Tag: American Petroleum Institute

Manufacturers, Business Community Question Discretionary Action by Administration on Ozone Standards

Today, Aric Newhouse, senior vice president for policy and government relations at the NAM, joined several industry leaders to discuss with the media the negative impacts of the Environmental Protection Agency’s (EPA) proposed ozone standards on jobs and economic growth.

Newhouse participated along with Governor John Engler, president of the Business Roundtable (BRT); Jack Gerard, president and CEO of the American Petroleum Institute (API); Cal Dooley, president and CEO of the American Chemistry Council (ACC); and Bruce Josten, executive vice president for government affairs at the U.S. Chamber of Commerce.

Aric Newhouse and industry representatives discuss the EPA Ozone Standards

Aric Newhouse and industry representatives discuss the EPA Ozone Standards

Newhouse explained that manufacturers in the U.S. start each day at an 18 percent disadvantage (excluding labor costs) compared to their competitors outside the U.S. Increasing the cost of manufacturing in the U.S. to comply with burdensome and costly regulations is unacceptable and will only continue to diminish our global competitiveness. Manufacturers are looking for a common-sense, balanced approach to regulatory policy. Unfortunately, these proposed ozone standards do not present such an approach.

He urged the EPA to hold off on current action until the next statutory review is required in 18 months, allowing for an appropriate review with new data and scientific studies on ozone regulations. By moving forward now, the Administration is using stale data gathered prior to 2008 to formulate these proposed ozone standards, ignoring the real-life effects their actions will have on a wide range of industry sectors.

The cost of nonattainment will make it difficult for manufacturers to grow and lead the economic recovery because these new ozone standards are excessive and unrealistic. These standards will affect a broad spectrum of industries and will freeze the economy, preventing future investment, expanded operations and job creation. The President must put the brakes on the EPA and use his authority to stop the Agency from continuing to impose new, irrational ozone regulations.

Additionally, last Friday, NAM President and CEO Jay Timmons, along with several other trade association representatives, met with EPA Administrator Lisa Jackson to discuss these proposed new ozone standards. Timmons conveyed the business community’s concern with the new proposal and told the Administrator that these standards would stifle economic growth and job creation.

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When Oil Industry is Attacked, Public Pension Funds Feel the Pain

The American Petroleum Institute has just issued a report by Sonecon titled “The Financial Contribution of Oil and Natural Gas Company Investments to Major Public Pension Plans in Four States, 2005-2009.” This analysis was an extension of earlier work by the same authors (Robert J. Shapiro and Nam D. Pham) from 2007 which found that oil and natural gas investments were widely held by individual Americans in personal portfolios, mutual funds, pensions, and retirement accounts.  At a time when petroleum prices are rising and energy company profits are being scrutinized for political purposes, these studies remind us that – whether we realize it or not – most of us are investors in these firms.

This study takes that concept a bit further, perhaps explaining why these stocks are so commonly held.  According to the Executive Summary, “From 2005 to 2009, spanning both vigorous expansion and deep recession, the share of the [public pension plan] funds’ returns attributable to oil and natural gas investments was 2.5 times to 2.8 times greater than their share of those funds’ assets.”

The authors specifically looked at the public pension plans in four states: Michigan, Missouri, Ohio, and Pennsylvania.  In layman’s terms, those of us who are investors in these companies are getting a good return for our dollar.  While oil and natural gas’s share of the portfolio in these plans averages 3.9 percent, they account for an average of 8.6 percent of the overall return over that period.

Overall, this is an interesting analysis and worthy reading, especially in the current political climate.

Chad Moutray is chief economist of the National Association of Manufacturers.

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On Oil, Instead of Raising Costs Through Taxes, Increase Supply

Jay Timmons, president and CEO of the National Association of Manufacturers, issued a statement in response to President Obama’s letter to Congress calling for higher taxes on domestic oil and gas production. Excerpt:

That misguided policy would result in more inflation, higher prices at the pump for already beleaguered Americans, and increased costs for products consumers need and use every day.Manufacturers support efforts to increase the use of clean energy sources and are helping to lead the way in meeting future energy demands with new energy sources. Until those alternative sources are cost-competitive with oil and gas and sufficient to meet this country’s demand for energy, manufacturers believe the United States should expand access to domestic energy by opening additional areas of the country – offshore and onshore – to exploration and development.

