When President Obama announced that he would nominate Sen. Max Baucus as ambassador to the People’s Republic of China, he raised expectations that Montana’s longest serving senator would play a key role in relations with a country whose economic output is second only to our own.
“The economic agreements he helped forge have created millions of American jobs and added billions of dollars to our economy, and he’s perfectly suited to build on that progress in his new role,” the president said.
During his distinguished tenure in the Senate, Baucus deservedly earned the respect of colleagues and rose to prominence in key roles, notably serving as Chairman of the Committee on Finance. But it was there that his advocacy on tax reform — particularly his politicized push for billions in new taxes on domestic energy producers — will be forever viewed by many Montanans as working against the state’s vital interests.
Montana is home to a large portion of the Bakken shale formation, one of the largest oil and natural gas resources ever discovered in the United States. If that potential is to be realized in Montana, where the $4.5 billion oil and gas industry now accounts for more than 40,000 jobs, we’ll need policies that incentivize the private sector to invest, develop and hire.
We look to neighboring North Dakota, where the state has created a sensible policy framework for Bakken development, and what do we find? A booming job market, vast new revenue streams for state and local government, and a key role in America’s rapid transformation from dependence on foreign oil to global energy superpower.
No one was surprised when a new ranking of states with the most millionaires per capita showed North Dakota moving up 14 spots. In western North Dakota, where much of the Bakken development is taking place, farmland values have skyrocketed, and it’s not unusual for property owners to report monthly oil royalties ranging from $20,000 to $100,000.
That’s hard evidence that the U.S. energy revolution, based on “tight” shale deposits of oil and natural gas, has been responsible for vast wealth creation throughout regional economies and states, such as North Dakota, Texas, Pennsylvania, Ohio and others.
But in Washington, we have an “alternate reality” at work on energy. Despite talking up what he calls an “all of the above” energy policy, President Obama has since taking office pushed relentlessly for higher taxes on U.S. energy producers. He and his supporters in Congress do this with no small amount of rhetorical camouflage, dressing up proposed tax increases as measures to end “corporate welfare” and “subsidies” for oil and gas producers.
This is Beltway nonsense. The domestic energy industry receives no subsidies or welfare. What the White House wants is to selectively deny oil and gas firms — but not other U.S. manufacturers — cost recovery measures in the federal tax code that are legitimate and widely used. Politically, that plays well with the president’s radical environmental base, which works overtime to demonize the fuels that actually power our economy.
In November, Sen. Baucus unveiled a draft tax reform proposal that would have raised taxes on domestic energy producers by $46 billion over a decade. In applauding his tax plan the Center for American Progress (CAP), a left leaning Washington-based think tank, once again repeated the mantra that the $46 billion amounted to “unnecessary tax breaks for hugely profitable Big Oil companies.” It is no coincidence that President Obama just hired former CAP president John Podesta as a White House advisor.
Tax proposals like that unveiled by Sen. Baucus are stunningly irresponsible. They take aim at one of the few sectors showing concrete benefits to a U.S. economy desperately in need of growth. Layering on $46 billion in new taxes undermines not only the energy sector, but the economy at large.
Two recent developments prove my point. First, citing rising domestic oil production and increased refining capacity, the U.S. Energy Information Administration says the average price for a gallon of regular unleaded gasoline should decline steadily for the next two years. AAA reports that average prices at the pump last year were at a three-year low, and the downward trend could continue in 2014.
Second, the Financial Times reported on Jan. 7 that “America’s domestic energy revolution helped drive a decline in the US trade deficit to its lowest level in four years.” Because of that narrowing trade gap, some economists expect an uptick in fourth-quarter growth estimates, “reinforcing confidence in the country’s economic recovery.”
It is unfortunate that Sen. Baucus did not exercise more prudence in backing a massive increase in energy taxes.
Rep. Mark Blasdel, of Kalispell, is the Speaker of the Montana House of Representatives.