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You Can Keep Cutting Taxes, If You Want to Pay the Price

October 31, 2015 by Llewellyn King Leave a Comment

By Llewellyn King

Those Republican presidential candidates who had been governors, vied with each other in their latest debate to claim who had cut taxes the most.

When I hear tax-cutting expounded as an unassailable conservative virtue, my mind goes back to a lunch in Houston in the 1970s, when two of conservatism’s rising stars and I were speakers at a meeting of the American Petroleum Institute.

The stars were Trent Lott, then a member of the House from Mississippi, and George Will, the hottest columnist burning up the op-ed pages across the country.

The three of us were urged to lunch together while the organizers got organized. I had recently launched The Energy Daily, a publication in Washington, D.C.

The conversation turned to taxes. We all agreed that we while we hated paying taxes, the United States was an under-taxed country. Let me repeat: Trent Lott, George Will and I agreed that the United States was under-taxed country.

So, I ask, how did we get to where we are today, when Republican presidential hopefuls are firmly committed to tax-cutting; when every state or local Republican governing body would rather see chaos reign — as has happened with our cities — than whisper that we should raise money to fix the problem?

The standard-bearer for taxophobia is neither an elected official nor a presidential hopeful. He is Grover Norquist, founder and president of Americans for Tax Reform, a political organization as powerful as the National Rifle Association, and as distorting of the national agenda.

Norquist has introduced a rigidity that makes discussion of tax policy almost impossible on the right. Tax has become not a matter of need and policy, but a litmus test of conservative purity.

The genesis of taxes as an evil goes back to a group of young conservatives — which included Norquist — with a consuming conviction that government is too big, and that the only way to cut it down to size (what size?) was, in their phrase, to “starve the beast.”

The problem is that Americans keep asking more of their government, and consequently it grows. We want more diseases to be researched by the National Institutes of Health, and more energy solutions to be developed by the Department of Energy. We want the food chain to be secured and nuclear waste disposed of. We want better roads, bridges, airports and air traffic control. When something untoward happens, like bee colony collapse or the disappearance of a strain of bananas, we want the Department of Agriculture to find a fix.

All those without a mention of providing social services, extending entitlements, and beefing up the military — all favored by the public.

The trouble gets worse when tax-cutting becomes an ethic, because even good taxes are an anathema to politicians, who are wont to start their political lives by signing Norquist’s “no new taxes” pledge.

Take the mess the highway trust fund is in. It is funded in fits and starts by a conflicted Congress, trapped between what it knows to be need and the desire to limit spending. Infrastructure needs to be funded in multi-year programs. Before the recent budget deal, it was funded for just three months. Can anyone build a bridge in three months?

The danger of blind tax hatred can be seen with the gas tax. It is generally agreed that using less gasoline would be a net good: fewer oil imports, fewer greenhouse gases, and more livable cities. Today’s price is low, even by historical standards.

An opportunity that may never come again exists to fix much of the nation’s crumbling infrastructure by increasing the federal gas tax from its present 18.4 cents per gallon, where it has languished since 1993. There is enormous elasticity in the amount of gas an individual or a family uses. You can buy a smaller car or a hybrid, or travel less. The price of gas is not like the price of shelter.

Many of the ills that contribute to the sense that the nation has lost its way would go away with better roads and general infrastructure improvement. You do not feel good waiting to cross a bridge or idling for hours on Interstate 95.

Sitting in a traffic jam for two hours in the morning and two hours at night may not qualify as a tax, but it is taxing. — For InsideSources.com


Filed Under: King's Commentaries Tagged With: 2016 presidential election, American Petroleum Institute, Americans for Tax Reform, George Will, Grover Norquist, highway trust fund, National Rifle Association, Republican Party, tax cuts, taxes, Trent Lott, U.S. Congress

Energy in the Time of Elections: Claims and Counterclaims

May 22, 2012 by White House Chronicle Leave a Comment

 

Where there's oil and gas, there's milk and honey.

That is the thrust of the American Petroleum Institute's  report to the platform committees of the Republican and  Democratic parties. It was previewed in Washington on May 15 by API President and CEO Jack Gerard, the oil  industry's man on Earth, known for his tough attitudes to just about everything, but the Obama administration in particular.

In unveiling the report at the National Press Club,  Gerard declared that the recommendations were without political slant and were delivered to both parties’ platform committees without favor; although it is  generally known that the oil and gas industry — and Big Oil in particular — cares not a jot for the Democrats. In a slip, while reading a prepared statement, Gerard referred to the “Democrat Party,” which is a term used by conservative commentators and members of the Republican Party who cannot stand the thought of  Democrats having a monopoly on the word democratic.

As expected, and in line with other recent utterances, Gerard called for accelerated leasing on federal lands, demanded more sensitive regulation, and declared his belief that the United States is potentially the greatest energy producer on Earth.

The White House shot back at API almost immediately, claiming it is the oil the industry that is lagging not the government.

Not to be outshot, Gerard said, “Once again, the  administration is trotting out claims about idle leases to divert attention from the fact it has been restricting oil and natural gas development, leasing less often, shortening lease terms, and going slow on permit approvals—actions which have undermined public support for the administration on energy. It is also increasing or threatening to increase industry’s development costs through higher taxes, higher royalty rates, and higher minimum lease bids.”

Even if the administration is right this time, it has a hard sell ahead.

In the case of natural gas, there has been a giant windfall from shale seams; but that has been coming for some time, and the administration can take no particular credit. Similarly, oil imports are down from 57 percent to 45 percent, reflecting increased domestic production, something that helps more with the balance of  payments than the price at the pump.

