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API Blasts Ideas For New Taxes Amid Oil Spill, Weak Economy

July 15, 2010 by  

API blasts ideas for new taxes amid oil spill, weak economyThe United States Congress prepares to consider a major energy bill later this summer, and some lawmakers have suggested paying for new programs through higher taxes on oil and natural gas companies. However, the American Petroleum Institute (API) has criticized the idea, saying it would further imperil an already weak economic recovery.

Proponents of new taxes on these industries have been partially prompted by the ongoing oil spill in the Gulf of Mexico, but API says the traditional energy sector supports 9.2 million jobs and adds 7.5 percent to the nation’s gross domestic product (GDP). As a result, the organization believes new taxes could have a devastating impact on jobs, economic recovery and America’s energy security.

To further spread its message the trade association is running an ad campaign in several states, including Colorado, Michigan, North Carolina, North Dakota, Pennsylvania and Virginia that began on July 6.

“The ads are part of the national debate on energy and tax policy. We hope they will help ensure decisions affecting our economic and energy security are not made in a vacuum or based on incomplete information,” said Jack Gerard, president and CEO of the API.

He added that “Americans have historically been suspicious of taxes on the industry that produces most of the energy they consume.”ADNFCR-1961-ID-19888260-ADNFCR

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  • Kinetic1

    Well, here’s a news flash. Imagine, the same Oil and Gas industry that by some estimates receives an effective U.S. subsidy of $15 to $35 Billion annually does not want to face higher taxes. They say their industry is vitally important to the economy and that increasing their taxes would cripple us. Yes, it’s true we need the energy industry, but at what cost? Just what are the positive effects of those subsidies? We know it increases their profits, and we assume it helps cut the cost of finding oil, but according to Citizens for Tax Justice,
    “among the largest five oil companies, less than 10 percent of profit goes to exploration for new oil fields”

    Well, If the money saved through subsidies and tax breaks to offset the cost of research and exploration for OUR OIL are not going to the same, where does it go? Again, based on information from the CYJ
    “… in the top five oil companies, managers direct most of their excess cash to dividends and stock repurchases, both of which drive up the companies’ share prices and the executives’ stock option values. The percentage of net profits directed towards dividends and stock repurchases for the top five oil companies was 58 percent in 2005, 73 percent in 2006, and 72 percent in 2007, 71 percent in 2008 and 89 percent in 2009. These figures are high in comparison to other industries. To the extent that tax loopholes targeting the oil and gas industry boost their profits, there is no evidence that the additional profits lead the companies to explore for more oil so that they can increase the supply.”

    So how can the industry defend itself? They talk about research for “alternative fuels”, but “reviews of oil company press releases, SEC filings and published articles suggest that alternative energy investments approximate less than of 5 percent of profits for the top five firms”.

    From the conservative talking heads to the Oil industry spokes persons we have all heard about the very, VERY low profits of only 9% on the sale of their products. That sounds like a good excuse, until you consider that grocery stores have an average profit of about 1%. It’s an even weaker defense when you understand that the real story is return on investment, and here the oil industry makes out BIG. In fact, over the last two years, the top five oil companies had an average annual return on equity of 21%! An investment placed in the big 5 20 years ago would have returned 80% more than the same investment in the S&P500! Great for those who can afford to invest, but their windfall is effectively paid for by our tax dollars!

    So what is congress considering that would do so much damage? How about holding the Oil industry to the same standards as other businesses? The Energy Policy Act of 2005 allowed more oil companies than ever to deduct a flat percentage of gross revenues rather than writing off their oil fields over their useful life (i.e., when they no longer produce enough oil.) This bill also allowed amortizing the cost of searching for oil to just 2 years instead of the suggested 7. Allowing the oil industry these special considerations can, in some cases create a tax break that is larger than their tax burden! Look ma! No taxes! Ending these and other special breaks for the Gas and Oil Industry would increase tax revenues by over $36 Billion over 10 years.

    The lobbying arm of the Oil and Gas Industry has done a wonderful job for them. Our politicians have also done a lot of great work for the Oil and Gas Industry. And if one considers a corporation as equal to an individual; if you believe that they, by providing us with jobs and products deserve the same rights and privileges as any citizen, then you may feel that much good has been done for all of us. What I see is a select group that has been granted rights and privileges well beyond anything that any single person can expect, plus immunity from laws that the average citizen would pay dearly for. And we pay them. Our infrastructure, the same infrastructure that corporations depend on to do business is crumbling beneath us, and we subsidize them. Our laws allow ALL corporations to operate at a level beyond what you and I can hope for. And we support them. Is it too much to ask that the Oil and Gas Industry at least play by the same rules as the other corporations?

