Regulatory onslaught could choke crude oil, natural gas production
Policymaking elites betting on OPEC+ over American workers
Oklahoma’s future is being plotted behind closed doors as Washington, D.C., Democrats seek to curb U.S. oil and natural gas production and surrender even more of that responsibility to OPEC+, the cartel of petroleum exporting companies that includes OPEC members plus other oil-producing countries like Russia, Azerbaijan, Oman and others.
“We are going to get rid of fossil fuels,” candidate Joe Biden said in 2020. Now, the coastal elites in control of what my parents considered the working man’s party are frantically trying to offshore flyoverstate jobs and U.S. energy security.
Congressional Democrats are assembling a $3.5 trillion budget reconciliation bill they hope to pass without a single Republican vote. Under the rules, it cannot be filibustered in the U.S. Senate regardless of how bad its policies are.
Among provisions on the table is a tax on methane to be paid by upstream, midstream and storage facilities across the nation. The most recent version of the tax, which is called a “fee” to skirt the rules, would be based upon a company’s reported methane emissions by basin of operations.
Oil and natural gas companies across the midcontinent are working hard and investing much to reduce emissions by replacing old equipment with new, adding cutting-edge leak detection monitors and automated controls, and by using proven emissions reduction techniques and equipment because it makes good business sense. Their mission is to prevent leaks, find them fast when they occur and fix them quickly.
The Democrats’ ever-escalating tax is designed not to limit methane emissions (as other methaneemitting industries are not targeted), but to drive oil and gas companies of every size out of business.
Next up is a plan to prohibit the oil and gas industry from deducting ordinary and necessary business expenses (aka intangible drilling costs) like labor, fuel, services and supplies. This would be a new 25% tax hike on Oklahoma oil and gas companies. Instead of those dollars being available to put men and women in Grady County to work, they would disappear inside the Washington, D.C., beltway.
Also in the crosshairs is the elimination of percentage depletion, which is an alternative to cost depletion for tax purposes and is like depreciation for a non-mineral asset. Used only by the smallest, family-owned oil and gas businesses and royalty owners, it allows them to retain a portion of their earnings, reinvest those dollars in production and plan for a well’s end-of-life.
If eliminated, Oklahoma would be second only to Texas in harm done over the next 15 years with 5,170 jobs shed each year, $29 million in state revenue lost each year, $71 million in foregone Oklahoma royalty payments each year, and the loss of 37,305 barrels of oil per day.
These combined with the Biden administration’s regulatory onslaught are designed to choke off U.S. crude oil and natural gas production and create artificial domestic energy scarcity to advantage intermittent power generation sources like wind and solar to electrify U.S. ground transportation.
The corresponding rise in pump prices and in home heating will enable political thundering, but the losers in this reconciliation bill’s reordering of society will be lower-income households and working families in both rural and urban areas who pay a greater proportion of their wages in energy costs.
How foolish it is for us to be governed by one prohydrocarbon political party and one anti-hydrocarbon political party. The coastal elites now crafting U.S. budget, tax and social policy are making a terrible error in betting on OPEC+ instead of the hardworking Americans in petroleum-producing states.