TRYING TO SAVE SOME BUSINESSES DOESN’T
WARRANT KILLING AN ENTIRE INDUSTRY CRITICAL TO AMERICA

BY MICHAEL BURNAMAN

How does President Obama and his team have the audacity to propose a budget that literally robs an entire industry of small oil and gas operators of their very livelihood? They say the oil and gas industry must pay more and more taxes so that they can save (or bail out) the nation’s failing banks, automobile manufacturers, and homeowners who can’t pay their mortgages. Does the administration have any idea what-so-ever of how many families they are hurting by even suggesting this drastic revenue raising scheme for our bloated government bureaucracy?

Small oil and gas companies—often with as few as 10 employees—are historically the drivers for bringing forward additional new fossil energy resources. The industry as a whole has been and continues to be one of the largest consumers of investment capital and is burdened with a much higher element of investment risk than that borne by other industries. Small oil and gas companies rely on many of the tax incentives scheduled to be eliminated or greatly reduced. They do not have the cash flow or the access to capital that the ExxonMobil, Anadarko, Chesapeake, and XTO sized companies enjoy.

Neither the budget proposal nor the recently approved “Economic Stimulus Plan” addresses the current and future role of oil and gas production within U.S. borders in any meaningful way. It is America’s fossil resources which will provide the fuels for all ground and air transportation plus the distribution of commercial and retail products for the foreseeable future. “Green” energy sources such as wind, solar and agricultural alcohols will never be produced at the volumes necessary to provide for the continued growth of the American economy – or to even sustain what we have.

The existing federal tax incentives for U.S. oil and gas exploration and development were put in place to ensure that a viable industry exists for continued economic development, national defense and our quality-of-life. Entire business sectors such as steel, chemical, oil field services, pipeline transportation, and automotive, to name a few, are either wholly or partially dependant on a steady stream of products derived from U.S. oil and gas resources and the jobs that support these industries. Right now jet fuel has already been curtailed because of availability and costs, which, in turn, impacts our military’s readiness training.

There are at least 22 states that currently have oil and gas production or are in the early stages of development. Landowners, municipalities and states derive revenues from this production. These numbers are growing as newer technologies allow oil and gas shales to be developed in areas such as Montana, North Dakota, Pennsylvania, New York and West Virginia.

Some seem to think that the industry as a whole derives enormous profits at the expense of the American people. They see these “new” taxes somehow bringing about “fairness” for the population in its entirety. Instead, the proposed changes appear as retribution by certain factions within our country who either do not truly understand the workings of capitalism or have motives unrelated to the continued success of the American economy.

Should the industry crumble, our Middle America will truly suffer. Specific populations that would be most impacted are labor unions, oil and gas drillers, transportation workers, pipeline contractors, vendors in all areas, industry retirees – and even the government employees who are in place to regulate all dimensions of hydrocarbon exploration and production. Where do these people go to work, when the small oil and gas operator closes its doors? Will there need to be an expansion of unemployment benefits and government subsidized health care for these employees and their families because they are not likely skilled enough in other areas to get new jobs?

The members of the Energy Committees of both the U.S. Senate and the U.S. House of Representatives surely are smarter than the Administration. They must put a stop to this misguided and ill-informed component of next year’s budget. If they don’t act now to reject the President’s ideas, the news headlines will soon read that unemployment is unprecedented due to the collapse of the oil and gas industry’s small but critically important operators.