Obama’s tax plan for oil industry unfair, unwise

At a time when billions of taxpayer dollars are being spent to keep afloat failing corporations and industries, the administration is now singling out the oil and natural gas industry — one segment of the American economy that has worked to hold its own — for billions in new taxes.

These additional taxes — on top of the billions in taxes, royalties and fees that oil and natural gas companies already pay to the federal and state governments — could have a devastating effect on our nation’s ability to meet the increased demand for energy, of all kinds, once the economy recovers.

That we will need more energy, including oil and natural gas, once the world’s economic troubles end, is undisputed. Energy Secretary Steven Chu acknowledged as much in February, when he told reporters that he anticipated a need for more oil once the recession ends. About the same time, Nobuo Tanaka, director of the International Energy Agency (IEA), said he saw an increase in demand for energy starting next year.

The question then is: Will that energy be there when the economy rebounds? The IEA’s Tanaka has some serious concerns about that. He warned of a “supply crunch” if investments in energy production are not adequate. And, most recently, the respected energy research firm, CERA, warned of a dramatic decrease in future oil supply as a result of a sharp reduction in investments and low oil prices.

CERA explains that the increased cost of developing new oil fields, coupled with low prices for oil and natural gas, could significantly reduce oil and natural gas company investments in future production — and that could lead to a reduction in capacity.

“The potential reduction in capacity represents a potentially powerful and long-lasting aftershock following the oil price collapse that began in 2008,” CERA stated.

So, what does that have to do with new taxes on oil and natural gas companies? Simply this: piling additional taxes on top of those high exploration and production costs is not the way to encourage greater energy production to meet that anticipated increase in demand.

Additionally, at a time of high unemployment, the federal government should not be promoting policies that would make it difficult for our companies to hold on to their valued employees. The recession has already forced some companies to reduce their labor forces as they have begun to pull back from planned investments.

Some 6 million Americans depend on our industry for their livelihood. That’s 6 million people who support their families, pay taxes, sustain local businesses, schools charities and places of worship — and lend a helping hand to those who are suffering as a result of the recession. This is an important part of the nation’s economic backbone and we should not be doing anything to weaken it. We need to retain these well-paying jobs while we seek to create more.

We are aware of the administration’s expressed desire to move the nation away from oil and natural gas and toward other forms of energy. But we also know that every high-level administration official who deals with energy – President Obama, Energy and Environment “Czar” Carol Browner, Interior Secretary Ken Salazar and Chu — has acknowledged that oil and natural gas must be a part of a comprehensive energy plan.

Many of our congressional leaders share that view. So does the public. A survey of voters in last November’s election showed that more than 60 percent supported increased access to offshore oil and natural gas resources.

Instead of seeking to impose new taxes on the industry, the administration should be working with Congress to encourage development of the nation’s vast oil and natural gas resources, onshore and off our coasts. A recent study shows that developing those resources that have been kept off limits would improve America’s energy security, create jobs and provide federal, state and local governments with more than $1.7 trillion in new revenues.

We understand that times are tough and that our leaders face a difficult task. The economic challenges confront us as well. We support our leaders’ desire to bring back economic stability. However, the way to do that is not by placing additional burdens on one of the industries that will shortly be called on to deliver additional energy as the economy rebounds.

Without the burden of new taxes — and with greater access to our nation’s vast resources of domestic oil and natural gas resources — we can provide even more revenues for governments at all levels, more American jobs, more American energy.

Gerard is president and CEO of the American Petroleum Institute.