Bad Tax Policy Could Jeopardize America’s Energy Future

Last month, we discussed the importance of smart tax policy in securing the full potential of America’s energy future. Policymakers in Washington continue to debate the tax issue, so it is important to understand how proposed tax increases on the natural gas and oil industry will harm communities across the nation.

Energy plays a vital role in our everyday lives, touching upon nearly every good we purchase and service we rely upon. As a result, increasing taxes on American energy providers could harm consumers through higher prices not just at the gas pump and utility meter, but also for every essential good delivered by trucks or made by utilizing plastics or petrochemicals as building blocks. With many families and small businesses just now getting back on their feet following the pandemic’s economic impact, such misguided energy policies could stall the recovery.

According to a recent economic impact study commissioned by the American Petroleum Institute, the natural gas and oil industry supports 11.3 million jobs across the country. The negative impacts of raising taxes on American energy will be felt nationwide, especially in the many states and hundreds of communities in which the industry serves as a vital economic resource.

Through wages paid to employees, tax revenues generated for government, massive capital investments made to build America’s industrial base and support of other industries through purchases of supplies and services, the energy industry contributes substantially to local, state and federal budgets. The unfortunate ripple effect of increased energy taxation would inevitably cause decreased energy production here at home, resulting in loss of jobs as well as government revenue that supports such essential services as schools, hospitals, roads and first responders.

Here are a few examples of benefits produced by the natural gas and oil industry:

• Alaska: The industry supported over 47,000 Alaska jobs, provided over $4.5 billion in wages and contributed more than $19.4 billion to the state’s economy in 2019.
• New Mexico: The industry supported over 115,000 New Mexico jobs, provided over $6.8 billion in wages and contributed more than $18.8 billion to the state’s economy in 2019. In 2020, the industry contributed nearly $3 billion to the state’s general fund and accounted for more than one-third of total state revenues¹.
• North Dakota: The industry supported over 87,000 North Dakota jobs, provided over $6.6 billion in wages and contributed more than $13.4 billion to the state’s economy in 2019.
• Oklahoma: The industry supported over 390,000 Oklahoma jobs, provided over $32.7 billion in wages and contributed more than $57.6 billion to the state’s economy in 2019.
• Pennsylvania: The industry supported over 480,000 Pennsylvania jobs and provided $40.4 billion in wages to American workers in 2019.
• Texas: The industry supported over 2.5 million Texas jobs, provided more than $251.1 billion in wages and contributed more than $411.5 billion to the state’s economy in 2019. The oil and gas industry paid $13.9 billion in state and local taxes and royalties in fiscal year 2020².

Well-crafted tax policy should focus on unlocking the potential of those American industries that are critical to our daily lives and necessary to our economic recovery. Sensible tax policies will also help ensure continued U.S. energy independence. As a nation, we should continue relying on our own natural resource endowment and domestic industrial capability, rather than allowing punitive tax policy to force us back to dependence upon unreliable and even hostile foreign producers to meet our energy needs.

¹NMOGA: The Impact of Oil And Natural Gas on New Mexico’s State Budget

²TXOGA: The Texas Oil & Natural Gas Industry By The Numbers