    You know, Jack Gerard is right. I am “suspicious of taxes on the industry”. Perhaps just not in the way he was thinking.

    • WarriorH

      Maybe they’ll be elegible for an amnesty program? We need a massive 2-4 thousand page energy bill to re-regulate everything that uses or doesn’t use energy and make please make sure there are some affirmative action provisions in it as well.

      • http://?? Joe H.

        WarriorH,
        The ambulance chasing lawyers are already crawling out of the walls!! I got two e-mails today that said ” get your share of the 20 billion oil settlement. call today!!” they are like blood sucking leeches and the biggest blood suckers are in D.C.!!!

    • John

      We are currently giving to Chrysler, GM, the hospitals, the so called poor, and many dollars to the very people who want to tax us more. Don’t think for one minute that corporations pay taxes. For your information they don’t they just include those taxes in their pricing to us the consumers. When it is cheaper to buy foreign fuel even from our enemies, that is what the public will do. Example, manufacturing by China and other foreign countries. I am sure there are those who like politicians want to so call pay for that regulation by taxes but that is the biggest BS and they know it as all that does is transfer money from my pocket to the government who will give it away at their discretion.

      The biggest current lie is that the drilling industry needs further regulation to MAKE IT SAFE. There is no doubt in my mind that the liability for this spill will be the driving force for safe drilling. Currently BP is spending it’s wealth on the damage it caused and could wind up losing the company. Isn’t that risk alone worth more than any regulation the government could dream up in regulations?

      • Dan Burke

        Amen to that. But those who believe in government largesse and government regulation would be hard pressed to see how businesses would actually self-regulate to reduce their risks…. Sort of like the financial melt-down. Do we really need a new law, or should we have let them fail in the first place and then the survivors would have self-regulated to stay “out of the muck.” It would have been in the self-interest of those who survived to figure out what their competitors did wrong and avoid the same mistakes. Unfortunately, we have taught our youth to focus on the here and now, our immediate rewards instead of the future, and then we wonder why our businesses are run to make immediate profits without consideration to long term viability.

      • Kinetic1

        If the risk were enough of a deterrent, then they would not have knowingly used defective parts. Did you read that, under new testing requirements imposed after the April 20 explosion, 45% of the new blow out protectors failed? Apparently is was worth that risk to save $500,000. Apparently is was cheeper to buy off the inspectors than to build a safe rig. There are 10s of thousands of oil rigs in operation and 10s of thousands more permanently or temporarily capped off. The MMS has no idea if those capped wells are safe or not. If just 1%, no just one tenth of 1% of these wells fail it will make the current disaster look like nothing.

        This is a wake up call. Yes, we need oil, but at what cost? Do we allow the Oil industry to do as they wish like a bully running a school yard protection racket? I’m sure many of you are happy to reap the rewards of high profit oil portfolios, and even more who are afraid of what they will do to us if we clamp down on safety standards, but we can’t just turn a blind eye and say “they’ve learned their lesson.” As the industry is quick to point out, this has never happened before. So who’s to say they won’t consider it worth the risk again?

    • bob

      You nitwit. Tell all of us unenlightened schlubs: how did you get to work this morning? How did your kids get to school? How do you and your wife get to the supermarket, and how did the stuff at the supermarket get there? How much of the long-wearing polyester yarns do you want to do without in your permanent press shirts?
      Like it or not, the whole dang world operates on fossil fuels and relies the petro-chemical community for countless solutions for life; and to make the change to something else cannot be crisis- or “morality” -induced without crushing the entire world economy – much less theat of the USA.

      • http://?? Joe H.

        kenetic,
        Have you picked up a bottle of water at the store lately? Are you an insulin diabetic? Been to the hospital and been given an IV? A shot? Got any storm doors with that unbreakable plexiglass in it? ride a bike with cables on it? Fake leather on the seat? Between my post and the one above we haven’t even scratched the surface on oil usage. If we were to reduce our oil consumtion by 50%, tomorrow, a lot of people would die and not all in this country!!!

