Oil and natural gas provide highway funding

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This year, President Obama will propose to Congress a six-year highway bill that sets surface transportation policies for the remainder of the decade. We anticipate that the goal will be to generate Congressional support for repairing our country’s roads, addressing congestion, increasing safety, generating blue collar jobs, and improving freight logistics. However, many Americans do not know where the money for those projects comes from.  Here’s a quick primer. 

Every time you fill up at the pump, you pay 18.4 cents a gallon for gasoline and 24.4 cents a gallon for diesel. This federal Highway-User fee is placed into the Highway Trust Fund, which primarily finances road projects across the country, enabling Americans to get to work and school each day and create a thriving interstate commerce system. This excise tax isn’t a variable amount, and it’s not tied to the cost of fuel. The more gasoline and diesel Americans buy, the more revenue we have for roads.

American energy consumption is largely driven by our ability to keep costs consistent and affordable. It’s not a complicated scenario – when the price of gas goes up, fuel consumption drops off and, consequently, less money goes into the trust fund. By ensuring affordable energy for American consumers, we not only solidify our standard of living, we’re also collecting a stable supply of user fees that funds America’s highways .   

While much can be done to improve the public’s “trust” in the trust fund, Americans can understand and support the simplicity of a dedicated fuel tax focused on roads. In effect, the goal is to ensure that those paying the fuel excise tax also benefit from its revenue.    

However, President Obama’s proposal to increase taxes on the oil industry is an entirely different concept. By promoting all kinds of new government spending, including a recently unveiled $53 billion High Speed Rail proposal, the tax would raise the price of fuel, hurting motorists at the pump. 

And the money could be spread out across limitless administration initiatives, some of which have nothing to do with transportation and most of which have minimal or no benefit to the motorists paying the bill. In effect, the highway user fee goes into a "trust fund," while the Obama tax increase on the oil industry would go into a "slush fund."  

 To exacerbate matters, Obama has proposed this tax increase while simultaneously restricting the industry’s ability to move forward on key projects that would benefit motorists, truckers, and other energy consumers. Projects that increase domestic energy supplies help to stabilize and improve fuel prices. Abundant fuel supplies reduce transportation costs and keep America moving. 

During the State of the Union address, the president also called for the removal of what he referred to as subsidies for the oil and natural gas industry. We need to be clear about our terminology here—these are not subsidies. They are deductions that every other industry, especially those in the manufacturing sector, receives to encourage job growth.

According to a recent Wood-Mackenzie study, additional taxes on the oil and natural gas industry would decrease government revenue and eliminate 50,000 American jobs. Those are well-paying positions that are putting food on the table right now. The proposed taxes seem even less logical when you consider the thousands of jobs we could create by drilling in the Arctic and Gulf of Mexico, two areas that are mostly off-limits now.

The president has the ability to steer the conversation on domestic energy development in a positive direction. He could choose to recognize that the industry, in addition to providing cost-effective energy that fuels our national highway program, also generates millions of jobs and billions annually in sorely needed government revenue. 

At a time when our country is struggling to get back on its feet from the recession, President Obama needs to embrace policies that will increase government revenue and jobs, not target an industry that’s already doing its part. Highway users and the energy industry must remain united in helping the president choose a better road forward.  

Greg Cohen is president of the American Highway Users Alliance, a non-profit organization in Washington, D.C.