Opinion: Obama promises fuel but produces hot air

Two weeks ago in his State of the Union address, President Obama called for more domestic oil and natural gas development. More development of our own oil and natural gas supplies could create vast numbers of new American jobs, enhance our energy security, and deliver hundreds of billions more in revenue to the federal government.

The good news is America’s oil and natural gas industry now supports more than 9.2 million jobs and delivers more than $86 million a day in revenue to the federal government. We pay more than our fair share in taxes with an effective rate nearly double the average for all industries. In 2010, we contributed more than $470 billion to the U.S. economy in spending, wages and dividends, a sum more than half the size of the president’s own 2009 federal stimulus package.

We are one of few industries that have continued to create jobs during the economic downturn. Hundreds of thousands of new jobs related to oil and natural gas development have been created recently in North Dakota, Pennsylvania, Texas and other oil and natural gas states, and where the industry has a strong presence, household incomes have been rising.

And with the right policies we could do even more.

Unfortunately, in his budget plan for fiscal year 2013, the president proposed policies that would make extending these successes more difficult. His budget calls for raising taxes on oil and natural gas companies by more than $85 billion.

A tax hike of this magnitude would discourage investment in new U.S. oil and natural gas projects - or direct it overseas - resulting in fewer new American jobs, less domestic energy, diminished energy security, a higher trade deficit, and eventually, less revenue for our government.

As taxes rise, investment would decline, drilling would decrease and so would the taxes and royalties that new production would otherwise generate. So any increase in revenue from new taxes would be short-term at best.

Not only would higher taxes on the industry be harmful to the nation, it also would fall on companies that already pay their fair share, and contrary to statements from the current administration, receive no subsidies.

In fact, there is not one targeted taxpayer credit in the U.S. tax code currently available to the oil and natural gas industry. The tax deductions the industry is entitled to take are the exact same or similar to those taken by other industries, intended to allow a company to recover its costs of doing business.

Examples include deductions for drilling costs and the use of credits to offset taxes paid on income earned overseas, as all other companies receive, which allow oil and natural gas companies to stay competitive internationally. They include manufacturing cost deductions, meant to encourage new job creation, and which all manufacturers can take - yet the president’s new budget would no longer allow the oil and natural gas industry to take this important and successful job-creating deduction.

The energy realities are clear: We will need all energy sources - fossil fuels, renewable and nuclear - to fuel our growing economy and our way of life, but for decades to come our nation will continue to rely on oil and natural gas for most of its energy. This is what the administration itself projects, even assuming continued growth in renewable energy and greater energy efficiency. The question is where will this oil and natural gas be produced?

We can produce more of this energy right here at home - or we can pay hundreds of billions annually on imports.

If we adopt a full program of domestic oil and natural gas development - without unfair and punitive tax increases and unnecessary new regulations - we could create 1 million more new jobs in just seven years and increase revenue to the government by $127 billion by 2020. By 2030, this program of development could boost government revenue by $800 billion and increase daily production of oil and natural gas by 10 million barrels.

Add to this more imports from Canada and increased domestic biofuel use and we could within 15 years have the capability to secure all of our liquid fuels from North American sources.

The president says he wants more domestic oil and natural gas development - and the jobs and energy security that would come with it. We want to work with him to make that happen, and we can do it in a way that not only would deliver jobs and energy, but also would produce far more government revenue than the president’s own plan could provide.

Brian M. Johnson is senior tax adviser for the American Petroleum Institute (api.org).