Oil Industry Regulation Hurting America’s Economy
By K.J. WEBB
Editor at Large
COMMENTARY
On a daily basis Americans reap the benefits of our nation’s energy industry by flying, driving, using natural gas for a wide variety of important purposes, and using any of the 6,000 products of which petroleum is a fundamental component. Most do not think about how integral the domestic energy industry is to their daily lives. If so, they would be concerned about the continuing drilling moratoriums and trend towards heavy federal regulation that has been creeping over the energy industry for the past three years. It is essential to understand what’s going on at the national policy level, which directly impacts Oklahomans, Oklahoma’s independent producers, jobs and the economy.
Limits imposed on domestic energy exploration have been a key issue impacting the energy industry, the economy and American jobs. The ongoing moratorium on drilling in the 19-million acre Arctic National Wildlife Refuge () has been a contentious issue for years. According to the Department of the Interior’s 1987 resource evaluation report of ANWR’s Coastal Plain, there is an estimated 4.8 – 9.2 billion barrels of recoverable oil, which would go a long way in helping America achieve energy independence. Arguing for drilling in , energy industry experts cite new and proven drilling technologies that impose minimal environmental impact, hundreds of thousands of new jobs, and over $100 billion in potential tax and royalty revenue for the government. Despite the benefits of opening for exploration, and the majority of Alaskans supporting opening for exploration, the moratorium remains in place.
isn’t the only area that could provide the nation with tremendous and much-needed natural energy resources. According to a recent study by the largest economics consulting firm in Alaska, Northern Economics, with the University of Alaska Anchorage’s Institute of Social and Economic Research, there is tremendous energy potential in the Alaska Arctic outer continental shelf () development in the Chukchi and Beaufort Seas. According to the report, the Arctic development would generate nearly 10 billion barrels of oil and 15 trillion cubic feet of natural gas. Moreover, exploration and production would create an estimated 54,700 new jobs, generate a $145 billion payroll, and generate $193 billion in federal, state and local government revenue. The American Petroleum Institute () has recently called on the Obama administration to open up Alaska’s region for exploration and production and adopt an energy policy that boosts rather than inhibits the nation’s economy. Important to note is that there are other areas in the country with an abundance of oil. The U.S. Geological Survey reported in 2008 that the Bakken Formation, stretching from Northern Montana into North Dakota, holds 3 to 4.3 billion barrels of recoverable oil, 1.85 trillion cubic feet of associated/dissolved natural gas, and 148 million barrels of natural gas liquids.
However, the Environmental Protection Agency () is threatening the energy industry’s ability to recover the Bakken oil. This is because hydraulic fracturing (pumping a water-sand mixture into underground rock layers where the oil or gas is trapped) is required. Despite the admitting that it knows of no case of hydraulic fracturing ever contaminating water supplies, and studies by the U.S. and the Ground Water Protection Council have confirmed no direct link between hydraulic fracturing operations and groundwater impacts, the continues to pursue regulations that burden the energy industry.
The Permian Basin, a major oil producing region in West Texas and Southeast New Mexico is under threat from the U.S. Fish and Wildlife Service. The Service has proposed to list a three-inch Dune Sagebrush lizard to the Endangered Species List, arguing that the lizard’s habitat is fragmented by the oil and gas, wind turbine, and agriculture industries. A decision about adding the lizard to the list is expected by mid-December. If added to the list, it would devastate the towns in the Permian Basin, where 70 percent of the economy, and the majority of jobs, depend on the oil and gas industry.
In addition to increasing regulatory burdens on exploration, by proposing to end tax cuts for the energy industry, the government is further crippling the nation’s energy industry and the economy. A July 2011 study sponsored by the American Energy Alliance () confirms that current proposals to carve out U.S. energy firms from receiving certain tax deductions would have a net negative impact on federal revenues. The study, by Louisiana State University Endowed Chair of Banking and nationally-renowned economist Dr. Joseph Mason, found that eliminating the energy industry’s tax deductions will result in: $30 billion in federal tax revenue at the expense of $341 billion in economic output; a loss of 155,000 jobs; $68 billion in lost wages, and $83.5 billion in reduced tax revenues. Mason points out the extremely large role that the energy industry plays in the country’s economy, contributing more than $1 trillion in 2008 alone.
According to Mason, eliminating the tax deductions on the U.S. oil and gas companies is grossly counterproductive to increasing federal revenues. Actually, the net impact on federal revenues of eliminating these tax deductions would be negative, resulting in adding hundreds of billions to the to the current $1.4 trillion U.S. deficit and $14.8 trillion U.S. debt.
Clearly, there is much at stake for the economy and jobs, particularly so for Oklahomans where the energy industry is a backbone of the state’s economy, a major economic driver and jobs provider. It’s time for Oklahomans to join to the conversation about national energy policy. Even though D.C. is miles away, energy policy decisions made in the Capitol will have a tremendously heavy impact on the lives of people in this state.
For more information about the American Energy Alliance visit www.americanenergyalliance.org.
The next article in this series will examine the question: is a government-controlled energy industry on the nation’s horizon, and what would the impact be?
Updated 11-14-2011
READER COMMENTS
- — Florian Schach Oct 24, 12:33 AM #
