August 16, 2008

The API Rejects

. . . the "Gang of Ten" proposal:

API must express its opposition to the approach outlined by the Group of 10 because it falls far short of what is needed. Unfortunately, the proposal appears to be a classic case of one step forward, two steps back -- or in this instance "light on new production/heavy on new taxes." Current world events only reinforce the critical importance of ensuring that our nation develops the full range of its domestic energy resources for economic competitiveness and national security reasons. The proposal’s approach to access to federal oil and natural gas resources is far too limited in its scope. And, it is unfortunately paired with the imposition of at least $30 billion in new taxes on the oil and natural gas industry that would have the effect of limiting needed oil and gas investment. A lesson learned well in the 1970-80 period. These measures create an environment that will virtually assure a future with less, not more, domestic production. While this new proposal would expand access in the waters of the Outer Continental Shelf, it unfortunately limits any expansion over current law to the eastern Gulf of Mexico and waters off four Atlantic Coast states in the South. Even in these areas, development in federal waters less than 50 miles offshore would be banned – despite the fact that offshore facilities would need to be 12 or fewer miles from shore to be visible from land.

Leasing in the North Atlantic and off the Pacific Coast would be banned and plentiful hydrocarbon resources in Alaska would remain off limits. Significant regulatory burdens on new development would remain in place. The imposition of $30 billion in clearly discriminatory new taxes, to pay for federal investment in alternatives and renewables, ignores the fact that the industry already provides more than 70 percent of all North American investment in research and development in emerging energy technologies.

Americans today are calling for Congress to do much more to supply their needs for additional energy. Our companies are supplying more energy – and more kinds of energy – to meet this growing demand. The U.S. Energy Information Administration continues to point out that oil and natural gas will be an essential part of this nation’s energy future for decades to come. Opening all available domestic resources to safe and environmentally responsible development would significantly boost U.S. supplies of oil and natural gas; increase the nation’s energy security; add more well-paying American jobs; help with our balance of payments and economic growth during a time of recessionary fears and bring billions of dollars into the Treasury instead of sending them abroad.

Huge and discriminatory new taxes on the U.S. oil and gas industry make no sense. The only beneficiaries of such an ill-advised approach would be international competitors in the global oil markets, who would benefit as US companies were made less competitive in the quest to find and develop global energy supplies. Already, the top 27 U.S. energy-producing companies have seen their annual tax liability rise to more than $100 billion, an 80-percent increase from 2004 to 2006. New taxes on these U.S.-based energy companies would drastically cut capital that otherwise could be invested in domestic oil and natural gas production and expanded refining capacity. The net result could be to stifle high-risk, capital-intensive projects in the U.S., leaving Americans more
dependent on foreign sources of energy, while jeopardizing U.S. jobs and economic growth.

Other than that, it's a great idea, you know. Read the entire text of the API Letter (it's a PDF), which was sent to all senators. We need a bill, but the GoT proposal ain't the one. And even one of the "DontGo" recommendations reportedly contains that "50 miles off shore" proviso for coastal development. That's at least twice of what's necessary for environmental safeguards. (Unless, perhaps, you're a yachting enthusiast; in that case, you might have to negotiate around the occasional oil platform that people on the beaches simply cannot see. Unless you get everywhere you go on sail-power alone—with no backup motor involved whatsoever—you might want to consider taking one for the team.)

The API site is here, by the way. They know their stuff, and because they have ties to the people out in the field who are doing the exploration and conducting the research on oil and natural gas, they can give much more pragmatic recommendations on how to solve the energy crisis in the short-term/medium-term, as we continue to work on alternative forms of fuel and creative ways to generate electricity.

So, let's be clear: having a relationship with the industry is a feature. Not a bug. But there's your disclosure, anyway. They are an invaluable think-tank and public information source on oil and natural gas, and we should listen to their input.

(If you're too much of a purist/anti-capitalist to do so. In that case, I assume you also ignore anything the American Booksellers Association has to say about the printed word.)

Posted by Attila Girl at August 16, 2008 02:51 PM | TrackBack

1. Kick the five Republicans in the gang out of the party. Period. They don't have to call themselves Democrats, but they can no longer call themselves Republicans.

2. Scrap their New Energy Reform Act of 2008.

3. Pass a bill requiring that the OCS/ANWR/All Other Oil & Gas Areas Now Off-Limits be the SOLE sources of any additional revenue increase for the Federal Gov't. Set new royalty rates. Establish an expediting commission to make it happen with authority over all Federal/State/Judicial/Environmental road blocks (like in WW II).

4. Let industry drill now. Offer incentive tax rates over a twenty year period to get the new oil sooner rather than later. The earlier the fields come on stream, the lower the lifetime tax rate.

Posted by: Darrell at August 16, 2008 07:14 PM

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