Obama Administration Stifling American Energy Production

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Jeff Eshelman / Julia Bell
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For Immediate Release
February, 17 2012

This week, the Obama administration sealed the deal on its anti-oil and natural gas agenda, proposing plans to increase taxes on producers, double royalty payments on federal lands, and implement federal regulations on hydraulic fracturing-a process already thoroughly regulated by the states.

The administration’s proposed budget seeks to impose $41 billion taxes on the oil and natural gas industry over the next decade, jeopardizing American energy production while cutting jobs and reducing millions in local and state revenues.  While the President believes that this proposal will target “Big Oil,” he fails to recognize the burden this heavy tax increase will bear on the foundation of America’s energy base-the thousands of small independent oil and natural gas producers who develop 95 percent of U.S. wells while producing 85 percent of U.S. natural gas and 54 percent of U.S. oil.

In response to the proposed tax increases, Independent Petroleum Association of America (IPAA) Chairman Virginia “Gigi” Lazenby stated (2/13/12):

“Oil and natural gas producers pay more in taxes, royalties and revenues than virtually any other American industry, as well as significant state and local taxes that support local communities. Reinvesting 150 percent of their American cash flow back into new American production, independent producers are constantly supporting and advancing this nation’s ability to develop its natural resources and maintain its standard of living. 

“Yet every tax increase on independent producers reduces capital investment in the industry, resulting in fewer jobs, less revenue to American governments, depleted retirement and pension funds, and dismantled American energy security.

“IPAA will continue to take its case directly to those in Congress, both Democrats and Republicans, who recognize the value which independent American energy producers deliver-if and when they are given the chance. If President Obama is truly dedicated to an America ‘built to last’, he will listen to our message, follow through on his word, and recognize the vast benefits of American oil and natural gas production for America’s workforce, economy, security and future.”

And yesterday, Interior Secretary Salazar told a panel of House appropriators his plan to increase royalty rates for oil and natural gas production on public lands by 50 percent, an act which stands to deter production on federal lands, stifle our secure domestic energy sources, cut jobs, and reduce one of the largest revenue streams to the federal treasury.

In response to the announcement, IPAA President and CEO Barry Russell noted (2/17/12):

“While oil and natural gas production on public lands is one of the top sources of federal revenues, providing $10 billion in bids, rents and royalty payments in recent years, the proposed 50 percent increase in royalty payments will further deter production and stifle much-needed investment in American’s struggling economy.

“While Interior is of the impression that an increase in royalty rates will increase revenue generated for the federal government, the reality is that such a motion will deter production, reduce investment, and cost the nation millions of dollars in investment opportunity.  It’s a basic economic principle: If you want less of something, tax or charge more for it. Indeed, in 2007, the Canadian province of Alberta significantly increased royalties on oil and natural gas production.  But why learn from these failed policies?

“With every top-down Washington tax hike, increased royalty payment, or bureaucratic delay, our ability to produce American energy, create jobs, and strengthen our nation’s energy future is further jeopardized, running counter to the Administration’s supposed objectives.”

With gasoline prices rising daily, and the economy struggling to recover, the administration has ignored the reality of what a true common sense, “all-of-the-above” energy strategy means for the American economy, workforce, and energy security. Our independent oil and natural gas producers have pushed forward to guarantee the energy production our nation depends on every day.  But as IPAA Chairman Virginia “Gigi” Lazenby noted just one month ago, “”the truth behind the veil is that this tremendous broad-based economic and energy security success is largely in spite of this administration’s, at times, harshly anti-oil and natural gas policies, not because of them (1/24/12).”  This week proved no exception.