Among the many issues covered by the President in last night’s State of the Union address one theme crept throughout President Obama’s narrative; jobs and his desire to put Americans back to work and the American economy back on track. Well, President Obama is in luck because the American energy industry has some good news…not that it is necessarily “new” news since industry has been telling anyone and everyone who would listen. Has the President not been listening? That is a topic that deserves its own discussion.
Last night the President said, “And no area is more ripe for such innovation than energy. You can see the results of last year’s investments in clean energy -– in the North Carolina company that will create 1,200 jobs nationwide helping to make advanced batteries; or in the California business that will put a thousand people to work making solar panels.” That is 3,200 jobs, and that is good news. I wholeheartedly support any and all efforts to provide work to Americans who need it. However, ongoing efforts by his party and cabinet are putting tens of thousands of existing and countless more potential jobs in jeopardy.
I am speaking of industry’s efforts to develop America’s unconventional shale plays. A legislative effort by Representative Diana DeGette of Colorado would place undue, redundant, and burdensome regulation on hydraulic fracturing, the key to unlocking America’s natural gas plays. Her bill would add unnecessary federal regulation on top of currently effective state laws and regulations governing the use of the fracturing process. Should this bill become law it would reduce the number of wells drilled in the U.S. by over 50%, putting untold thousands out of work.
Pennsylvania State University released a study examining the economic impacts of developing the Marcellus Shale. The study found:
- Natural gas production had a $2.3 billion direct impact on Pennsylvania’s economy in 2008, adding more than 29,000 new jobs and $240 million in state and local tax revenue. More than 30 percent of all tax revenues remain at the level local.
- The industry will contribute a cumulative economic impact to the state of $265 billion by 2020, along with nearly $15 billion in state and local revenue. The study includes direct, indirect and induced jobs, and economic activity from Marcellus Shale development in Pennsylvania.
- During 2009, the ramp-up in industry activity will generate more than 48,000 jobs and more than $395 million in state and local taxes. In 2010 the total number of jobs created by the Marcellus industry could exceed 100,000. Valued added would exceed $8 billion in 2010. In 2015, gross output generated from the Marcellus industry could exceed $12 billion with employment of over 160,000 and over $1.3 billion in additional state and local taxes. In 2020, state and local taxes could exceed $1.4 billion and employment could exceed 174,000.
That is just in Pennsylvania. Those would seem to be the kind of numbers the President would be willing to embrace.
The President went on to mention offshore development stating, “It means making tough decisions about opening new offshore areas for oil and gas development.” Indeed Mr. President 68% of Americans agree, this nation does need to make tough decisions with respect to developing offshore resources. Those decisions need to be made expiditiously and with the purpose of providing affordable energy to Americans. However, if history is any guide the Administration’s decision on offshore development continues to be whether or not they should go from slow to stop. October, 2009 brought the one year anniversary of the lifting of the offshore development ban. That anniversary brought no new developments or efforts by the Administration to move forward with a five year plan and that stagnation continues into the new year.
However, the Department of Interior has been moving forward on efforts related to resource development on federal lands. Earlier this month Secretary Salazar announced that the Department would open the permitting process to unfettered opportunity to file frivolous claims with no purpose other than to hinder development or stop it outright. Furthermore, the Department will revise or only allow the use of categorical exclusions under “extraordinary circumstances”. This will significantly limit the ability of independent producers to utilize these important and common sense tools. Decisions regarding oil and natural gas development are best made at the field office level rather than the top down approach being advocated in these regulations.
Lastly, the President addressed the issue of taxes saying, “…we will not continue tax cuts for oil companies…” indicating Obama’s intent to renew last year’s effort to repeal meaningful tax incentives related to domestic production; some of which have been in place for over 100 years. These tax items are aimed directly at continuing a tradition of robust and responsible energy development and ensuring capital for reinvestment. Independent producers have traditionally reinvested 150% of their revenues; looking for more production. Last year’s tax proposal would have stripped over $30 billion in capital from industry and last night’s address gave no reason to believe this year’s tax proposal will be any different. Restricting capital for development will fundamentally put companies out of business, employees out of work, and increase American reliance on foreign sources of energy.
Taken in total the efforts, or lack thereof, of this Administration and the majority party with respect to responsible and robust energy development fundamentally threatens an entire industry and the hundreds of thousands in its employ. If the President truly cares about jobs and energy security he should reconsider his entire approach to energy policy. Crippling an industry and an economy will not move America towards a recovery, will not put people to work and will not provide families an opportunity to provide a better future for their children.
Oh, and did I mention Cap and Tax?