Timmons concluded: “President Obama wants to raise taxes on energy companies and, at the same time, reduce the cost of gasoline. He can’t have it both ways.”

John Felmy, chief economist of the American Petroleum Institute, had several pithy comments for the reporters. From USA Today, “Obama, Republicans tangle over oil subsidies“:

This is a proposal born of desperation that would do nothing to reduce gasoline prices,” said American Petroleum Institute chief economist John Felmy. “It would reduce investment in new oil and natural gas projects, cost new jobs and decrease oil and natural gas production.” (continue reading…)

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President Obama: Eliminate Oil Subsidies (That Don’t Really Exist)

President Obama has made criticisms of the U.S. energy industry a feature in his recent public appearances, especially the campaign fundraisers, and today he elevated the political misdirection with a “Letter from the President to Congressional Leadership Regarding Oil Subsidies.”

While there is no silver bullet to address rising gas prices in the short term, there are steps we can take to ensure the American people don’t fall victim to skyrocketing gas prices over the long term.   One of those steps is to eliminate unwarranted tax breaks to the oil and gas industry and invest that revenue into clean energy to reduce our dependence on foreign oil. Our outdated tax laws currently provide the oil and gas industry more than $4 billion per year in these subsidies, even though oil prices are high and the industry is projected to report outsized profits this quarter.

We must raise taxes on domestic oil and gas production in order to reduce our dependence on foreign oil! Is that really a serious argument?

No. No it’s not. Just as the President’s repeated attacks about “subsidies” and “tax breaks” for Big Oil are not serious arguments.

The American Petroleum Institute explains the realities of energy taxation in the United States in this fact sheet. Good to actually see some actual facts in this important policy debate.

The U.S. oil and natural gas industry does not receive “subsidized” payments from the government to produce oil and gas. However, there are many provisions in the tax code that allow companies to recover their costs. The oil and gas industry are eligible for these deductions, which are similar to, if not the same as, deductions available to many other industries.

Tax deductions should in no way be confused with subsidies. A fundamental pillar of the U.S. income tax system is that businesses are taxed only on net income. This means that there needs to be some practical and fair method for businesses to recover costs. The policies underlying cost recovery provisions in the tax code legitimately utilized by the oil and natural gas industry are no different than those for any other industry, and are necessary to insure that our industry is treated no differently than any other. (continue reading…)

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President Should Accept Responsibility for Lack of Domestic Energy

The Associated Petroleum Industry held a conference call with reporters this morning in anticipation of President Obama’s speech on energy. The API’s top policy expert on upstream operations, Erik Milito, discussed the many policy and regulatory decisions by the Obama Administration that have prevented domestic energy development, especially offshore oil and natural gas.

Milito was justifiably tough on Tuesday’s report from the Department of Interior on “unused oil and gas leases.” From his prepared statement:

Yesterday, the President’ point person for oil and natural gas development, Secretary Salazar, released a politically motivated and deeply flawed report on so-called idle leases. Among other things, it lists offshore leases that do not yet have approved exploration or development plans as “inactive,” regardless of whether there is exploration or pre-production activity going on such as seismic or technical reviews of the geography. This preparation work is necessary to determine whether natural resources exist on a lease and how to produce any oil and natural gas safely.

The Administration’s report assumes that oil and natural gas are spread uniformly across a lease acreage, suggesting that 70 percent of idled leases equates to 70 percent idled resources – as if finding oil were no more difficult than sticking a pipe in the ground. (continue reading…)

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Alaska’s Senators Debunk ‘Use It or Lose It’ Distraction on Energy

Sens. Lisa Murkowski (R-AK) and Mark Begich (D-AK) released a joint statement on Wednesday blasting the introduction of S. 600, the “Use It or Lose It” bill. They’re exactly right. From “Sens. Murkowski and Begich Opposed to ‘Use it or Lose it’: Unwarranted Fees on Energy Companies Will Result in Less Production, More Imports, and Higher Prices.”

