White House Declares Jihad on Domestic Oil and Gas

[promoted from the diaries by bs]

All bloviating about “Energy Independence” aside, the White House’s new budget proves that the main goal vis a vis the domestic energy industry is to maximize the extraction of tax dollars. The inevitable result will be the permanent crippling of the industry and the loss of millions of jobs. In the meantime, say goodbye to whatever shot at Energy Security that the U.S. ever had.

I’ve also heard a couple of times recently from high-ranking Dept of Interior officials (namely Sec. Ken Salazar and MMS official Chris Oynes) that the government is looking at royalty schemes that would increase its direct take in mineral revenue. Higher royalty rates generally make exploration less attractive from the oil company’s perspective.

Even if Our Energy Future is one of gumdrops, rainbow unicorns and Magic Windmills, it ain’t going to happen tomorrow, babe. Or in 10 years. The grownups in the room must realize that there is a role for fossil fuels (which, together with nukes and non-P.C. renewables account for 99.5% of current energy use), even if it is only to bridge the gap to that new future.

Ooops. There’s the problem. There are no grownups in the room.

From the Wall Street Journal (N.B. the headline is wrong):

The White House is sticking with [its] plans to eliminate $26 billion in tax breaks for oil and gas companies. Half of that would come from eliminating a tax break for domestic oil and gas production. Companies say the tax break keeps jobs in the U.S. [Actually, that’s $31 billion – the WSJ did not include a $5 billion excise tax, which is still in the budget, and about which there is a troubling lack of specificity. – ed.]

“Oil and, to a large extent, gas are internationally traded commodities, and their prices are determined on the world market,” the White House said in justifying the tax plans. “As a result, domestic oil and gas production subsidies do not significantly reduce the prices that consumers pay for products such as gasoline and home heating oil, resulting primarily in higher returns to the oil industry.”

So, in other words, the Government of the United States is completely, totally indifferent whether Joe Consumer buys a barrel of oil from, say, me, or from Osama bin Laden’s uncle in Saudi Arabia. Also, it is the Government’s opinion that the dependence of the U.S. on foreign imports is not even a factor on OPEC policy or the world crude oil trading market.

It also says that the Government is oblivious to the role of natural gas in the nation’s economic picture. The tax breaks they take away from oil they take away from gas, too. Natural gas is 80% domestic (most of the balance comes from Canada); it’s abundant, cheap relative to oil, secure, and clean.

Here, from the Oil and Gas Journal, are the comments of a couple of industry representatives:

The new taxes and other provisions in the budget will make it more difficult to develop domestic energy, according to Independent Petroleum Association of America Pres. Barry Russell. “This budget does not recognize that in order to decrease our reliance on foreign oil, we need to increase our own American supplies of natural gas and oil. It also punishes American gas production, which could play a lead role in climate change discussions as our abundant, affordable, clean-burning energy source,” Russell said.

“From repealing existing tax provisions that encourage American production to new excise taxes on offshore production to new user fees that will go to pay for an already complex and costly permit process, this budget takes our natural resources and puts them further out of reach,” Russell said.

Natural Gas Supply Association Pres. R. Skip Horvath said Obama’s budget was bad news for American consumers and worse news for American jobs. “People don’t appreciate how big the gas industry is in this country. Four million Americans depend on domestic gas for their livelihoods, both those who work directly in the industry as well as those in second jobs, such as steel and concrete, and retailing,” he said.

He said that it was too soon to say definitively how many jobs would be lost, “but just a 10% decrease in direct natural gas jobs could wipe out the beneficial effects of a doubling of wind and solar jobs.

“Tax policies directly impact the decisions that are made regarding drilling, especially for smaller companies,” Horvath said. “More importantly, over 80% of the gas in the US is actually produced in this country. We are troubled that this administration has such a basic misunderstanding of how domestic gas markets will be impacted,” he said.

[emphasis added.]

H/T Artie