Being energy competitive is in our national interest

To many skeptics, the decline in America’s oil and gas production more than a decade ago — and rising dependence on OPEC imports — demonstrated the energy industry’s shaky future.

Fast forward to today. Thanks to the development of shale deposits using hydraulic fracturing and horizontal drilling, the United States is now the world’s leading producer of oil and natural gas.

According to the Energy Information Administration, the number of drilling rigs is basically flat, but production continues to increase in shale formations such as the Permian Basin that underlies Texas and New Mexico, and this drilling productivity shows no signs of slowing.

Producers are able to get more production from existing wells than many had thought. Technological innovations are making the difference.

Soaring oil and gas production has led energy companies to hire thousands more workers. No sector of the nation’s economy has produced more new employment than the oil and gas industry.

And an abundance of oil and gas has led to a dramatic reduction in consumer energy costs.

But something else that is generally not discussed has bolstered oil and gas production: tax incentives.

Tax breaks such as the intangible drilling deduction and the special percentage depletion allowance have encouraged energy companies to invest billions of dollars in the advanced technologies that led to the shale revolution. The stark reality is that without tax incentives, the United States would not be able to compete with foreign rivals and would not be on a path to becoming energy independent.

Yet there are those voices of conventional prudence in the new administration and Congress who want to eliminate tax deductions for oil and gas companies.

We can’t spend more money on energy jobs, these voices say, because that would mean more debt.

Why would any well-intentioned person want to reduce investment in the future and put people out of work? Apparently some policy makers believe one of the best ways to strengthen the nation’s economy is to penalize oil and gas companies.

Never mind that lower energy costs over the past decade have translated into hundreds of billions of dollars in savings for American consumers, far exceeding any taxpayer savings that could be gained by repealing oil-and-gas tax deductions.

What’s particularly sorry about this pro-tax view is that it seems disconnected not only from the real needs of the nation’s economy, but from the views of most Americans.

Recent polling data shows strong bipartisan support for increased U.S. production of oil and natural gas. And voters oppose tax hikes that could decrease energy investment and development.

Legitimate concern about weaknesses in our economy should not obfuscate what remains the essential point: the United States has been and should continue to be a major energy producer. A fair tax system with incentives that encourage domestic investment in oil and gas production and enable U.S. companies to compete with overseas rivals is in our national interest.

Jim Constantopoulos is a geology professor at Eastern New Mexico University. Contact him at: [email protected]