Gerard admitted that while natural gas prices are at historic lows because of new recovery and drilling technology, oil is priced internationally and that is no help to American consumers. API and its chief tend to conflate oil and gas to make a point. Likewise, they like to include Canada in “North American” energy.

But the energy claims of the administration are even harder to follow and more dubious. It likes to confuse fossil fuels – coal, gas and oil — with electricity and, in particular, with alternative energy, like wind, solar and, in a manner of speaking, nuclear.

Most energy gurus see the dawning of a switch from oil to electricity for personal transportation, for buses and some trucks. But that dawn is breaking slowly with consumer indifference, battery life questions and other problems, including the availability of rare earths for motors and wind turbines.

Experience suggests that energy is a lousy political issue. It is complicated; each side has its own facts and there is some truth to both sides’ facts.

At the end of the day, the energy debate is reduced not to the amount of drilling taking place on federal lands, or to the virtues of natural gas over nuclear, but to the price of gasoline at election time. If that is lower than it is today, President Obama garners votes. If it is up, no matter why, all the GOP and Mitt Romney have to say is that it is Obama's fault.

The money vote is known already: With a very few exceptions the energy money is on the GOP. But that is not new. What is new is that environment is not on the agenda. Better wait until 2016.

Filed Under: King's Commentaries Tagged With: American Petroleum Institute, Democratic National Committee, Democratic Party, energy, environment, gas, Jack Gerard, Mitt romney, natural gas, Obama administration, oil, President Obama, Republican National Committee, Republican Party

The Politicos Know for Sure Where the Oil Is

March 5, 2012 by White House Chronicle Leave a Comment

 

Lemuel Gulliver is back! You remember him – he’s the hero of “Gulliver’s Travels,” a satire written by Jonathan Swift, first published in 1726.

Many adventures befall Gulliver, but the one most remembered is that he's captured and pinned down with innumerable strings by the tiny Lilliputians. By their standards, he was a giant, but they tied him down so well that he was helpless.

That, according to those seeking the Republican presidential  nomination, is the state of the U.S. energy industry – by energy, they mean oil and gas.

According to Newt Gingrich, who's echoed by frontrunner Mitt Romney and his two rivals, the oil and gas industries have been cruelly tied down by government, which imposes onerous environmental regulations and restricts drilling in the most hopeful parts of our ocean shelves and on federal lands.

If these lands and ocean sites were just opened to drilling, the Republican hopefuls argue, the United States would become the world’s greatest energy producer, as it was in the 1940s and 1950s. Drill, baby, drill and a gigantic cornucopia of energy awaits; energy for the United States and the world.

Jack Gerard, president and CEO of the American Petroleum Institute, the take-no-prisoners trade association that represents nearly 500 oil and gas companies, is a vocal advocate of more drilling in more places. He's a Gulliver theorist.

From Republicans and the oil industry, this is a new optimism born of an old idea. The old idea is that if you drill enough holes in enough places, oil will be abundant.

That optimism has existed more in the fringe world of wildcatting than it did in the big oil companies, which knew that there were limited reserves of recoverable oil and gas in the United States. They also knew that once a reserve is in production, you can calculate the point at which it will decline; as has happened with the North Slope of Alaska, where less than half the 2 million barrels a day produced at its peak is flowing today.

Then came the new technologies, largely developed by the despised government. Now in full deployment, these technologies have incontrovertibly changed expectations for natural gas but their impact on oil is debatable.

The first of these  is  3-D seismic mapping. Advanced physics enables the companies to determine very accurately how much hydrocarbon a particular formation underground might contain. Gone are the days when the hard-drinking wildcatter followed his gut and mysterious patterns in the tumbleweed.

Next, is the hole itself. At one time, a well was a well – drilled straight down, looking for a pool of oil, a cavern of gas or both. Fracturing – the process in which water, chemicals and other substances are injected down the hole to break up rock in proximity to the hole – has been used to release more of the good stuff. With time fracturing, also called “fracking,” has become more sophisticated.

What has made the euphoria of the politicians and oil lobbyists possible is the miracle of horizontal drilling, which allows as many as eight holes to be spread out for miles from a single shaft. This and better fracking has changed the prospects for gas out of all hope, and has somewhat improved oil expectations.

Much of the enthusiasm for new drilling has come from the success of the new technologies in North Dakota, which has overnight become the the fourth-largest oil-producing state in the Union. But beware. This isn’t Texas circa 1945.

Oil from North Dakota's Bakken Field isn’t cheap. Its “lifting cost” is among the most expensive there is: It costs about $50 a barrel to bring North Dakota oil to the surface, compared with about $15 in Russia and Saudi Arabia. Is it oil or incense?

API’s Gerard told reporters in a telephone conversation, designed to preempt President Obama’s “all of the above” energy recommendations, that technology in its inevitable advance would keep the oil flowing for many generations.

Only the government, in Gerard’s view, stands between the American people and abundant oil.

However, fields that have peaked – like the North Slope and much of Texas, Louisiana and the North Sea –  have seen declining production and no technology has been enough to revive them. All the oil has been removed. Gone, baby, gone.

More drilling has already improved domestic oil production. But will unfettered drilling really make a new Saudi Arabia of the. United States? Can the resource base stand the exploitation? Can Gulliver actually stand up?

The next generation of technology won’t put more oil in the ground. – For the Hearst-New York Times Syndicate

Filed Under: King's Commentaries Tagged With: 3-D seismic mapping, American Petroleum Institute, Bakken Field, fracking, Jack Gerard, Louisiana, North Dakota, North Sea, North Slope, oil drilling, President Obama, Saudi Arabia, Texas

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