Murkowski, the ranking member of the Senate Energy and Natural Resources Committee, said the bill was an attempt to shift blame for rising gasoline prices to energy producers.

“While I don’t accept my colleagues’ analysis, I am glad to see them acknowledge that increasing domestic oil production will help address rising energy prices,” Murkowski said. “Unfortunately, their bill is misguided. Our laws already reflect a use-it-or-lose-it policy; that’s why we have lease terms and a range of lease fees. It is the current administration’s intentional slowdown of the permitting process that is stopping millions of acres onshore and offshore from producing the energy we need. In Alaska, ConocoPhillips and Shell have both seen work on promising oil projects blocked by government obstruction. To hold them responsible – and force them to pay for delays that are not their fault – is simply absurd.”

Sen. Begich: (continue reading…)

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‘Use It or Lose It’ Meant to Distract from Real Energy Debate at

President Obama used his recent news conference on energy to dust off his discredited campaign claim that energy companies are sitting on leases.

“There is more we can do, however. For example, right now, the industry holds leases on tens of millions of acres — both offshore and on land — where they aren’t producing a thing,” the President said, announcing he had asked the Department of Interior “to determine just how many of these leases are going undeveloped.”

“People deserve to know that the energy they depend on is being developed in a timely manner,” President Obama continued.

On Wednesday, three Senate Democrats reinforced the President’s misdirection by introducing S. 600, a bill to promote the diligent development of Federal oil and gas leases. At a news conference, chief sponsor Sen. Robert Menendez (D-NJ) dubbed the measure the “Use It or Lose It” bill. From the news release, “Senators Demand Oil Companies ‘Use It or Lose It’ on Drilling Leases“:

Under current law, oil companies can lease possible oil reserves on Federal land regardless of whether they are producing oil on that land or even have plans to produce oil there. In some cases, oil companies are leasing – but failing to develop – federal land in order to book more reserves on their balance sheet and inflate their stock price. In others, oil companies are attempting to prevent competitors from producing on those acres.

One can appreciate the President and Senators’ motivation to deflect the public’s attention from the Administration’s failure to promote domestic energy development. Unfortunately, in this display of message discipline, the message is bunk.

Erik Milito at the American Petroleum Institute explained the realities of oil and gas leasing at EnergyTomorrow.org, the API’s blog, in a post appropriately titled, “The ‘Use It or Lose It’ Deception“:

The administration itself is preventing the industry from developing these leases because it is not issuing permits to drill or conduct seismic studies of these leases. They want the industry to develop the leases it already possesses, but they won’t grant the permits to do so.

Companies pay millions of dollars to acquire these leases (each lease costs at least $250,000 and some have gone for more than $100,000,000), further fees for renting the leases and the leases have a finite term. If a company does not produce oil or gas from a lease then they are required to return it to the government. In other words “use it or lose it” is already the law.

These are very successful and sophisticated companies that are engaged in this business and it makes no logical sense for companies to pay millions of dollars to purchase leases, sit on them for 10 years, and then give them back to the government. They make money by supplying the American economy with the energy it needs to grow, not from sitting on assets.

The fact that the companies invest billions of dollars to develop these leases demonstrates their commitment to finding oil and gas, Milito explains. And the argument ignores the basic reality of the oil and natural gas industry, that companies purchase leases in order to explore for resources, and one cannot ascertain if they will produce until exploratory wells are drilled.

The President knows these facts, and if he wants a detailed accounting of the leases, he should instruct Secretary Salazar to hit the “print” command to produce a list. This month’s revival of the “use or lose it” canard is meant to evade the serious discussion — the accountability — about the critically needed development of America’s abundant domestic energy resources. It’s transparent politics.

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What’s the Logic: By Raising Taxes on Employers, We’ll Create Jobs?

A round-up of coverage and commentary on the Obama Administration’s budget proposal for Fiscal Year 2012…

Aric Newhouse, senior vice president, National Association of Manufacturers, NAM statement:

Unfortunately, President Obama’s budget plan … contains higher taxes for virtually all manufacturers – a direct threat to growth and manufacturing jobs. Increased income taxes on companies with worldwide operations, increased energy taxes and income taxes for small and medium-sized companies will make manufacturers less competitive.

