With Congressional debate on Interior’s budget underway, the Administration has predictably tried to misdirect attention by issuing one, lone permit. This meaningless offer is an old trick we’ve already seen from the Administration, when they originally “lifted” the moratorium just days before the November elections.
Now, Congress has the opportunity to let Secretary Salazar and the Department of Interior feel the pocketbook pinch they’re imposing on thousands of U.S. small businesses and hundreds of thousands of workers dependent on Gulf energy production.
Offshore energy exploration and production provides a significant economic boost without additionally burdening taxpayers, but overregulation and favoritism by the Obama Administration ignores this. The taxpayers currently own 85 million acres of oil and gas reserves, which could bring in an estimated $61 billion in tax revenues at auction. These sales, if allowed, would be joined by the $95 million in lease payments, rents, and royalties paid daily to the federal treasury by oil and gas producing companies.
How about jobs? Expanded drilling would create 250,000 new jobs, and add nearly $500 billion to the economy, according to a Wood Mackenzie study. Considering that the President’s proposed budget would create the largest deficit in U.S. history, one would assume that such measures would be wildly popular.
Instead, the Obama Administration has scrapped previously stated plans to expand oil and gas exploration, and continues to punish the Gulf with permitting delays at great expense to businesses and taxpayers. A study by LSU Professor Dr. Joseph Mason showed that as early as September, almost 20,000 jobs had been eliminated in the Gulf region.
Furthermore, studies estimate that if sluggish permitting on energy exploration and production persists for one year, it will unnecessarily cost the government $10.8 billion in revenue that must be covered by program cuts and new taxes.
The President’s FY 2012 budget calls for an additional $90 billion in U.S. oil and gas taxes to help shore up the projected deficits. In 2008, the already heavily taxed oil and natural gas industry paid an estimated $100 billion in income taxes alone. Dramatically increasing this burden on U.S. oil and gas companies will serve no one, except for state owned foreign companies like those in China or Venezuela. Increasing this burden will, however, drive up domestic energy prices and kill jobs.
One estimate suggests that just two of the numerous new proposed taxes would immediately eliminate 150,000 jobs across the entire economy, as the energy from oil and gas is an inescapable input cost for a sizable fraction of goods and services. Given that energy prices are built into everything from shipping produce to grocery stores, heating office buildings, and manufacturing plastics, it is hardly a sound strategy for the Obama Administration to target the energy industry in the name of reducing the debt and encouraging economic growth.
The Interior Department budget proposed by President Obama would put $73 billion into wind, geothermal, and solar power initiatives. Evidence suggests that it will be decades – if ever – before these energy sources are competitively priced, reliable, and widely available. As we face a massive budget deficit, an ongoing recession, and high gas prices as a result of both loose monetary policies and turmoil in countries like Libya and Egypt, increased domestic energy production should be a priority, not an afterthought.
Secretary Salazar will have a tough time convincing members of Congress to increase funding for his agency in light of the billions the Obama Administration is withholding from the American public through ongoing drilling delays. Denying the Nation needed jobs and economic growth, while decreasing the federal government’s revenue is not the way to convince Congress of the need to increase budget funding.
Legislators should use the budget process to prod the Obama Administration to take action, end the devastating moratorium, and expand exploration for and production of energy. It is time to get the Gulf back to work, and it’s time for the Obama Administration to start pursuing policies that make economic sense.
Thomas J. Pyle is the president of the American Energy Alliance (AEA), a not-for-profit organization that engages in grassroots public policy advocacy and debate concerning energy and environmental policies.