With less than a year left in office, President Barack Obama is upping the pressure on America’s fossil fuel industries with a slew of new regulations and tax proposals.
Last month, Obama ordered a moratorium on new coal leasing on federal lands. Unlike oil and gas production, which occurs primarily on private land, 40 percent of U.S. coal mining takes place on federal lands.
Coal use has been declining in power generation for several years, in part because of abundant natural gas.
But it still accounts for 39 percent of our electricity, it remains the cheapest way to generate power and coal is a major export commodity.
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Over time, the moratorium will drive up electricity costs for households and businesses, destroy jobs, diminish federal, state and local tax revenues and widen America’s trade deficit.
The administration also wants to put further limits on offshore drilling for oil and gas.
Under the 2012-2017 lease program, no sales were permitted on the Pacific Coast, the Atlantic Coast, the eastern third of the Gulf of Mexico and much of Alaska.
Then last October, the Interior Department canceled two planned lease sales for Arctic drilling rights and denied two companies’ requests for lease extensions.
Now the Bureau of Ocean Energy Management is putting together its 2017-2022 program for offshore lease sales.
A first draft of the plan, released last year, would allow offshore drilling on the Atlantic outer continental shelf, parts of the Gulf of Mexico and limited tracts of the Arctic Ocean north of Alaska.
But environmental groups are pushing for a total moratorium on offshore drilling. More than 100 East Coast communities have passed anti-drilling resolutions, while 100 members of Congress, as well as 650 state and local elected officials, have expressed opposition to Atlantic drilling.
In today’s low-price environment, it might seem counterintuitive that investors would want to bid on leases in fields that have no production history and limited seismic testing. But they’re thinking long term — perhaps 10 to 20 years out.
Should the final 2017-2022 lease plan be modified to prohibit drilling in the Atlantic, not only will imports increase but communities along the East Coast will be forfeiting high-wage jobs, income and tax revenue.
In its most recent attack on hydrocarbons, the Obama administration is proposing a $10-per-barrel tax on oil companies as part of its fiscal 2017 budget.
Ostensibly, the tax — which is equivalent to 30 percent at today’s prices — would help finance the Highway Trust Fund while providing money to invest in “sustainable transportation programs.”
In practice, it would further erode the earnings of an industry going through its greatest financial crisis in 25 years.
Oil imports would rise, because foreign producers would not be subject to the tax.
Today, with the world drowning in oil, and gasoline and diesel prices at their lowest levels in 15 years, the siren song of “keep it in the ground” (or keep it under the ocean floor) may be alluring.
But the American economy runs on energy, and oil, gas and coal will be providing the lion’s share of transportation and power generation fuel for decades to come.
It simply makes more economic and political sense to develop our own hydrocarbon resources, in an environmentally responsible manner, rather than increase our dependency on imported energy.
Bernard L. Weinstein is associate director of the Maguire Energy Institute and an adjunct professor of business economics in the Cox School of Business at Southern Methodist University.