      • Deborah

        We use the tools we are given. Hemp ropes were the best ever! They stood in the profit of a politician..so, no hemp ropes.
        Wind power, nope…we bailed out banks, Automotive how many times?
        Solar Power? oh no, it costs to much…and no profit for the government.
        So, until we Stand together… it won’t change!

    • Dan Burke

      So if I get this right, both of us would agree that government should get out of the oil business.

      I say they should stop the excessive regulations, let them drill closer to land, on the land, open up new refineries on OUR soil without all the excessive fees for “environmental” protection. In short, stop treating them as evil. Let the business succeed or fail on its own. Let them learn to clean up oil production on their own. Hold them accountable to the law, but stop meddling.

      You say that government is propping them up and declare that government should get out of the business of being the lapdog of big oil. I actually agree with that too. See, despite my views above, I too agree that government is far too bound to big oil and their lobbyists and political capital ($$$). Unfortunately, I suspect that this is where you and I diverge. I suspect that many like you would like the lobbyists and $$$ of big oil out of government where both assist each other, but on the other hand you are all for government oversight and restrictions on big oil. See, that is where I disagree. For I believe that government intervention is what drives big oil to partner with government. They must lobby politicians to protect themselves from intrusions. When government passes laws to hurt their bottom line, they must lobby for special funding (tax breaks) to protect themselves. Thus the bond between government and big oil is bonded and strengthened. For as government threatens big oil, big oil must spend more on big government to keep big government at bay and their profits up. So politicians win because this gives them various gifts and capital ($$$) to use to maintain their power base. Big oil wins because government gives them exemptions, tax breaks, etc that protects their bottom line and thus both parties benefit from this twisted relationship. That is why I am all for limited government. Get government out of big oil and big oil will having nothing to gain by thrusting favors upon big government. A limited government has nothing to offer big oil. Only a big government has the power to grant or deny favors in return…. Under a limited government and legislature devoted to small government, instead of debating regulations on big oil, perhaps they would debate the practicality of the laws. In other words, what legal protections would we have and what legal protections would “big oil” have under the law. For example, if I go out and start a willful fire to destroy the property of big oil, I should probably be responsible for both the destruction of their property but also for any resulting damages due to potential oil leaks because of my actions while big oil might be responsible for failure to have standard protections against accidental fires that might have reduced the damages my willful and malicious caused….

      • Kinetic1

        Dan,
        If you want to go down the list of government regulations pertaining to the Oil industry, I’m with you. I’m sure there are many we could agree don’t belong. But the idea of allowing industry to regulate themselves, I can’t support that. Bush played that game in Texas, and Texas had some of the worst environmental standards in the country. BP was warned that their blow out preventer might be faulty, but they moved forward. Halliburton has a nasty record of failed cement jobs on rigs like this, but they were hired to do the job anyway. Do you see a pattern here?

        Yes, I’m sure there are needless and wasteful regulations, but that does not mean that no new regulations are needed. Coast Guard Capt. Hung Nguyen asked a regional supervisor of the federal regulatory agency a question about blowout preventers:

        “It’s my understanding that it’s designed to industry standard and it’s manufactured by the industry, installed by the industry, with no government witnessing or oversight of the construction or installation. Is that correct?”
        “That is correct,” replied Michael Saucier, the MMS field supervisor for the Gulf.

        Left to their own devises, it appears they use the cheapest devises they can! Sounds like profit over safety. Will the industry correct this error? Maybe. Are they paying for their error? To a degree, but we are paying far more in damage to our workers, our economy and our eco system. BP may be responsible for cleaning up their mess, but they can’t undo the damage that has been done to peoples lives. They can’t undo the stress they have put on people in the gulf coast. They can’t replace the hours these people spend worrying about their future. They can’t bring back the workers or the wild life that has died to save BP a few dollars. And from the way their lawyers and the insurance industry are acting, it looks like they have no intention of paying as much as they should.

        A drunk drive recently hit and killed a little girl in our neighborhood. He will spend no less than the next 24 years in prison for his actions. If he ever has the chance, will he drive drunk again? Probably not, but it would have been better if we had stopped him one of the other 7 times he was caught. Will BP, Trans Ocean or Halliburton ever again take risks like they did on the Deep Water Horizon rig? Looking at their record, I’d rather the government not give them a chance.

  • Peter Ramsey

    The world runs on oil not windmills, Don Quixote!
    The oil companies are not our enemies or cash cows as the Democrats seem to believe.
    We need to cut spending and elect people to Congress who want to cut taxes, stimulate the economy and cut down the debt.
    The USA national debt is now almost $14 trillion.
    By the way, the word “profit” is not a dirty word!

