The GOP's Gas Problem

As America pushes past the one year anniversary of the BP oil spill, Republicans are defining the new consequences of the largest environmental disaster in our nation’s history.  A July 2011 report by IHS Cambridge Energy Research Associates details the economic effects of the Obama administration’s moratorium on deepwater oil and gas drilling, forecasting a cost of 230,000 new jobs and a $44 billion boost to the GPD.  The study had been heralded by Sen. David Ritter (R-LA), but is gaining national traction thanks to the support of conservative groups like the Heritage Foundation and the National Federation of Independent Business (NFIB).  Already no friends to the administration and Interior Secretary Ken Salazar for his harsh policies on Big Energy, pro-business advocates will ensure that the study will undoubtedly be the opening salvo in a full-scale campaign to tie energy policy to the quagmire of domestic economics.

But are Republicans setting themselves up for more than they bargained for?

The same groups that are lining up to tout the results of the IHS study as evidence of failed environmental policy also excoriated Obama last year when he announced his plan to rollback the $4 billion in tax subsidies for Big Oil.

Here’s where the problem comes in for Republicans as the most important election since 1860 looms on the horizon.  Last year, 47 governors heralded an oil & gas tax of some sort as the savior to state budget woes.  Only three states – Pennsylvania, Iowa, and New York – do not assess any sort of fee, assessment, or tax on oil and natural gas.  And as the GOP edges closer and closer to embracing Gov. Rick Perry as the standard-bearer for 2012, the issue is becoming a bigger and bigger elephant in the room.

Nowhere is the battle more evident than in Pennsylvania, as the Commonwealth struggles to make crucial decisions about taxing drillers of the Cibola-like Marcellus Shale natural gas deposit.  The state’s Republican governor, Tom Corbett, is feeling pressure from a more moderate faction of Republican state senators to exact a modest impact fee on the industry, but they may be a day late and a dollar short.  During his 2010 campaign, Corbett fell in line with Grover Norquist, head of the Americans for Taxpayer Reform (ATR), who said of the impact fee in no uncertain terms, “make no mistake, this proposal is a tax increase based on any honest and objective analysis.” Corbett’s commitment to the ATR’s no-tax pledge, which has been signed by a prodigious number of Congressmen, Governors, and state representatives, has drawn a line in the sand for Republicans, who are charged with fixing the deepening chasm of economic disparity that will surely dominate 2012.

As Perry’s opponents make the push to define his “brand” of conservatism, they will undoubtedly force him closer and closer to the ATR and its absolutist, populist-friendly no-tax pledge.  Which puts Perry and the GOP in a difficult position, not only because of Perry’s murky history with taxes, but also because of his proximity to one of 2012’s defining issues in energy.  Rick Perry’s Texas is one that is left with low taxes on Big Energy, but also struggles with the Business Margin Tax, which Perry signed into law in 2006.   And who better to finesse a diversifying federal energy policy to ease the pain of a national economic crisis?

To date, Perry has focused on simplifying the tax code as a means to addressing questions about his tax policies.  But his role in Texas’ energy boom will surely find the spotlight in the months to come, and more questions will come about his willingness to generate federal revenues in a similar fashion.  As states like Pennsylvania, Iowa, Colorado, and Ohio – all battleground states in 2012 – take longer looks at their own energy policies and struggling state budgets, it’s a safe bet that all eyes will be on the Lone Star.