A frequent refrain during budget and debt ceiling debates is that we need revenue enhancement: higher tax rates, reduced deductions, eliminated credits. But doing this, especially amid today’s massively expanding regulations, will kill more jobs and further reduce government revenues.
There is a better way. Huge revenue sources are literally under our noses, or more precisely our feet.
America is blessed with vast oil, gas, coal, uranium, rare earth and other natural resource riches – to compliment our ultimate resource: the creative, competitive, innovative spirit of our people.
Finding and developing these resources would generate millions of jobs and billions, even trillions, in new government revenue and societal wealth. It would prevent default and downgraded credit ratings, reduce the need to cut government programs, shrink unemployment and welfare payments, avoid having to send hundreds of billions of dollars overseas each year for foreign energy and minerals, and reduce the need to borrow $120 billion out of every $300 billion the United States is now spending every month.
Many of these untapped resources are on federal public lands in our western states, Alaska and Outer Continental Shelf (OCS). Many more are on private land and onshore and offshore state-owned lands.
Leasing, exploration, extraction, transportation and processing unleash economic activities and revenues on extraordinary scales: lease bonus and rental payments, permit fees, royalties and severance taxes for each unit produced, direct and secondary jobs, taxes on corporate profits and workers’ income, property taxes on equipment and facilities.
These activities also generate billions of dollars in purchases of equipment, food, supplies, raw materials, hotel lodging, special services and myriad other items. All this means still more employment, newly enabled consumer spending, more local, county, state and federal revenue, and other economic benefits.
Newly developed horizontal drilling and hydraulic fracturing (“fracking”) techniques have enabled companies to unlock previously unavailable natural gas riches in conventional and shale gas deposits. That increased production, in turn, has reduced industry’s cost for energy and raw material feed stocks.
The American Chemical Council says this is reopening idled plants and creating jobs. In 2010 it helped increase chemical and plastics exports by 17% and 10% respectively, turning a $100 million industry balance of trade deficit into a $3.7 billion surplus. Other industries could soon see similar benefits.
America’s OCS generates over $19 billion annually in bonus, rent, royalty and tax revenue, IHS Global Insight has calculated. Alaska’s Prudhoe Bay oil field alone has generated hundreds of billions in government revenues since 1978, and the state of Alaska has collected a whopping $157 billion (in 2010) dollars from statewide oil and gas development since 1959. Millions of jobs were created and sustained.
In the Lower 48 States, Marcellus Shale deposits stretch across 95,000 square miles of New York, Pennsylvania, West Virginia, western Maryland and eastern Ohio. In Pennsylvania, say the state Labor and Revenue Departments, Marcellus fracking activities created 72,000 jobs (with an average $73,000 salary) between October 2009 and March 2011. Workers and royalty recipients paid $214 million in personal income taxes attributable to Marcellus development, while Marcellus drillers paid $1 billion in state taxes 2006-2010 (and another $238 million just during first quarter 2011).
The shale gas success story is being repeated in West Virginia, Louisiana, Texas and other states: thousands of jobs created, billions in royalties and taxes collected. New York should take note.
Taken together, America’s oil industry sustains 9.2 million direct and secondary jobs (5.3% of all US employment), generates $533 billion in total annual payrolls, contributes $1.1 trillion to US gross domestic product (7.5%), invested $2 trillion in capital improvements since 2000, and accounted for $190 billion in 2010 oil production. The largest integrated oil companies alone paid $1.95 trillion in corporate income, severance, property, excise and sales taxes, between 1981 and 2008, says the Tax Foundation.
We have it in our power to put many of our 20 million unemployed and involuntary part-timers back to work, generate trillions in revenue, and slash our chronic indebtedness. We just need to take action.
* End the leasing moratorium and “green flu” backlog on drilling permits in formerly accessible areas of the Gulf of Mexico. By the end of 2012 America could create 230,000 jobs in Gulf Coast and dozens of manufacturing states, produce 150,000,000 barrels of oil (worth $15 billion), reduce oil imports by a like amount, and generate $12 billion in tax and royalty payments, says IHS Global Insight.
(Right now, we are losing over $1 billion annually in Gulf royalty payments, because Gulf oil and gas production is down 220,000 barrels a day, thanks to DOI, EPA and White House foot dragging.)
* End leasing and drilling bans in the East Coast, West Coast, Western Gulf and Alaskan OCS, Rocky Mountains and Arctic National Wildlife Refuge. America could produce up to 40 billion barrels of oil (worth $4 trillion at $100 a barrel) … create 114,000 to 160,000 jobs … and generate $547 billion to $1.7 trillion in new government revenues over the next few decades, according to ICF International.
* Open up some of the nearly 500 million acres of public lands that are now closed to mineral exploration (nearly 70% of all public lands). We could repeat these petroleum-related gains, and end our near-total dependence on China for rare earth metals that are essential for smart phones, smart bombs, night vision goggles, hybrid and electric vehicles, wind turbines, solar panels and a host of other modern technologies.
Unfortunately, Congress and the EPA, Interior Department and White House are doing just the opposite.
EPA denied Shell Oil permits to drill in Alaska’s Chukchi Sea, after Shell had spent $5 billion acquiring and exploring leases. EPA also blocked construction of the Keystone XL oil pipeline from Alberta, Canada to Port Arthur, Texas. During construction, the project would generate 130,000 US jobs, plus $600 million in state and local tax revenues – plus $5 billion in property tax and other government revenues during the pipeline’s life. EPA’s excuse? The projects would contribute to global warming.
EPA is also imposing thousands of pages of new rules on coal-fired power plants that provide 48-98% of the electricity in 26 states, including our most important manufacturing centers. Experts say the actions will raise electricity rates 20-60 percent, shutter up to 60,000 megawatts of electricity generation, kill 3.5 million jobs in six Midwestern states, and cost those six states $42-82 billion in lost annual GDP.
Interior Secretary Ken Salazar continues to stall OCS leasing and drilling, and keep Western States oil, natural gas, oil shale, shale gas, coal, uranium and metals deposits off limits.
Meanwhile, our state and federal governments are spending over $10 billion annually, subsidizing wind and solar energy, and bankrolling radical environmental activism on energy, climate and public land issues.
Americans deserve a complete and honest accounting of how much revenue and how many jobs have been lost to environmental excesses. We have a right, and a duty, to develop our resources, rather than depleting other countries’ energy and minerals – and saddling our children with more joblessness and debt. It’s a perfect time for bipartisanship, at least among Republicans and moderate Democrats.
Committee hearings and briefings could discuss and evaluate industry, government and independent analyses of our vast energy, mineral, job and revenue opportunities. They would go a long way toward revealing the enormity of our self-inflicted wounds – and charting a responsible path forward.
Join the conversation as a VIP Member