Jack Gerard, president, American Petroleum Institute, “Administration tax hike will hurt jobs, cut government revenue“:

It’s no surprise the administration is proposing yet again to raise taxes on the U.S. oil and natural gas industry.  But it’s still a bad idea and comes at one of the worst times in our economic history.  The administration continues to ignore the fact this industry is among the nation’s largest job creators and delivers enormous revenues to government at all levels.  The industry pays income taxes, royalties and other fees totaling nearly $100 million every day and pays income tax at an effective rate far higher than most other industries.

 Besides eliminating thousands of new potential jobs, the increases, over the long term, would actually lower revenue to the government by many billions of dollars as a result of foregone revenues from projects the tax hikes would prevent going forward.

Dean Zerbe, Forbes, Capital Tax blog, “Obama’s Budget Proposal and Taxes: Lots of Regifting“:

The tax proposals in the administration’s FY 2012 budget released today is a combination of regifting (lots of old and cold proposals that didn’t go anywhere even when the Democrats ran the whole show) and some new proposals that will take a good deal of energy to get moving in this Congress. (continue reading…)

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On Energy, Talking Points That Damage Competitiveness

In his State of the Union address Thursday, the President again repeated his familiar talking points dismissing the oil industry.

We need to get behind this innovation. And to help pay for it, I’m asking Congress to eliminate the billions in taxpayer dollars we currently give to oil companies. (Applause.) I don’t know if — I don’t know if you’ve noticed, but they’re doing just fine on their own. (Laughter.) So instead of subsidizing yesterday’s energy, let’s invest in tomorrow’s.

Yesterday’s energy? That’s not a serious comment that should be included in any serious address to the American people. Oil and natural gas provide more than 60 percent of the America’s energy. It’s TODAY’s energy, and TOMORROW’s energy, and investment in it should be encouraged, not disparaged.

The American Petroleum Institute issued a statement from its president and CEO, Jack Gerard, in response. Excerpt:

Tonight was a missed opportunity. The president focused on job growth through federal spending, but was silent on one of the best ways to create jobs: allow more energy development. Natural gas and renewables are important components of our energy mix, but we will need our nation’s vast oil resources for decades to come. The oil and natural gas industry is a key driver of new jobs and economic prosperity Producing more oil and gas at home, which most Americans want, could create hundreds of thousands of jobs, reduce our deficit by billions, and enhance our energy security. Even better, the government wouldn’t have to invest a single taxpayer dollar – just give industry a green light to invest its own money.

The U.S. oil and natural gas industry also pays taxes at effective rates far higher than most other industries, and does not receive payments from the government to support oil and gas development. The tax deductions it does receive are similar to those enjoyed by other industries to encourage energy production and new jobs. We need policies that help the 9.2 million hardworking men and women in the industry, not hurt them.

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API Analysis: Offshore Permitting Delays Threaten U.S. Jobs

The American Petroleum Institute (API) released a study this morning on the negative impact the delays in offshore drilling in the Gulf will continue to have on the US economy and energy security. The analysis by Wood Mackanezie supports what the National Association of Manufacturers has pointed out in the past -– delays in permitting have had and will continue to have detrimental impact on the U.S. economy and domestic energy.

According to the study, an estimated 125,000 jobs can be lost by 2015 and approximately 680,000 barrels of oil a day could be at risk by 2019. The delay on permitting continues even though the moratorium on offshore drilling was lifted in November of last year. This stems from the fact that companies are now faced with new procedures and guidelines in order to secure permits to resume their activities in the Gulf. These requirements mean companies can no longer rely on the old applications which they submitted for a permit. They now have to go back to the drawing board, re-start their application process and go through the steps of applying for a permit all over again.

This continued delay is devastating to the U.S. economy as it has and will continue to cause a great deal of job loss which this country cannot afford, especially with an unemployment rate of 9.4 percent. More delays will only lead to companies leaving the U.S. shores to drill in foreign waters and reduce domestic oil supply. Drilling off the coast of Brazil or West Africa does a lot less to create U.S. jobs than drilling in the Gulf of Mexico.

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