By Brook A. Simmons
The elites’ attack on the U.S. crude oil and natural gas industry continues, this time in the form of the absurdly named Inflation Reduction Act.
With President Biden’s signature, the soon-to-be law Democrat leaders tout as a life preserver for working families will have the opposite effect plus further destabilize our electric grid. It is “Green New Deal Lite.”
Because Oklahoma’s economy and its budget depend on the oil and gas industry, the bill is an attack on our state and others providing the nation’s energy.
A major line of attack is a new 15% alternative minimum tax on applicable corporations, including large independent producers meeting an annual adjusted financial statement income test. If they trip the trigger, they are prohibited from deducting ordinary and necessary business expenses. With this move, Democrats take from oil and natural gas producers something other legal businesses have. The Joint Committee on Taxation estimates the tax will transfer more than $222 billion over 10 years from the private sector to government.
The result? Fewer dollars to drill wells, pay for well services, and hire workers. Less oil and natural gas production means higher energy prices and continued supply-demand imbalance. Companies will further have to high-grade capital investments, meaning Oklahoma will remain disadvantaged versus competing states. This eventually will hit Oklahoma’s budget because the industry is the state’s largest taxpayer and largest private-sector employer.
Wind and solar industries don’t pay taxes on electric generation to the state; they redistribute state and federal tax subsidies to localities through ad valorem taxes and landowner payments. This bill gives intermittent power generators another 10 years of federal subsidies to not be there when you really need them to be there. Remember Winter Storm Uri’s wind drought?
Various climate modelers estimate the bill spends $370 billion to reduce U.S. greenhouse emissions somewhere between 31 to 44 percent by 2030 compared to 2005 levels – a 7% to 17% improvement over what would happen without the bill – with an actual global temperature impact of between 0.0009 and 0.028 degrees Fahrenheit by 2100, according to The Wall Street Journal. Essentially, nothing.
Meanwhile, European leaders faithful to climate orthodoxy are firing up coal plants and reconsidering bans on hydraulic fracturing for natural gas so their citizens don’t freeze to death this winter and in winters to come. Benchmark Dutch front-month gas now costs more than $197 (US) per megawatt hour and Paris gasoline prices average $6.94 (US) per gallon.
We shouldn’t have to repeat Europe’s mistakes. If climate change is your biggest worry (and it shouldn’t be), sleep well knowing we already lead the world in greenhouse gas emissions reductions thanks to the switch to clean-burning natural gas for power generation.
The bill raises federal mineral leasing rates, places a new natural gas tax on the oil and natural gas industry based upon an EPA standard the EPA does not yet have, and subsidizes electric vehicles, nuclear, carbon capture utilization and storage, hydrogen, and biofuels. It also sends your tax dollars to support green banks.
This is definitely not “inflation reduction.” The result will be increased prices for home heating and cooling, fuel, groceries and every consumer good you can imagine while simultaneously increasing electric grid instability.
But, chin up! I am sure the extremists running the White House and Congress will be back soon with another good idea for how to spend your hard-earned dollars.
— Brook A. Simmons is president of The Petroleum Alliance of Oklahoma.