  • s c

    NOW is the time time for a Haavid-educated LOSER to grow a spine and do what JFK did [LOWER TAXES]. Tragically, predictably, that certain White House LOSER will never have any credibility.
    He won’t do the right thing. He will dance for his puppet masters. He won’t use the same common sense that JFK used to bolster America’s economy.
    He’s content to do what he’s told. How many years has it been since he had an original, independent thought between those huge ears? Only his puppet masters know that (and they’re not going to tell us).
    It’s the ECONOMY, dude. Keynesian economics DON’T work. Cut those damned puppet strings. Act like a PRESIDENT! ANYBODY can be a prez. You’ve proven it to America and the world for over a year and a half.

    • eddie47d

      sc, You never change and have no credibility,just pre-recorded hype and slander. You dance to the puppet masters of the oil industries and are afraid to take them head on

      • http://?? Joe H.

        edduh47DUH!!
        And you are too afraid to go against your boy hero!

    • Kinetic1

      Conservatives love to point to JFK’s tax cuts, but they rarely tell the whole story. Yes, JFK was a Democrat and he lowered the highest tax rate, but he did so while closing loopholes used by those in the highest tax bracket. It’s not the same as giving the oil industry special breaks to help their executives rack up huge profits.

      While were talking Kennedy, Your assertions are backwards. Kennedy’s tax cuts were demand side and a demand-side cut is based on the Keynesian theory that public consumption spurs economic activity. Not unlike stimulus spending, Government puts money in people’s hands, as a temporary measure, so that they’ll spend it. A Reagan/Bush supply-side cut sees business investment as the key to growth. Also not often heard from Republicans using JFK as a stick to beat us over the head, Nixon’s economic adviser Herb Stein noted that the 1964 plan led to a diminished output-per-person-employed! Let the productivity rate drop today and listen for the Chamber of Commerce to scream for blood.

  • Steve

    AMERICA: AT THE CROSSROADS

    In times such as these, we need only to look at world history. The ancient civilizations of Persia and Greece come to mind. One might consider the history of the British or Roman Empires; Napoleonic France or Spain; also the dynasties of the Chinese and Japanese Emperors, along with the Egyptian Pharos, or the Mayans and Aztecs. All of these republics, empires and dynasties have fallen upon the dust heap of history. Do these once great societies have any meaning in our present day? Oh yes! Big time!

    The study of these civilizations was the basis and foundation for our Constitutional Republic. Madison, Jefferson, Hamilton, Adams and all our founding fathers studied how these civilizations emerged, evolved and eventually failed. Our founders answered these rises and collapses of past civilizations with the Great American Experiment; The Constitution of the United States of America; our map for continuing success.

    Our grand document is based on the creation, evolvement and failure of every civilization in history. It was conceived through the wisdom of all the grand thinkers in world history. (Thinkers and philosophers who knew that their history would be important to some future civilization and they were intelligent enough to write it down or carve it in stone) Our Constitution is a document written to preserve individual liberty and to organize a union of separate states, into a Federal Union; The United States of America.

    Why do we now fail our Constitution? Why don’t we teach more of it in public and private schools? Why do politicians and judges say it’s outdated? The reality is that we are at the crossroads between the success or failure of our Constitutional Republic. This Great Document needs to be honored and cherished dearly.

    Our Congress; the Senate and House of Representatives, is now failing us by passing legislation that they do not read before they vote on it’s passage. Our President is failing our country by signing this unread legislation into law. We might call this a failure of their Oath of Office. Or we might call it a failure of our national identity. Either way, we can not continue to exist as a nation under these failures in government.

    Ancient Rome is a prime example. Senators of the Roman Republic sat in their Coliseum seats, along with the Roman Emperors. They watched as slaves fought gladiators and cheered for blood. They watched as Christians were eaten by lions while the minions screamed for more blood. Those Senators allowed the decline of the Roman Republic by their lack of concern, accession and decadence. Eventually, their appeasements to the Caesars contributed to the decline of the Republic and the Empire. All was lost as hoards of barbarians over-ran a militarily-over-extended, over-taxed, Roman Empire.

    That barbarism was unmatched until the 20th century, when Marxist/Socialist/Communism overtook Russia and Eastern Europe, culminating in the deaths of 50 million human beings. All of them murdered and starved by a mentally ill, psychotic-paranoid, Joseph Stalin; along with his secret police.

