Big Oil vs. the Congressional Budget Office
Last year, the Congressional Budget Office (CBO) released a report on expected federal tax revenues if energy cultivation in America was expanded. The report is now being challenged by the Institute for Energy Research (IER) in a new analysis. From The Washington Times:
The IER-funded review by Louisiana State University economist Joseph Mason found that opening federal areas to leasing would generate an additional $24 billion annually in tax revenues initially, growing to $99 billion annually over 30 years.
CBO’s estimate was far lower:
CBO estimated that ANWR leasing would generate about $5 billion over the next 10 years, with 90 percent going to Alaska under current law. Between $2 billion and $4 billion a year in royalties from 2023-2035 would be split between the state and Washington once production gets underway.
Another $2 billion annually could be expected from additional leases in OCS waters that are not currently open, CBO said. It estimated annual royalties ranging from tens of millions of dollars a year to a few hundred million dollars a year, because of the uncertainty about whether production would take place on the leases.
Mason estimated that beyond the additional tax revenues generated by new leasing and development, total economic output would range from $127 billion annually to $450 billion annually during production, or about 3.2 percent of gross domestic product.
Mason estimated job creation at about 552,000 jobs annually for the first seven years and two million jobs annually after that.
I have to admit, as a former staffer for a Congressman, I’m always a bit cautious about believing any industry-backed reports. On the other hand, CBO is often very cautious when it comes to these kinds of analyses. In this case, though, caution about the IER report is not inappropriate:
The IER study comes as oil and gas proponents continue to press the Obama administration to make more federal lands and offshore areas available for drilling, despite Obama’s argument during the campaign that the majority of known reserves are already open to the industry.
It also comes as the industry prepares to defend its tax incentives on Capitol Hill as Democrats look to close deductions and other tax breaks claimed by oil companies.
Potential concerns about the IER report aside, expanding energy cultivation is an important part of bringing America into the 21st Century. Yet many people who think tax increases are a good policy alternative to spending cuts use oil company loopholes as a weapon of demagoguery instead of effective change to existing public policy. And while Tea Party Patriots supports cutting loopholes in order to lower rates and encourage a fairer, more efficient economy, this should happen across the board, not only to specific industries. It is also the position of Tea Party Patriots that elimination of loopholes should only happen if rates go down equivalently.
In the end, when it comes to deficit reduction, freer markets, and reducing regulatory barriers to economic growth – never mind the employment potential and national security implications – the possibilities for expanded energy cultivation are enormous. Whether you believe CBO or IER, or another organization entirely, everyone agrees that America needs greater freedom to explore our energy resources, and the sooner we do that the better.