Obama's Double-Talk on Energy Taxes, Jobs

| by John Rafuse

Addressing the Business Roundtable in Washington, DC earlier this week, President Obama reaffirmed his administration’s plans to tackle an array of domestic issues ranging from the economy and education, to infrastructure and financial reform. His comments are talking points we’ve heard before. Yet, his well-worn remarks belie a new threat. While the White House has clearly mastered its “jobs” rhetoric, it has yet to realize the inherent irony concerning its newly-proposed energy taxes.

The president stated: “I … want to make sure we don’t give relief to companies that move jobs outside of the US.” If he’s is truly serious about this statement, though, why is his administration looking to levy up to $80 billion on top of the already staggering $140 billion America’s domestic energy producers already pay in royalties and income tax? Simple economics dictates that, if taxes are raised in one city, state or country, than producers are well-inclined to move to another.

The White House’s call for an extensive array of new taxes on US oil and natural gas companies came in the form of its FY2011 budget proposal. Hiking taxes on energy companies’ work overseas, adding new manufacturing costs, or amending accounting methods, you name it, our energy producers here in America are facing many difficult tax challenges this year. With that in mind, it’s puzzling why our government would single out one particular industry with these new tax burdens, especially since America’s oil and natural gas industry is one of the few remaining stable industries providing jobs and generating significant revenue for our economy.

What’s even worse? As our economy continues to struggle toward recovery, these new energy taxes will dry up many possible job opportunities and revenue streams citizens and states are counting on to get back on their feet.

Nowadays, not a day goes by without reports of America’s disheartening unemployment rate. With jobless numbers still hovering close to 10 percent, the Obama administration should be promoting job creation across all industries. Sadly, it’s instead targeting a specific industry that supports over 9.2 million jobs nationwide with new tax burdens. These oil and natural gas jobs – coupled with industry-affiliated employment – pay well and they are jobs that should not be driven away by our own government.

Furthermore, broader economic activity will be negatively affected if our domestic energy industry is forced to pay higher taxes. To pay for these taxes, companies will have to cut down on investing in new projects. With the shale gas production boom, it is essential that America’s energy producers have the resources to explore for and exploit these new projects, especially in the Marcellus and Haynesville formations. When new projects emerge at these world-class energy sites, shops, restaurants, and hotels, among other commercial enterprises, pop up and generate significant local economic growth. As we continue to struggle out of our recession, this type of organic growth is what is truly needed.

The president concluded his Business Roundtable address, saying, “I support all business, and I will go to bat for you every time.” Well, the time is now to support America’s domestic energy producers, too, and every other industry trying hard to get people back to work. From shale gas exploration in Pennsylvania, to more oil production in the Rocky Mountains, increased energy production will provide the jobs and the economic growth that we so desperately need right now. On the other hand, increasing taxes on oil and natural gas companies here in the US will simply grind many of the gears of our economic recovery to a halt.

If the president doesn’t want US companies shipping jobs overseas, there’s a very simple way to ensure that they stay here in America – don’t raise taxes.  And if the government is serious about a stronger economy and a cleaner and more secure energy future, then it would be wise not to implement new energy taxes that stand to kill jobs and stifle investment.


Jack Rafuse, a former energy adviser to the Nixon administration, currently acts as head of Rafuse Consulting and as an independent consultant on energy and trade issues.