A Formula for Failure

By Alan Caruba

Oil producing nations such as Saudi Arabia and the Gulf states, along with Venezuela, will grow rich while Americans will be faced with high costs for gasoline, motor and heating oil, and everything else that depends on oil such as asphalt or even Vaseline.

Meanwhile, oil producers in America, large and small, will take a financial beating. If you don’t like living in a modern, advanced and industrialized society, you will favor this. If you think Americans consume too much, drive too much, and deserve to be punished for it, you will favor this.

Recently, Barry Russell, the president of the Independent Petroleum Association of America, released a statement in which he said, “President Obama delivered a devastating blow to the American oil and natural gas industry by proposing an astonishing $30 billion tax increase (as part of his FY 2010 budget) on American energy producers, most of whom are small businesses.”

“Ninety percent of the oil and natural gas wells developed in the United States are done by small, independent businesses—not so called ‘Big Oil’—so tax increases hurt these companies most.” It also, of course, hurts any prospect for the discovery and production of new sources of oil and natural gas in America.

In a world where more oil and natural gas is required by developing nations such as India and China, the Obama administration proposes:

(1) A repeal of expensing of intangible drilling costs; a repeal of percentage depletion that allows for the depreciation of existing small, barely economic wells;

(2) A repeal of marginal well tax credit, a safety net for wells that produce small amounts of oil and gas that, collectively, supply almost 20% of the nation’s oil and 12% of its gas;

(3) A repeal of the enhanced oil recovery credit that allows industry to get more energy from wells that are depleted instead of drilling new wells;

(4) Increases the costs of geological and geophysical amortization costs involving the high cost of doing seismic and other high-tech surveys;

(5) An excise tax on Gulf of Mexico production;

(6) And a repeal of the manufacturing tax deduction, a provision given to every other American manufacturer and which allows independent oil and natural gas producers to put more money into new energy projects.

It is a plan to destroy the American oil and natural gas industry, and with it the nation’s economy.

Right now, however, the Obama administration has installed an “energy team” that is completely opposed to the development of any energy resources in America, from offshore and ANWR oil to coal mining or the construction of coal-fired plants to generate electricity. Coal currently produces 50% of the nation’s electricity.

Steven Chu, the Secretary of Energy, is on record saying, “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.” It is $8 a gallon there.

Ken Salazar, the Secretary of the Interior, the agency that administers energy leasing on federal lands and most offshore areas, has a long record of opposition to such leasing of oil, natural gas, and coal exploration and extraction. He has already nullified recently awarded leases for natural gas drilling in federal land in Utah. Salazar is responsible for legislation blocking the development of shale oil.

Obama’s science advisor, John Holdren, out-does Al Gore with predictions of global warming calamities. Back in the 1970s he was worrying whether mankind would survive the “threat of making the planet too cold.”

Meanwhile, Wall Street is watching investment drop like a stone as Timothy Geithner, the Secretary of the Treasury, testifies that U.S. oil and natural gas producing companies should not receive federal subsidies in the form of tax breaks because their businesses contribute to global warming!

This attack on energy companies and access to energy resources in America is a formula for failure.