves keep growing, potentially generating more job opportunities. In 2007, 200 trillion cubic feet of natural gas, equivalent to 33 billion barrels of oil, or about 18 years of U.S. oil production, were found in the Haynesville Shale, a rock formation in northern Louisiana. Discoveries have also been made in Texas, Arkansas, and Pennsylvania. New optimism about U.S. gas reserves and production capacity has been pushing natural gas prices down. Since the fuel is there, why propose new taxes to discourage production?
President Obama’s new tax proposals, rather than leading towards energy independence, would drive oil and gas production abroad. New taxes would place American producers at a disadvantage in the global market, punishing domestic American oil and gas companies and benefiting countries with large reserves such as Venezuela, Saudi Arabia, Iran and Russia. Does President Obama really want these countries, all under fire for their neglect of basic human rights, to get richer at our expense?
Moving towards energy independence is under attack from another quarter—extreme environmentalists. After Tuesday’s failure of California ballot initiatives to cut spending, Californians might take seriously Governor Arnold Schwarzenegger proposal to allow additional offshore drilling from Platform Irene, off the coast of Santa Barbara, which would raise $1.8 billion. But drilling on the Outer Continental Shelf remains unpopular. It’s telling that residents find it preferable to release 40,000 prisoners from jail or fire thousands of teachers—rather than drill offshore, which could bring in a steady stream of revenue to the state capital of Sacramento.
Until the United States has the technology to operate its 250 million motor vehicles without gasoline and natural gas, we need more domestic exploration, not less. At some point, maybe later this year, maybe in 2010, our economy is going to shift to post-recession recovery, and oil and gas consumption are going to rise. We don’t want a repeat of $5 gasoline and sky-high home heating bills.