    Adolph Hitler murdered 6 million Jews. Joseph Stalin murdered 50 million of his own Soviet people. The German people were compliant with Hitler and the Soviets with Stalin. They followed those leaders to their graves. The Roman Senators were compliant with the Caesars. Rome fell, as all great civilizations did in time. None of those civilizations had a living Constitution: a map for success throughout the ages. Our nation has one and it’s high time our Congress and our President start abiding by it.

    The failure to follow our Founding Fathers’ map has lead America down the wrong road; to the crossroads we find ourselves looking upon. A “fundamental change in America”, we do not need. What we do need, is to return to a “foundation based on our Constitution”. We should command the respect due to us and their Oath of Office, from all our elected officials in city, county, state and federal government. Only that respect to their Constitutional Oaths and to the People, will save this country from the dust heap of history. We, as a free Nation, still have the right to demand that of our elected representatives. This is the duty and the responsibility of every citizen in a Constitutional Republic. Demand it! Vote for it! Pass it on to everyone!!

    If you are an American Patriot, then please, remember this on November 2, 2010. VOTE !

    God’s Speed America!

    • eddie47d

      Excellent post Steve. We have new Caesars trying to control the World and a few in our nation. The oil and gas industries,citibank,Lehman Bros.,Big Pharma have been trying to control us “minions”for a long time.Some have failed to “own us” but on their way out have taken part of the American Empire with them. They want or wanted to represent our nation and make us believe they stand for integrity. When the opposite seems to be the norm in their quest for economic power. They are trying to be little nations of their own instead of being apart of America.

    • Deborah

      Beautiful! Absolutely beautiful. Now, if we had this patriotism in Washington, American’s would be better off!
      We need people that feel this way in Washington…not so much the thieves and liars up there now.

  • eddie47d

    Sure the A.P.I. doesn’t want regulations to govern their lack of ethical behavior or to pay their fair share of taxes. They want to be left alone and always act like they are being persecuted. Their ads on TV are one big pity party where they act like they are one step away from welfare. The public has to buy their product no matter what. So they have us over a barrel regardless of what the economy looks like. So their phooney concern over the weak recovery and major job losses in their industry is rather lame.I do have empathy for their workers in both the oil and gas industries;for their work can be brutal. I do not have sympathy for their CEO’s and their pretend grief after stuffing millions in their pockets.

  • s c

    Mr. Prez, act like a leader (if you dare), and send environmental ‘volunteers’ to Arizona. They can help Arizona CLEAN UP all the environmental damage caused by hordes of illegal aliens who’ve invaded that great state.
    Even if minimum wage was involved, you, O Great and Fearless Leader, could CLAIM that you helped to CREATE many, MANY new JOBS. That does ASSUME that you really CARE, and that you think environmental damage is a SERIOUS matter.
    If you don’t care, just continue doing the same incompetent, puppet-like job that you’ve been doing for over a year and a half, and then everyone on the face of ther planet will know without a doubt just what kind of “leader” America has.
    Just a thought – for those who CARE.

  • http://gmail i41

    To all the anal venting morons who want more regulations, hells bells, there were all kinds of educated expert who were off signing papers, but sure as hell not paying atytention. The simple minded muslim smuck in the White House , had to go golf, just like most liberal eleitists. Have never done a damn thing in life but read marxist crap, and go to school and theorize. The more regulations on any project or businesses have to put up with numnutted trained apes, who don’t know their rears from their mouths, because they are interchangable. All the states with beaches, should hold every damn wonk agencies libal along with the phony “leadercouldn’t, had no ideas. played pasture pool, and just plane sat with his head up his rear. He could have told the agency jachasses to get to moving, but he isn’t been a leader but an overeducated stupid bastard. He has never run a lemonade stand and has always lived off of someone else and taxpayers money.All of these sh-t bird agencies were dreamed by eleit democrap num skulls, more goverenment appointed over paid jackbrained morons, who do nothing but push paper to validate their jobs.

    • Deborah

      you made me laugh! That’s hard to do!! You’ve got the picture it looks like.

  • Deborah

    Funny, American taxes have funded 98 billion dollars a year for exploration and discovery for oil. Wonder why these oil companies are rich? Money coming in from everywhere and the American taxpayer gets an outstanding bill at the pump and utilities.
    This ain’t right!

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